The Texas Real Estate Commission (TREC) is responsible for licensing of residential or home service contract companies. TREC has recently proposed amendments to its regulations governing companies offering home warranties, a.k.a., Residential Service Companies (RSC). RSCs are companies that offer residential or home warranty or home service contracts to maintain, repair or replace all or any part of the appliances, structural components, electrical, plumbing, heating, or air conditioning systems of residential property.
These proposed rules amend the Funded Reserve section of existing rules by expanding the eligible liquid assets that may be used to fund the required reserve to include additional governmental-backed financial instruments acceptable to TREC. The rule amendments will also require that each RSC complete a monthly reconciliation of such reserve to confirm that fluctuations in the aggregate value continue to meet the state’s required minimum levels.
The proposed rules will also require that each RSC confirm, every February 1, that the separate security that it is required to maintain relative to claims paid in a given year, continues to meet the State’s minimum levels as well; and take “immediate action” to remedy any security amounts that fall before required minimums.
The amendments also propose new language that would require an RSC to provide a complete copy of any residential service contract to a contract holder within 15 days after such contract is purchased or becomes effective, whichever is later. The new rules will also subject RCS to disciplinary action if it uses a “side-by-side” comparison in its advertising and the contracts being compared to do not have “substantially the same covered items and exclusions”.
Lastly, the proposed rules will require the following new forms to be filed with TREC, including a Consent to Service of Process form and a Notice of Modification form, the latter of which will require that any changes in ownership or officers be reported to TREC. Any changes in officers specifically must be reported to TREC within 10 days after the change. Revisions to TREC’s required Annual Report and Mid-Year Reports for RCSs are also included in this rule development.
These proposed changes are not yet final.
