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Tort strict liability and negligence claims should be available, whether manufactured homes are treated as realty or personalty.

Financed manufactured home sales are subject to state credit laws, often including a retail installment sales act (RISA) or motor vehicle retail installment sales act (MVRISA). If a third party makes the loan directly, a different statute will apply.⁵¹⁷ Sometimes determining which state credit statute covers manufactured home sales is difficult.

The federal Truth in Lending Act (TILA) requires disclosures in consumer credit transactions and provides substantive rights to manufactured home credit buyers. TILA applies when the home is intended to be the consumer’s principle residence or when the amount financed is under $58,300. This dollar amount is current as of January 1, 2020;⁵¹⁸ it is adjusted annually for inflation. TILA is thoroughly examined in NCLC’s Truth in Lending.⁵¹⁹

The special protections of the Home Ownership and Equity Protection Act (HOEPA) apply to “high-cost mortgages”: purchase money or non-purchase money credit transactions secured by the consumer’s principal dwelling, including a manufactured home, and that meet certain cost triggers specified in the statute are covered.⁵²⁹ Because lenders treat manufactured home loans as “chattel” lending, the resulting high interest rates may satisfy the HOEPA triggers.

The federal Real Estate Settlement Procedures Act (RESPA) and its Regulation X provide protection for consumers buying a home. When RESPA applies, it requires disclosures about closing costs both before and at the time of settlement, notices about escrow accounts and servicing transfers, and the right to obtain account information through a written request that meets certain requirements. RESPA also prohibits kickbacks and unearned fees for settlement services, charges for preparation of certain documents, and the steering of borrowers to a particular title insurance company.

A creditor will usually be liable for the consumer’s claims against the seller, up to the amount paid by the consumer, because of the contractual language required by the FTC Holder Rule.⁵⁴¹ All assignees of consumer sales contracts for goods or services have this derivative liability, and purchase-money lenders do also as long as the seller arranged the financing or is affiliated with the lender by common control, contract, or business arrangement.⁵⁴²

A document trail is created during the construction of a manufactured home.⁵⁴⁹ Seek these documents from the manufacturer through discovery. Complaints about other homes are also relevant,⁵⁵⁰ because the existence of similar problems with other homes tends to show that the problems were caused by faulty construction rather than misuse.⁵⁵¹ The manufacturer will have copies of these, but it is also wise to seek copies from relevant agencies.

If a manufactured home appears defective, an expert should inspect the home as soon as possible. The expert should prepare a signed report and an estimate of repair costs and the reduction in market value caused by the defects. If possible, the expert’s report should be set out in affidavit form, so that it can be used to support a summary judgment motion.

If a buyer keeps the home, the standard measure of damages is the difference between the value of the home as warranted at the time of delivery and its actual value.⁵⁶² If defects are latent and the buyer discovers them only after delivery, proof of the home’s value at the time of discovery of the defects may be sufficient.⁵⁶³ It is far safer to present at least some evidence about the value of the home at the time of delivery.

The UCC allows a buyer to recover as incidental damages “expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.”⁵⁷⁰ Incidental damages in manufactured home cases can be substantial.

Consequential damages are often substantial in manufactured home cases. The UCC defines consequential damages as including “(a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property proximately resulting from any breach of warranty.”⁵⁷¹

The UCC allows a warranty to include a clause in the contract waiving the buyer’s right to recover incidental or consequential damages or to exercise other remedies.⁵⁷⁹ But the clause is ineffective if it is unconscionable or if the limited remedy fails of its essential purpose.⁵⁸⁰

UCC section 2-717 allows a buyer to deduct damages from installment payments due the seller, whether the damages are for reduced value of the goods, incidental damages, or consequential damages. The remedy is effective not only against a credit seller, but also against the credit seller’s assignee or a related lender, pursuant to the FTC Holder Rule.⁵⁸³ The right to deduct damages is a defense if a creditor brings a replevin action on a defaulted loan, an action for the price, or a deficiency action after repossession.

The UCC does not provide attorney fees to a prevailing consumer.⁵⁸⁴ They are allowed under the Magnuson-Moss Warranty Act,⁵⁸⁵ under most states’ UDAP statutes,⁵⁸⁶ and under some manufactured home warranty laws.⁵⁸⁷

In many states, a manufactured home manufacturer, dealer, or installer must obtain a state license. Many of these licensure statutes include a requirement that the licensee post a bond.⁵⁸⁸ While bond amounts vary in size, the bond may be a source for recovery when the liable party is insolvent or out of business.⁵⁸⁹ A few states have recovery funds to pay for defects in manufactured homes when the responsible party does not pay.⁵⁹⁰

The first step in evaluating and preparing a warranty case is the client interview.¹ Ask the client to bring all available documents to the initial interview, including:

In-person, or at least video, interviews are extremely important. Even when initial contact with the attorney’s office is made with a telephone call, set up an in-person meeting as soon as possible.⁴ Make sure that the in-person interview includes only the attorney and the client, and in some cases the client’s spouse. Do not let friends, other family members, or non-married significant others sit in on that meeting so as to preserve the attorney-client privilege.

Attorney fees should be thoroughly explained to the consumer at the outset of the relationship. If the monetary value of the case is small and it involves a claim under a fee-shifting statute, the consumer should know that, unless the defendants resolve the matter promptly, the attorney fees will likely end up being significantly larger than the consumer’s recovery.

When an attorney who formerly represented a manufacturer or dealer decides to join a practice that represents consumers in lemon law cases, the prior representation should not create a conflict of interest unless the subjects of the successive representations are substantially related.⁷ A court denied a manufacturer’s motion to disqualify the consumer’s counsel when the counsel had not represented the manufacturer with respect to the year and make of the car in question; the manufacturer did not establish that it had communicated confidential pol

The next step in evaluating a warranty case is to analyze the relevant documents. Form numbers, coding, and preprinted references may provide clues to the relationship between the seller and the finance company or bank. The salesperson’s signature will usually be on the documents, thus identifying this key individual. A credit application may show that the seller had actual knowledge of the buyer’s limited resources.

Analysis of a warranty case should start with the contract documents, but should by no means stop there. The UCC gives effect to the true understandings and expectations of the parties rather than relying exclusively on the writing to determine intent.²⁰ The meaning of a contract term, the admissibility of oral statements made before the signing of the writing, and the validity of disclaimers all depend, in part, on the parties’ understandings and expectations.

Development of the buyer’s individual circumstances is critical to a proper understanding and presentation of a warranty case. One important circumstance usually is the buyer’s lack of sophistication, especially as compared with the seller’s. On the other hand, it is important to know whether the customer is more sophisticated than the average consumer. Find out whether the consumer has any specialized mechanical training, or a personal relationship with either the dealership or the manufacturer. All of these things have direct bearing on, among other things:

The difficulty of proving breach of a warranty often depends upon the type of warranty being provided. Characterizing the warranty as a performance warranty is often advantageous. Failure to perform is easier to show than defective condition at sale, which is the standard for the implied warranty of merchantability and the typical manufacturer’s warranty.⁴⁰

In some cases, the seller has a statutory right under the UCC to correct any nonconformity.⁴² The seller may also have a contractual right to repair or replace nonconforming goods without fear of cancellation or suit by the buyer. In either circumstance, the seller has only a reasonable time and a reasonable number of attempts to cure. After that, the buyer can pursue UCC remedies. Allowing cure also satisfies a precondition to suit under the Magnuson-Moss Warranty Act and state lemon laws.⁴³

Another critical question is whether the buyer should cancel the sale or keep the goods and seek damages. Attempting to cancel the sale is easier if the buyer has not already accepted the goods.