Manufactured Home Rule Docket No. 12-0210-12581-1

12-0210-12581-1

STATE OF MINNESOTA

OFFICE OF ADMINISTRATIVE HEARINGS

FOR THE MINNESOTA DEPARTMENT OF ADMINISTRATION

BUILDING CODES AND STANDARDS DIVISION

Proposed Amendments to Rules Governing Manufactured Homes, Minnesota Rule Chapter 1350.

REPORT OF THE

ADMINISTRATIVELAW JUDGE

The above-entitled matter came on for hearing before Administrative Law Judge Steve M. Mihalchick on January 5, 2000 at Conference Room B, 408 Metro Square Building, 121 West Seventh Street, Saint Paul, Minnesota.

This report is part of a rulemaking proceeding held pursuant to Minn. Stat. §§ 14.131 to 14.20 to hear public comment, to determine whether the Department of Administration (Administration, Department) has fulfilled all relevant substantive and procedural requirements of law applicable to the adoption of the rules, whether the proposed rules are needed and reasonable and whether any modifications to the rules proposed by the Department after initial publication are substantially different from the rule as published in the State Register.

The Department was represented at the hearings by Amy V. Kvalseth, Assistant Attorney General, Suite 200, 525 Park Street, St. Paul, Minnesota 55103-2106. The Department's Panel was Elroy Berdahl, Supervisor for Elevator Safety and Manufactured Structures; Randy Vogt, Senior Building Code Representative, and Scott R. Simmons, Rules Coordinator, all of the Building Codes and Standard Division of the Department. Twenty-five people attended the hearing, and all attendees signed the hearing register. The hearing continued until all interested persons, groups or associations had an opportunity to be heard.

The record remained open for the submission of written comments for 20 calendar days following the last day of hearing, through January 25, 2000. Pursuant to Minn. Stat. § 14.15, subd. 1, five working days were allowed for the filing of responsive comments. At the close of business on February 1, 2000, the rulemaking record closed for all purposes.

NOTICE

This Report must be available for review to all affected individuals upon request for at least five working days before the agency takes any further action on the rules. The agency may then adopt a final rule or modify or withdraw its proposed rules. If the Department makes changes in the rules other than those recommended in this Report, it must submit the rules with the complete hearing record to the Chief Administrative Law Judge for a review of the changes prior to final adoption. Upon adoption of final rules, the Department must submit them to the Revisor of Statutes for a review of the form of the rules. The Department must also give notice to all persons who requested to be informed when the rules are adopted and filed with the Secretary of State.

Based upon all the testimony, exhibits and written comments, the Administrative Law Judge makes the following:

FINDINGS OF FACT

Procedural Requirements

1. On October 20, 1999, the Department requested the scheduling of a hearing and the prior approval of the Additional Notice Plan. The Department filed the following documents with the Chief Administrative Law Judge:

A. A copy of the proposed rules certified by the Revisor of Statutes.

B. The Dual Notice of Hearing proposed to be issued.

C. A draft of the Statement of Need and Reasonableness (SONAR).

2. On October 26, 1999, the Department’s Additional Notice Plan was approved.

3. On November 15, 1999, the Dual Notice of Hearing and a copy of the proposed rules were published at 24 State Register 684.[1]

4. On November 10, 1999, the Department mailed the Dual Notice of Hearing to all persons and associations who had registered their names with the Department for the purpose of receiving such notice and the nineteen legislators identified as chairs or ranking members whose committees have oversight over the subject matter of these rules.[2] The Department also mailed a memorandum to three trade associations and consumer groups requesting that notice be published in their organizations' newsletters.[3]

5. By November 15, 1999, the Department posted the Dual Notice, the proposed rules, and the SONAR on the agency website, at http://www.state.mn.us/ebranch/admin/buildingcodes/rules.html.[4]

6. At the hearing, the Department placed the following additional documents in the record:[5]

A. A chronology of the adoption of and amendments to the manufactured homes rule in Chapter 1350.

B. Copies of statutes governing manufactured homes and limited dealer licenses.

C. The Department’s Request for Comments on Limited Sales License for Manufactured Homes published in the State Register on June 8, 1998 at 22 State Register 2163, and comments received in response.

D. The Department’s Request for Comments on Planned Amendment to Rules Governing Manufactured Homes published in the State Register on November 30, 1998 at 23 State Register 1297, and comments received in response.

E. The Certificate of Mailing the Dual Notice of Hearing and the Certificate of Mailing List certifying that the rulemaking mailing list is accurate, complete, and current.

F. A copy of the proposed rules certified by the Revisor of Statutes.

G. The Notice of Hearing as mailed and as published in the State Register at 24 State Register 684.

H. The Statement of Need and Reasonableness (SONAR). The Certificate of Faxing Additional Notice. Certifying the Department faxed a press release to 27 associations. (DPS Ex. 8)

I. The approval of the Administrative Law Judge of the Department's proposed Notice Plan and the mailing lists used for that Plan.

J. A copy of the transmittal letter showing that the Department sent a copy of the SONAR to the State Legislative Reference Library and notified the Legislative Reference Librarian of the rulemaking.

K. Comments received by the Department during the comment period.

L. Trade association comment letters received during the comment period.

M. Notice of Hearing mailed to those persons requesting a hearing with the mailing list used and certified.

N. The Department of Finance's approval of the fee changes proposed.

O. Assorted correspondence received by the Department.

P. Additional exhibits from various sources.

Q. The list of minor changes proposed by the Department.

R. The comments received by the Department after the comment period ended.

7. The documents were available for inspection at the Office of Administrative Hearings from the date of their filing.

Statutory Authority

8. The Department indicates that it has the statutory authority to adopt these rules under the following statutes:

16B.61 Subdivision 1. Adoption of code. Subject to sections 16B.59 to 16B.75, the commissioner shall by rule establish a code of standards for the construction, reconstruction, alteration, and repair of buildings, governing matters of structural materials, design and construction, fire protection, health, sanitation, and safety. The code must conform insofar as practicable to model building codes generally accepted and in use throughout the United States. In the preparation of the code, consideration must be given to the existing statewide specialty codes presently in use in the state. Model Codes with necessary modifications and statewide specialty codes may be adopted by reference. The code must be based on the application of scientific principles, approved tests, and professional judgment. To the extent possible, the code must be adopted in terms of desired results instead of the means of achieving those results, avoiding wherever possible the incorporation of specifications of particular methods or materials. To that end the code must encourage the use of new methods and new materials. Except as otherwise provided in sections 16B.59 to 16B.75, the commissioner shall administer and enforce the provisions of those sections.

327.33, subd. 2. Fees. Establish reasonable fees for seals, installation seals, and inspections which are sufficient to cover all costs incurred in the administration of sections 327.31 to 327.34, Laws 1981, Chapter 365, section 5 and sections 327.51 to 327.55.

327.33, subd. 3. Administration and Enforcement. Adopt other rules as may be necessary to administer and enforce sections 327.31 to 327.34 and Laws 1981, Chapter 365, section 5. The rules shall, to the extent practicable, be uniform with these adopted by other states.

327.33, subd. 4. Installation Rules. Adopt rules governing the installation of manufactured homes, and shall include them in the State Building Code. The rules may include a list of specific safety items to be inspected at the time of installation.

327B.10. Rulemaking Authority. The commissioner may adopt rules and issue orders reasonably necessary to implement and administer the provisions of sections 327B.01 to 327B.12. (Chapter 327B is entitled "Manufactured Home Sales" and encompasses 327B.01 to 327B.12.)[6]

9. The proposed rules modify the existing rules governing installation and maintenance of manufactured homes. The proposed rules also establish a category of limited dealer license for sales of manufactured homes and corresponding fees for application and renewal of such licenses. The fees charged for issuance of replacement seals (the certification that the manufactured home complies with the applicable code) are also increased by the proposed rules. The subject matter of the rules falls squarely in the scope of the cited statutes. The Department has the statutory authority to adopt these rules.

Standards for Adoption

10. Under Minn. Stat. § 14.14, subd. 2, and Minn. Rule 1400.2100, one of the determinations which must be made in a rulemaking proceeding is whether the agency has established the need for and reasonableness of the proposed rule by an affirmative presentation of the facts. In support of a rule, an agency may rely on legislative facts, namely general facts concerning questions of law, policy and discretion, or it may simply rely on interpretation of a statute, or stated policy preferences.[7] The Department has prepared a Statement of Need and Reasonableness (“SONAR”) in support of the proposed rules. At the hearing, the Department primarily relied upon the SONAR as its affirmative presentation of the need and reasonableness for the amendments. The SONAR was supplemented by the comments made by the Department at the public hearing (including written comments on the staff’s proposed changes) and in its written post-hearing submission dated January 25, 2000.

11. The question of whether a rule has been shown to be reasonable focuses on whether it has been shown to have a rational basis, or whether it is arbitrary. Minnesota case law has equated an unreasonable rule with an arbitrary rule.[8] Arbitrary or unreasonable agency action is action without consideration and in disregard of the facts and circumstances of the case.[9] A rule is generally found to be reasonable if it is related rationally to the end sought to be achieved by the governing statute.[10] The Minnesota Supreme Court has further defined an agency’s burden in adopting rules by requiring it to “explain on what evidence it is relying and how the evidence connects rationally with the agency’s choice of action to be taken.”[11] An agency is entitled to make choices between possible approaches as long as the choice it makes is rational. Generally, it is not the proper role of the Administrative Law Judge to determine which policy alternative presents the “best” approach since this would invade the policy-making discretion of the agency. A rule cannot be said to be unreasonable simply because a more reasonable alternative exists, or a better job of drafting might have been done. The question is rather whether the choice made by the agency is one that a rational person could have made.[12]

12. In addition to need and reasonableness, the Administrative Law Judge must assess whether the legislature has granted statutory authority to the agency, whether the agency has complied with proper rule adoption procedures, whether the rule grants impermissible discretion to agency personnel, whether the rule is unconstitutional or illegal, whether the rule constitutes an improper delegation of authority to another entity, or whether the proposed language is impermissibly vague.[13]

13. Where the Department has proposed changes to the rules after publication in the State Register, the Administrative Law Judge must determine if the new language is substantially different from that which was proposed originally.[14] The standards to determine if the new language is substantially different are found in Minn. Stat. § 14.05, subd. 2 (1996).

14. This Report is limited generally to discussion of the portions of the proposed rules that received significant critical comment or otherwise require examination. Accordingly, this Report will not discuss each proposed rule, nor will it respond to each comment which was submitted. Persons or groups who do not find their particular comments referenced in this Report should know that each and every submission has been read and considered. Moreover, because some of the proposed rules were not opposed, and were adequately supported by the SONAR, a detailed discussion of each section of the proposed rule is unnecessary.

15. The Administrative Law Judge finds specifically that the Department has demonstrated the need for and reasonableness of provisions of the rules that are not discussed in this Report, that such provisions are within the Department’s statutory authority noted above, and that there are no other problems that prevent their adoption. Where changes were made to the rule after publication in the State Register, the Administrative Law Judge must determine if the new language is substantially different from that which was proposed originally.[15] Unless mentioned specifically, any language proposed by the Department which differs from the rule as published in the State Register and is not discussed in this Report is found not to be substantially different.

Cost and Impact of the Rule Proposals

16. Minn. Stat. § 14.131 requires an agency seeking to adopt or amend its rules to explain, in it SONAR, who the rules will affect, how they will be affected, and what other approaches were considered. Specifically, the Department must include its SONAR:

(1) A description of the classes of persons who probably will be affected by the proposed rule, including classes that will bear the costs of the proposed rule and classes that will benefit from the proposed rule;

(2) The probable costs to the agency and to any other agency of the implementation and enforcement of the proposed rules and any anticipated effect on state revenues;

(3) A determination of whether there are less costly or less intrusive methods for achieving the purpose of the proposals;

(4) A description of any alternative methods for achieving the purpose of the proposed rule that were considered seriously by the agency and the reasons why they were rejected in favor of the proposals advanced;

(5) The probable costs of complying with the proposed rules; and

(6) An assessment of any differences between the proposed rules and existing federal regulations and a specific analysis of the need for and reasonableness of each difference.[16]

17. The Department identified as affected parties "dealers, installers, manufactured home park owners, manufacturers, and consumers because they must become familiar with and incorporate applicable new provisions into the manufacture, assembly, and sale of their product.[17] Manufacturers and installers are expected to bear the costs of the program, although those costs are likely to be passed on to park owners and consumers. Regarding benefits, the SONAR states:

Those who will benefit from the rules include manufacturers, installers and manufactured home park owners who prefer to manufacture and sell manufactured homes under current standards; the general public by having manufactured home installations provided in accordance with the most current code.[18]

18. The only additional costs to any State agency identified by the Department were associated with the limited dealer license program.[19] In the information provided to the Department of Finance for fee approval, Administration estimated that a fee of $100 per limited dealer license would cover its costs in administering the program.[20] In essence, there is no cost borne by a governmental agency by adoption of these rules that is not paid for by the new fees.

19. The Department asserted that the proposed rule was the least costly and intrusive methods for achieving the goals of the rules and consumer protection. The alternatives were described as follows:

The purpose of the proposed rule amendments primarily address the need to make organization and grammatical changes to improve the clarity of the existing code and make it conform to current style requirements. Other provisions of the proposed amendments make limited, substantive changes to existing rules for the purpose of conforming to federal and state laws or regulations. New rules and rule changes are also proposed to provide regulatory guidance for a new statutory authority for manufactured home park owners to sell up to five used homes per year. Alternatives to these proposed organizational and grammatical amendments fail to achieve the clarifying and style conformity purposes of the proposed rules. The alternatives also fail to satisfy necessary compliance with federal and state laws or regulations. For the purpose of satisfying the legislative mandate to adopt rules providing for limited dealer’s licenses, the proposed rules incorporate the requirements of Minnesota Statutes, section 327B.04, subdivision 8. Alternatives considered failed to address these requirements and adequately afford consumer protection.[21]

20. The SONAR cites the estimates given to the Department of Finance as its estimates for the costs imposed by the rules.[22] Those cost estimates only relate to the fees imposed by the rules. As discussed in the Findings below regarding specific rule parts, significant additional costs may be imposed by some of the proposed rules. The statutory obligation to estimate costs imposed by the rules applies to all costs, not merely those resulting from payments to the Department. The lack of consideration of these costs is a defect in the procedural requirements of rule adoption.

21. The standards to be applied in assessing procedural defects is set out in Minn. Stat. § 14.15, subd. 5, which states:

Subd. 5. Harmless errors. The administrative law judge shall disregard any error or defect in the proceeding due to the agency's failure to satisfy any procedural requirement imposed by law or rule if the administrative law judge finds: (1) that the failure did not deprive any person or entity of an opportunity to participate meaningfully in the rulemaking process; or (2) that the agency has taken corrective action to cure the error or defect so that the failure did not deprive any person or entity of an opportunity to participate meaningfully in the rulemaking process.

22. By not identifying the anticipated installation costs to be incurred by manufactured home owners arising out of these rules, substantial numbers of manufactured home owners were not adequately notified of the costs that these rules will impose. While the Minnesota Manufactured Housing Association (MMHA) participated in the rulemaking, this entity cannot be said to adequately represent manufactured home owners, apart from manufacturers, brokers, and park owners. At no time in this proceeding did the Department take corrective action by attempting to quantify the costs imposed or notifying affected parties of these costs. The procedural error here does not qualify as a "harmless error."

23. To cure this procedural error, the Department may renotice the entire proceeding, with the required cost estimates, or decline to adopt in this proceeding those provision that impose costs not described in the SONAR. The particular provisions are proposed rules 1350.1400, subp. 2.B; 1350.2700, subp. 8; and the new language proposed for rule 1350.2900, subp. 6.C.

24. The Department did not identify any federal statutes or rules that conflicted with the proposed rules. The applicable standards were cited as:

Federal CFR, subpart "G" 3282.303 State Administrative Agreement approved State Plan, includes Dealer Lot Inspection and installation. Federal Regulations do not regulate Dealer Licensing or installation of manufactured homes. Section 623 of "The Act" requires states to develop laws and rules equal to United States Department of Housing and Urban Development (HUD) CFR Regulations and Standards and also provides that states adopt rules for construction and safety.[23]

25. Throughout the rules, the Department has been careful to conform its language to federal requirements and avoid proposing rules in areas preempted by federal statutes or rules.

Analysis of Rule Language.

1350.0100 - Definitions.

26. Part 1350.0100 sets out definitions for terms to be used throughout the rules. Not all the proposed definitions were the subject of comments or otherwise require discussion. Only those definitions that raise significant issues will be discussed. The other definitions are found to be needed and reasonable.

Subpart 5 - Anchoring Equipment.

27. Manufactured homes are subject to damage by winds to a greater extent that other types of construction. To prevent injuries and property damage from high winds, the rules set out standards for anchoring equipment in subpart 5 of part 1350.0100. The Department proposed adding the term "bolts" to the list of equipment identified for use in anchoring. The Department also added "foundation system" as an alternative to anchor as a means of securing the manufactured home. John F. Bonner of Bonner Dawson Borhart, on behalf of the MMHA, asserted that the term "bolts" is inconsistent with federal standards and therefore preempted. The Department responded that the standard only applies where manufactured homes lack installation instructions and "new homes, 'with installation instructions' are within the purview of the federal Act and its definition of anchoring equipment."[24] Under those circumstances, there is no preemption of the state standard. The Department has shown subpart 5 to be needed and reasonable, as proposed.

Subpart 15 - Dealer.

28. Subpart 15 amends the existing definition of "dealer" to "any person who engages in the business, either exclusively or in addition to any other occupation, of selling or brokering manufactured homes, new or used, or who offers to sell, solicit, broker, or advertise the sale of manufactured homes, new or used." The Department stated:

This change is needed because current language does not read the same as the statutory definition in section 327B.01, subd. 7. This proposed change is reasonable because both rule and statute need to have identical language to avoid confusion.[25]

29. The proposed definition conforms to the statutory definition of "dealer." The rule does nothing to alter the impact of the governing statutes on how these rules are applied to persons engaging in the business of manufactured home sales or brokerage. Subpart 15 is needed and reasonable as proposed.

Subpart 20 - Evaluation Agency.

30. The existing definition for "evaluation agency", set out in subpart 20 is proposed for modification by replacing "commissioner" with "secretary". Mike Ives of Mike Ives Realty questioned who was meant by "secretary".[26] In the SONAR, the Department described the reason for the change in subpart 20 as:

In subp. 20, the Department proposes to delete "commissioner" and insert "secretary." This change is needed because Federal Regulations, effective June 14, 1976, requires evaluation agencies be approved by the Secretary for Manufactured Home Construction. This proposed change is reasonable because states are required to have the same wording as the Federal Regulations.[27]

31. By using the exact language of the federal regulation, the Department has created confusion in the rule. To eliminate this confusion, the Department must add a definition of "secretary", either in subpart 20 or in its own subpart. If the Department actually means that the Commissioner of Administration is the "secretary" referred to, the new language can be incorporated into subpart 12. The Department's choice must address the other places in the rules where "secretary" appears, such as subpart 26. Once amended in accordance with this Finding, the language is needed and reasonable. The new language is not substantially different from the language of the rule as published in the State Register.

Subpart 39 - Manufactured Home Accessory Structure.

32. After installation of manufactured homes, accessory structures are often added to enhance the use and enjoyment of the home. Such accessory structures can take the form of additional rooms incorporated into the structure of the home or decks or porches minimally attached to the manufactured home. The Department proposed removing the words "factory built" from the definition of "manufactured home accessory structure" in subpart 39. The intent of the rule change is to capture owner built structures in the definition, since such additions, if improperly done can bring the manufactured home out of code compliance and can constitute a hazard.[28]

33. MMHA objected to the rule change, asserting that the deletion of "factory built" would bring owner built structures under the jurisdiction of the Department and cause great difficulty in assessing whether homes with such structures remain in compliance with the manufactured home code. Compliance is important, because noncompliant structures cannot be sold.[29] Mike Ives noted that many manufactured homes are located in "noncode" areas, where there is no local building code inspector.[30] The commentator indicated that there are approximately 150,000 manufactured homes and most of them have accessory structures without seals certifying building code compliance.[31]

34. Initially, the Department responded by proposing to add a definition of "add-on" and modify Minn. Rule 1350.3800 to clarify that manufactured home accessory structures and add-ons could create an alteration taking the home out of compliance.[32] In its description of how the modified rule is to work, the Department clarified that the accessory structure must have some impact on a code sensitive aspect of the home to affect the home's code compliance. Examples were provided, such as the manufactured home providing structural support for the accessory structure, the electrical system being affected, and exits being blocked.[33]

35. After further discussion, the Department agreed to withdraw the proposed language from the rule.[34] MMHA objected to the Department's interpretation of the existing rule that owner built accessory structures were within its jurisdiction and that such structures could bring homes out of compliance.[35] An agency's interpretation of its existing rule is outside the scope a rulemaking proceeding. With the withdrawal of the proposed language there is no issue remaining regarding need or reasonableness.[36] Withdrawing the suggested changes does not result in a rule substantially different from the rule as published in the State Register.

Subpart 48a - Replacement Construction Seal.

36. Seals are certifications placed on manufactured homes at the time of construction to evidence that the particular home was constructed to meet code standards. The Department cannot issue original construction seals.[37] That authority is reserved to the federal government.[38] The Department proposed a definition for "replacement construction seal" to allow certification of manufactured homes that have lost their seals or where addition construction affecting the manufactured home has occurred. The Department has demonstrated that a definition of replacement seals is both needed and reasonable.

1350.0400 – Requirement for Seals, Code Compliance, Construction Compliance Certificates, or Labels.

37. Part 1350.0400 sets out the standards for using seals to certify code compliance when installation of manufactured homes is performed. Subpart 3 is amended to clarify the exemption from the installation seal requirement for such homes on a foundation only applies in municipalities enforcing the State Building Code. Subpart 4 is amended to allow building officials to approve permanent installation of such homes between the dates of November 15 and March 31. The Department indicates that the discretion is needed and reasonable because of the differences in the building season throughout the State, arising from differences in weather.[39]

38. Although the language in subpart 4 uses the word “may”, the subpart appropriately limits the discretion afforded by the term by requiring that the official approving the installation determine “that the climatic conditions would not prevent completion of a permanent installation.” The inclusion of the standard to guide the official’s discretion precludes undue discretion in the application of the rule. Part 1350.0400 is needed and reasonable as proposed.

1350.0500 – Acquisition of Labels and Seals; Installer Licensing.

39. Each of the five subparts in part 1350.0500 is being modified to conform these rules to changes in federal regulations and state law.[40] After publishing the rules in the State Register, the Department noted a typographical error in subpart 5 and included the correction of that error in its procedural filings.[41] The new language is needed and reasonable and the modification is not substantially different from the rules as published in the State Register.

1350.1000 – Lost or Damaged Seals or Labels.

40. The procedures to be followed for replacing lost or damaged seals are set out in part 1350.1000. The modifications proposed in these rules are intended to conform the rule language to federal regulations and make some grammatical changes.[42] MMHA noted that the proposed change to subpart 3 obligates a manufactured home owner to identify the date of the home’s manufacture. MMHA indicated that the owner often does not know the date of manufacture. The Department proposed changing the subpart and similar language in subpart 2 to clarify that the homeowner need report the date of manufacture only if it is known.[43] The rule as modified is needed and reasonable and the new language is not substantially different from the rule as published.

1350.1400 – Application for Manufactured Home Accessory Structure Approval.

41. A modification is proposed for Subpart 2 of rule part 1350.1400 to require "a dimensioned foundation support plan" be included with the other plans and specifications to be submitted for approval of accessory structures to manufactured homes. The addition of such a plan imposes costs on persons subject to the rules. As discussed in Findings 20-23, above, the Department has failed to provide an estimate of those costs. Therefore, the rule cannot be adopted without renoticing the rule. Removing this language pending renoticing does not result in a defective rule and does not significantly change the rule from the language proposed in the State Register.

1350.2400 – Notice of Violations.

42. Under part 1350.2400, a manufactured home cannot be moved from its location after the owner is notified that the home is in violation of the manufactured home code. MMHA objected to the impact of the rule, asserting that the removal of homes to be disposed of cannot be done without first bringing the home up to code.[44] The language complained of is in the current rule and not proposed for change. The modifications proposed merely conform the rule part to language changes throughout the chapter. The Department introduced into the rulemaking record the information made available to the public as to how title surrender is accomplished when a manufactured home is salvaged or junked.[45] That information makes clear that code compliance is not required of such homes. The Department has demonstrated that the language proposed is needed and reasonable.

1350.2700 – Foundation and Support Systems.

43. The requirements for manufactured home foundations and support systems are set out in part 1350.2700. The first significant change being proposed is in subpart 2, where the rule requires that footings, piers, or supports be installed to the manufacturer’s specifications. The existing rule states “to assure that the manufacturer’s warranty remains valid.” The proposed change is from “assure” to “ensure.” MMHA vigorously objected to the change, asserting that the rule creates an unreasonable obligation on the installer. The Department maintained that the two words are interchangeable and that no change in meaning was intended.

44. “Assure” and “ensure” have similar meanings. They are often used synonymously to mean that one will make certain that an event occurs. In the context of the rule, the proposed language requires installers to make certain that the manner in which a manufactured home is installed is consistent with the standards required by the manufacturer’s warranty. This is both within the ability of the installer and consistent with the obligations inherent in maintaining licensure as an installer. The Department cited a manufacturer's notification to a homeowner concerning the impact of improper installation on a home, showing that improper installation can result in harm to homeowners.[46] The existing rule (using “assure”) requires installers to follow the size and location standards required by manufacturers so that a voided warranty does not result.[47] To read the rule as MMHA suggests would render it meaningless. It would amount to requiring an installer to say, "I think I installed it right." The Department may choose to adopt the new language or retain "assure." Either choice is needed and reasonable and either may be adopted.

Subpart 8 – Vapor Retarder.

45. When skirting material is used to conceal the underside of a manufactured home, moisture can collect under the structure and create problems. Skirting is required for aesthetic reasons in many manufactured home parks and communities. The language proposed for subpart 8 requires:

If the space under the house is to be enclosed with skirting or other material, a vapor retarder of a minimum six mil polyethylene sheeting or its equivalent that keeps out ground moisture out of the home must be installed.

46. Steve Oehlenschlager of Alexandria Homes, Inc. noted that he had never found sheeting under any home installed by the owner.[48] The commentator indicated that poor grading under homes created the potential for sheeting to cause additional moisture problems. Dean Minardi, a park owner, objected to the requirement for adding a vapor barrier. He cited cost and difficulties in installation as reasons for not requiring that installation. Mr. Minardi also requested clarification as to when the material must be installed.[49] The Department indicated that the vapor barrier must be installed only when the manufactured home is being installed or moved, and only then when skirting is used.[50] At the hearing, the Department stated that only new installation (either of a new or moved manufactured home) was intended to trigger the vapor retarder requirement.[51]

47. Manufactured homes fall into four categories with regard to this rule part. The first category is homes without skirting. Subpart 8 is clear that no vapor barrier is required for such homes. The second category is homes, new or used, being installed with skirting. Subpart 8 and the Department's repeated statements make equally clear that a vapor barrier must be installed for such homes.

48. The application of the rule to the third and fourth categories is not clear. The third category is that of homes, already installed and using skirting, but lacking a vapor barrier. The fourth category is that of homes already installed and lacking a vapor barrier, but having skirting installed for the first time. The first clause of the subpart ("if the space under the house is to be enclosed with skirting or other material,") suggests that the mere fact of having the space enclosed triggers the vapor barrier requirement. This suggestion in the language of the rule is responsible for much of the confusion that persists concerning how the rule is to be applied. The language is vague and a defect in the proposed rules.

49. The Department's explanation of how subpart 8 is meant to apply resolves the question regarding the third category of homes (already installed and already equipped with skirting). Those homes are not required to install a vapor barrier. The explanation of the problem to be addressed by vapor barriers suggests that new installation of skirting on an existing home without that feature (the fourth category of homes) would trigger the vapor barrier requirement. To ensure that the rule accurately reflects the Department's intent and is not unduly vague, the Administrative Law Judge suggests the following language:

Upon installation of a manufactured home to be enclosed with skirting or other material, or upon initial installation of skirting material, a vapor retarder of a minimum six mil polyethylene sheeting or its equivalent that keeps out ground moisture out of the home must be installed.

50. The suggested language moves the focus from the "space to be enclosed" to the installation of the skirting material. Since the problem to be avoided is caused by the lack of ventilation under the home, the new installation of skirting material is the proper event to trigger imposition of the vapor barrier requirement. The suggested language also removes the potential for persons attempting to avoid the requirement by installing the manufactured home as one step and later installing skirting.

51. The potential for water pooling under the home is removed when the installation site is properly sloped. There is no evidence in the record as to how much of a financial burden is being placed upon an installer or homeowner to require the addition of a vapor barrier when a manufactured home is installed or moved. The need for vapor barriers is demonstrated by the potential for mold or mildew through the lack of ventilation under homes. With the lack of a cost estimate, there is no demonstration that the homeowner is not unduly burdened when compared to the benefit of obtained by installation of a vapor barrier. The failure to estimate the costs is a defect that is not a harmless error.[52] The rule must be modified to clarify the Department's intent and the notice regarding adopting the rule must be republished. Further, the record needs to be augmented to demonstrate that the rule as renoticed is needed and reasonable. Since renoticing the rule will necessitate republication in the State Register, there is no issue raised regarding modification of rule after publication in the State Register.

1350.2800 – Anchoring Equipment.

52. The first sentence of the existing rule on anchoring equipment begins, “Anchoring equipment, when installed, shall be….” The Department proposed changing that language to read, “Anchoring equipment must be installed that is….” MMHA objected that the proposed rule requires that anchoring equipment be installed on manufactured homes that have not required that equipment in the past. The Department maintained that the language did not constitute a change from the existing rule. After significant discussion[53], the Department agreed to withdraw the proposed change and rely upon the existing rule.[54] The retention of the existing rule is needed and reasonable. Withdrawing the suggested language does not result in a substantially difference from the rule as published in the State Register.

53. MMHA asserted that the Department is preempted from altering the language in subpart 1 that allows an architect to design the stabilizing system of a manufactured home.[55] The Department based its proposed rule on information received from the Minnesota Board of Architecture, Engineering, Land Surveying, Landscape Architecture, Geoscience and Interior Design, that such design work is not within the expertise of architects.[56] The support for MMHA's preemption claim refers to "the same aspect of performance of such manufactured home which is not identical to the Federal manufactured home construction and safety standard."[57] The reference to "architect" is not a performance standard for a manufactured home. Absent some additional support, the preemption argument must fail.

54. The Department noted that "architect" appears in 1350.2600, subpart 2 and 1350.2700, subpart 3. The Department proposed to delete the term in both those rule parts. The Department has shown that the work described in those parts falls outside the licensure of architects in Minnesota. The Department also noted that an incorrect reference to a standard had been included in subpart 6 and replaced it with the correct standard.[58] The changes are needed and reasonable and do not constitute a substantially different rule from that published in the State Register.

1350.2900 – Ground Anchors.

55. A modification is proposed for Subpart 6.C. of rule part 1350.2900 to require that concrete slabs used as ground anchors be "designed by a registered engineer." The addition of such approval imposes costs on persons subject to the rules. As discussed in Findings 20-23, above, the Department has failed to provide an estimate of those costs. Therefore, the rule cannot be adopted without renoticing the rule. Removing this language pending renoticing does not result in a defective rule and does not significantly change the rule from the language proposed in the State Register.

1350.6500 - Fees for Accessory Structure Seals, Replacement Construction Seals, Certificates, and Labels.

56. Part 1350.6500 sets out the fees charged by the Department for certifications required under the manufactured home code. The Department indicated changes were needed to the part to conform the structure of the rules to federal regulations.[59] The amounts of the fees charged were modified so that the amount of each fee covers the cost of administering that particular certification.[60] The fee changes have been shown to be needed and reasonable.

1350.7100 - Definitions.

57. Definitions of terms used the licensing of manufactures and dealers of manufactured homes are set out in part 1350.7100. Subpart 3a defines "disclosure statement" as:

"Disclosure statement" means a written report revealing information about the manufactured home and its installations. Disclosure statements include, but are not limited to, safety feature disclosure forms, installation statements, and formaldehyde use disclosure statements.

58. MMHA objected to the subpart as "broad and vague."[61] The inclusion of formaldehyde use disclosure statements was cited as causing particular concern for existing homeowners. The Department indicated that the rule was intended to work with Minn. Rule 1350.8600, which requires dealers to provides copies of documents, including disclosure statements and the formaldehyde warning, to purchasers at the time of sale.[62] The rule does not impose any unreasonable burden on homeowners.

59. But the rule is unduly vague, since it does not define what information must be in the disclosure statement. The existing rule using the term "disclosure statement" is Minn. Rule 1350.8600. In that rule, the form to be provided is distributed by the Commissioner. Presumably, the Department has the particular types of information sought to be disclosed on the current form and compliance can be achieved by simply filling out that form.

60. There is no authorization in subpart 3a for issuance of a form. The existing language regarding the form in Minn. Rule 1350.8600 is proposed for deletion. Under these circumstances, the Department's proposed language is too vague to inform those preparing the disclosure statement as to what information must be included. This is a defect in the proposed rule.

61. To cure this vagueness defect, the Department must either list the contents of the disclosure statement, or import the form language proposed for deletion in 1350.8600. If the form option is chosen, the general description of the statement ("information about the manufactured home and its installations") must be retained to limit the discretion of the Department as to what is contained in the form. Either approach is needed and reasonable to clearly state what information must be disclosed under the rule.

62. In addition, the rule refers to documents that "include, but are not limited to" a list of specific forms. Constructing the rule in this fashion results in a non-inclusive list of documents independent of the definition itself. No one reading the rule can determine whether a particular unlisted document is required. By this approach, the Department has unfettered discretion to add documents to its list.[63] The rule language is defective and cannot be adopted. To cure the defect, the two sentences can be combined into one using the words "such as," in front of the list of examples. Such a change renders the rule needed and reasonable and the new language is not substantially different from the rule as published in the State Register.

1350.7205 - Limited License Application.

63. In 1998, the Legislature amended Minn. Stat. § 327.04 to add a provision for limited dealer licenses. The new language, codified as subdivision 8, states:

Subd. 8. Limited dealer's license. The commissioner shall issue a limited dealer's license to an owner of a manufactured home park authorizing the licensee to engage in the sale, offering for sale, soliciting, or advertising the sale of used manufactured homes located in the owned manufactured home park as principal only. The licensee must be the titleholder of the homes and may engage in no more than five sales annually. The license shall be issued only after receipt of the application described in section 327B.04, subdivision 3, payment of the fee prescribed in section 327B.04, subdivision 7, and compliance with the license prerequisites contained in section 327B.04, subdivision 4; except that an applicant need only secure a surety bond in the amount of $5,000, and the applicant need not comply with section 327B.04, subdivision 4, paragraph (e). The holding of a limited dealer's license does not satisfy the requirement contained in section 327B.04, subdivision 4, paragraph (e), for the licensee or salespersons with respect to obtaining a dealer license.

The commissioner shall adopt rules under sections 14.22 to 14.28 to provide for issuing a limited dealer's license.

64. Part 1350.7205 is proposed to meet the statutory obligation to adopt rules for issuing a limited dealer's license. The Department received many comments objecting to the standards proposed for the rule part. The amount of information required and the similarity of the application process to the full dealer license application process were criticized as inconsistent with the intent behind limited dealer licensure.

65. The Department responded that Minn. Stat. § 327.04, subd. 8, sets out the standards that must be met in obtaining a limited dealer license and the rule conforms to the statute.[64] The Department is correct that the rule cannot exempt persons from standards required by statute. The Department modified subpart 2 to eliminate the requirement that home telephone numbers be provided in the application for a limited dealer license.[65] Of course, any applicant using a residence as the business location must still provide a telephone number (which may be the telephone for the residence). The Department had not provided facts demonstrating that both business and residence telephone numbers were required of applicants. The modification to the proposed rule renders it needed and reasonable. The new language is not substantially different from the rule as published in the State Register.

1350.7300 - Established Place of Business.

66. Several commentators vigorously objected to the requirement in part 1350.7300, subpart 2 that applicants for limited dealer licensure "have a permanent enclosed building, other than a residence …." The Department agreed to modify subpart 2 to clarify that limited dealer licensees can operate out of their residences, consistent with Minn. Stat. § 327.04, subd. 4(a).[66] The modification made was to delete the comma from the quoted language, which the Department asserted would change the meaning of the rule. The statutory provision reads:

(a) the applicant has a permanent, established place of business at each licensed location. An "established place of business" means a permanent enclosed building other than a residence, or a commercial office space, either owned by the applicant or leased by the applicant for a term of at least one year, located in an area where zoning regulations allow commercial activity, and where the books, records and files necessary to conduct the business are kept and maintained. The owner of a licensed manufactured home park who resides in or adjacent to the park may use the residence as the established place of business required by this subdivision, unless prohibited by local zoning ordinance.[67]

67. Retaining or deleting that comma does not change the meaning of the rule so as to bring subpart 2 into compliance with the statute. The rule must, at a minimum, reference the statutory exemption for resident park owners applying for licensure. In the alternative, the Department can incorporate the text of the exemption into subpart 2. With either change the rule is needed and reasonable and not in conflict with the statutory standards governing such applications. Neither modification would render the rule significantly different from the rule as published in the State Register.

1350.8000 - License Renewal.

68. The renewal standards to be met by licensees, including holders of limited dealer licenses are set out in part 1350.8000. Subpart 2 requires limited dealer licensees to submit photocopies of the records of transactions conducted during the year at the time of license renewal. MAHA objected to this provision, asserting that the submission of all the transaction documents is unnecessary and burdensome.[68] The Department indicated that limited dealers cannot have more than five transactions in a year, resulting in limited amounts of paperwork.[69] MAHA suggested using some sort of certificate to be filed upon renewal and the other paperwork to be required if the licensee is to be audited.[70] The Department noted that limited dealers are likely to be working out of their homes and therefore audits would be unduly intrusive.[71] With the maximum number of transactions statutorily limited to five, requiring submission of the transaction documents upon renewal is not an onerous burden. The rule ensures that oversight can be efficiently conducted. The rule is needed and reasonable as proposed.

Clarity of the Proposed Rules.

69. This rulemaking proceeding has been characterized by confusion between the intent of the Department and the perception of the impact of the proposed rules on persons involved with manufactured homes. Much of this confusion arises from the language used in drafting the rules. Where possible, the Administrative Law Judge has suggested language the removes much of the confusion or restated the impact of the proposed rule to clarify how it is to apply. But the Department should consider withdrawing this rule, in its entirety, to redraft the language in light of the record in this matter. The rules can be stated more clearly and the costs imposed by the rules be assessed more fully if that is done.

Based upon the foregoing Findings of Fact, the Administrative Law Judge makes the following:

CONCLUSIONS

1. The Department gave proper notice of the hearing in this matter.

2. The Department has fulfilled the procedural requirements of Minn. Stat. §§ 14.14 and 14.15, except as noted in Findings 16-23. The procedural error does not qualify as a "harmless error" under Minn. Stat. § 14.15.

3. The Department has documented its statutory authority to adopt the proposed rules, and has fulfilled all other substantive requirements of law or rule within the meaning of Minn. Stat. §§ 14.05, subd. 1, 14.15, subd. 3 and 14.50 (i) and (ii).

4. The Department has demonstrated the need for and reasonableness of the proposed rules by an affirmative presentation of facts in the record within the meaning of Minn. Stat. §§ 14.14, subd. 4 and 14.50 (iii), except as noted at Findings 30-31, 41, 45-51, 55, 57-62, 66 and 67.

5. The additions and amendments to the proposed rules which were suggested by the Department after publication of the proposed rules in the State Register do not result in rules which are substantially different from the proposed rules as published in the State Register within the meaning of Minn. Stat. §§ 14.05, subd. 2 and 14.15, subd. 3.

6. The Administrative Law Judge has suggested action to correct the defects cited in Conclusions 2 and 4, as noted at Findings 30-31, 41, 45-51, 55, 57-62, 66 and 67.

7. Due to Conclusions 2 and 4, this Report has been submitted to the Chief Administrative Law Judge for his approval pursuant to Minn. Stat. § 14.15, subd. 3.

8. Any Findings which might properly be termed Conclusions are hereby adopted as such.

9. A finding or conclusion of need and reasonableness in regard to any particular rule subsection does not preclude and should not discourage the Commission from further modification of the rules based upon an examination of the public comments, provided that the rule finally adopted is based upon facts appearing in this rule hearing record.

Based upon the foregoing Conclusions, the Administrative Law Judge makes the following:

RECOMMENDATION

IT IS HEREBY RECOMMENDED that the proposed rules be adopted except where otherwise noted above.

Dated this

2nd

day of

March,

2000.

STEVE M. MIHALCHICK

Administrative Law Judge

Reported: Barbara F. Schwegman

Kirby A. Kennedy and Associates

Transcript Prepared

[5] The lettering corresponds to the Exhibit designation in the record.

[7] Manufactured Housing Institute v. Petterson, 347 N.W.2d 238, 244 (Minn. 1984); Mammenga v. Department of Human Services, 442 N.W.2d 786 (Minn. 1989).

[8] In re Hanson, 275 N.W.2d 790 (Minn. 1978); Hurley v. Chaffee, 231 Minn. 362, 367, 43 N.W.2d 281, 284 (1950).

[9] Greenhill v. Bailey, 519 F.2d 5, 10 (8th Cir. 1975).

[10] Mammenga v. Dept. of Human Services, 442 N.W.2d 786, 789-90 (Minn. 1989); Broen Memorial Home v. Minnesota Dept. of Human Services, 364 N.W.2d 436, 444 (Minn. App. 1985).

[11] Manufactured Housing Institute v. Pettersen, 347 N.W.2d 238, 244 (Minn. 1984).

[12] Federal Security Administrator v. Quaker Oats Company, 318 U.S. 218, 233 (1943).

[36] This is particularly important with respect to the suggested changes to Minn. Rule 1350.3800, subpart 1. Language such as "may or may not have created a non-compliant manufactured home" is defective for vagueness and cannot be adopted.

[38] Id. Specifically, the agency that issues original construction seals is the U.S. Department of Housing and Urban Development.

[43] Department Comment, at 10; Department Reply, at 2.

[47] “Ensure” is also proposed in part 1350.4500, subpart 6. There the word is used to reflect the result of a manufacturer following the “safe harbor” standards regarding corrective action prior to approval of an action plan. In that instance, the manufacturer can make certain of a result by following the standards set out in the rule. No objections were made regarding that use of the word.

[57] MMHA Reply, at 3 (citing 42 U.S.C. § 5403(d)).

[63] In the Matter of Proposed Adoption of Permanent Rules Relating to Surveillance and Utilization Review of Medical Assistance Services, Minn. Rules, Pts. 9505.2160 to 9505.2242, OAH Docket No. 4-1800-5176-1 (Report issued April, 1991)("For the purposes of rulemaking, a person must be able to determine what conduct is permitted and what is prohibited. Second, the phrase "but not limited to" fails to provide notice of what conduct is included in the definition of abuse."). This language is allowed in instances where the subject matter of the rule is not well understood and the effect of the rule is to make the rule more lenient, rather than more proscriptive. In the Matter of the Proposed Adoption of Rules of the Minnesota Department of Health Relating to Wells and Borings, Licensing and Registration, Permits and Notifications, Well Labels, Minnesota Rules Parts 4725.0100 to 4725.1850 and 4725.6750, OAH Docket No. 11-0900-4274-1 (Report issued March 28, 1990)("The language proposed by the Department provides examples of acceptable documentation and demonstrates that there must be some flexibility in the implementation of the documentation requirement.").

[66] Exhibit S, at 15. The statute expressly allows a resident owner of a manufactured home park to use the residence as a place of business, subject to local zoning restrictions.

[67] Minn. Stat. § 327B.04, subd. 4(a)(emphasis added).