DAR File No. 43015

Commerce, Occupational and Professional Licensing

Rule R156-38a

Residence Lien Restriction and Lien Recovery Fund Rule

Notice of Proposed Rule

(Amendment)

DAR File No.: 43015
Filed: 06/21/2018 10:41:01 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

The purpose of this rule filing is to make substantive changes to comply with H.B. 310, passed during the 2018 General Session, that was effective 05/08/2018, and other technical changes as approved by the Residence Lien Recovery Board.

Summary of the rule or change:

In Section R156-38a-102, this change deletes unnecessary language which requires online and public availability of the affidavit form. In Section R156-38a-202a, based on H.B. 310 (2018), the Utah Legislature eliminated the initial assessments for contractors to the Lien Recovery Fund (LRF). As a result, this rule change deletes this provision concerning the initial assessments. In Section R156-38a-202b, based on H.B. 310 (2018), the Utah Legislature eliminated the special assessments for contractors to the LRF. As a result, this rule change deletes this provision concerning the special assessments. In Section R156-38a-301a, these nonsubstantive technical changes clarify the updated contractor classifications. Additionally, Subsections R156-38a-301a(2) and R156-38a-301a(3) are deleted because no special assessment may be assessed based on H.B. 310 (2018). Section R156-38a-302 is deleted based on H.B. 310 (2018) elimination of the special assessment, as the special assessment is no longer a prerequisite to renewal or reinstatement of licensure.

Statutory or constitutional authorization for this rule:

• Section 38-11-101
• Subsection 58-1-106(1)(a)
• Subsection 58-1-202(1)(a)

Anticipated cost or savings to:

the state budget:

First, the legislative analyst for H.B. 310 (2018) estimated that implementation of H.B. 310 would result in zero fiscal impact. This is because the LRF is used to pay claims under the LRF program and to pay for administrative costs. As a result, elimination of the assessment merely caps the total funds available for claims to be paid and does not impact the state budget otherwise. Obviously, once the LRF is depleted the LRF will no longer be able to meet its current statutory obligations to pay claims. Second, no state agencies shall be directly or indirectly affected by these rule changes because the proposed changes will not result in any significant increase or decrease in administrative costs or revenue compared to the currently anticipated costs and revenues. Accordingly, this rule is not expected to impact the state beyond a minimal cost to the Division of Occupational and Professional Licensing (Division) approximately $75 to print and distribute the rule once the proposed amendments are made effective.

local governments:

Local governments will neither enforce nor be affected by the processes and requirements implemented by this rule, nor will local governments be indirectly impacted because none of these amendments create a situation requiring services from local governments. Therefore, no cost or savings to local governments are anticipated.

small businesses:

These proposed amendments only conform this rule to practices required by H.B. 310 (2018), so these changes will not impact small businesses any more than the enrolled bill, which already has a fiscal note (available online at https://le.utah.gov/~2018/bills/ static/HB0310.html). Because of the statutory changes and this rule which is required as a result of those changes, the only quantifiable impact small businesses will encounter is a savings of $195 for every new contractor license applicant that applies for a classification that previously required LRF assessment. This includes most contractor license applications. As this was a one-time initial assessment fee at initial licensure and as special assessments have been eliminated with H.B. 310, the small businesses that will save will be any new applicants for contractor licensing after 05/08/2018 and the amount saved will be $195 per applicant. Currently, most contractor license applicants, except for certain classifications, are required to pay the one-time initial LRF assessment of $195 per license. With an average of 20 to 30 new initial business contractor applications per working day, most of which require the LRF assessment, the estimated savings for all applicants will be approximately $1,365,000 per year.

persons other than small businesses, businesses, or local governmental entities:

There is no perceivable or quantifiable impact of these rule amendments on other persons, other than those noted above, because these proposed changes only conform the rule to practices required by H.B. 310 (2018).

Compliance costs for affected persons:

There will be no compliance costs for any affected persons because these proposed changes only conform the rule to practices required by H.B 310 (2018).

Comments by the department head on the fiscal impact the rule may have on businesses:

The purpose of these rule changes is to make substantive changes to comply with H.B. 310 (2018), and to adopt other technical changes as approved by the Residence Lien Recovery Board. The legislative analyst for H.B. 310 (2018) estimated that implementation of H.B. 310 would result in zero fiscal impact. This is because the LRF is used to pay claims under the LRF program and to pay for administrative costs. As a result, elimination of the assessment merely caps the total funds available for claims to be paid and does not impact the state budget otherwise. Obviously, once the LRF is depleted the LRF will no longer be able to meet its statutory obligations to pay claims. These proposed amendments conform this rule to H.B. 310 (2018), so these changes will not impact small businesses any more than the enrolled bill, which already has a fiscal note (available online at at https://le.utah.gov/~2018/bills/ static/HB0310.html). The only quantifiable impact small business will encounter is a savings of $195 for every new contractor license applicant that previously required LRF assessment. This includes most contractor license applications. As this was a one-time initial assessment fee at initial licensure and as special assessments have been eliminated with H.B. 310, the small businesses that will experience savings will be any new applicant for contractor licensing after 05/08/2018, and the amount saved will be $195 per applicant. Currently, most contractor license applicants are required to pay the one-time initial LRF assessment of $195 per license. With an average of 20 to 30 new initial business contractor applications per work day (most of which have required the LRF assessment), the estimated savings for all applicants will be approximately $1,365,000 per year.

Francine A. Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Office of Administrative Rules, or at:

Commerce
Occupational and Professional Licensing
HEBER M WELLS BLDG
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Chris Rogers at the above address, by phone at 801-530-6720, by FAX at 801-530-6511, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/14/2018

Interested persons may attend a public hearing regarding this rule:

• 08/08/2018 08:30 AM, Heber Wells Bldg, 160 E 300 S, North Conference Room (first floor), Salt Lake City, UT

This rule may become effective on:

08/21/2018

Authorized by:

Mark Steinagel, Director

Appendix 1: Regulatory Impact Summary Table*

Fiscal Costs	FY 2019	FY2020	FY2021
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$0	$0	$0
Non-Small Businesses	$0	$0	$0
Other Person	$0	$0	$0
Total Fiscal Costs:	$0	$0	$0
Fiscal Benefits
State Government	$0	$0	$0
Local Government	$0	$0	$0
Small Businesses	$1,365,000	$1,365,000	$1,365,000
Non-Small Businesses	$0	$0	$0
Other Persons	$0	$0	$0
Total Fiscal Benefits:	$0	$0	$0
Net Fiscal Benefits:	$0	$0	$0

 

*This table only includes fiscal impacts that could be measured. If there are inestimable fiscal impacts, they will not be included in this table. Inestimable impacts for State Government, Local Government, Small Businesses and Other Persons are described above. Inestimable impacts for Non - Small Businesses are described below.

 

Appendix 2: Regulatory Impact to Non - Small Businesses:

Most non-small business contractor license applicants will also save from the elimination of the one-time initial LRF assessment of $195 per license. However, the full impact cannot be estimated because the data regarding how many new applicants will be non-small businesses is unavailable. There is no perceivable difference concerning the fiscal impact of these rule amendments on non-small business compared to small business. As a result, the fiscal impact to non-small business is noted to be the same as the impact to small business as noted above, and is not distinguished here.

 

The head of the Department of Commerce, Francine A. Giani, has reviewed and approved this fiscal analysis.

 

 

R156. Commerce, Occupational and Professional Licensing.

R156-38a. Residence Lien Restriction and Lien Recovery Fund Rule.

R156-38a-102. Definitions.

In addition to the definitions in Title 38, Chapter 11, Residence Lien Restriction and Lien Recovery Fund Act; Title 58, Chapter 1, Division of Occupational and Professional Licensing Act; and Rule R156-1, General Rule of the Division of Occupational and Professional Licensing, which shall apply to this rule, as used in this rule:

(1) "Affidavit", as required by Subsection 38-11-110(2)(a), means a form affidavit approved by the Division[and posted on the Division's website or otherwise made available for public inspection,] that establishes the following:

(a) the applicant is an owner as defined in Subsection 38-11-102(17);

(b) the residence is an owner-occupied residence as defined in Subsection 38-11-102(18);

(c) the amount of the general contract as defined in Subsection 38-11-107(1)(b)(i)(B) and clarified in Subsection R156-38a-102(14);

(d) the original contractor as defined in Subsection 38-11-102(16);

(e) the location of the residence; and

(f) any other information necessary to establish eligibility for the issuance of a certificate of compliance under Subsection 38-11-110(2)(a), as determined by the Division.

(2) "Affidavit of Compliance" means the affidavit submitted by the owner seeking issuance of a certificate of compliance under Subsection 38-11-110(1)(a)(ii).

(3) "Applicant" means either a claimant, as defined in Subsection (4), or a homeowner, as defined in Subsection (8), who submits an application for a certificate of compliance.

(4) "Claimant" means a person who submits an application or claim for payment from the fund.

(5) "Construction project", as used in Subsection 38-11-203(4), means all qualified services related to the written contract required by Subsection 38-11-204(4)(a).

(6) "Contracting entity" means an original contractor, a factory built housing retailer, or a real estate developer that contracts with a homeowner.

(7) "During the construction", as used in Subsection 38-11-204(1)(c)(ii), means beginning at the time the claimant first provides qualified services and throughout the time frame the claimant provides qualified services.

(8) "Homeowner" means the owner of an owner-occupied residence.

(9) "Licensed or exempt from licensure", as used in Subsection 38-11-204(4) means that, on the date the written contract was entered into, the contractor held a valid, active license issued by the Division pursuant to Title 58, Chapter 55 of the Utah Code in any classification or met any of the exemptions to licensure given in Title 58, Chapters 1 and 55.

(10) "Necessary party" includes the Division, on behalf of the fund, and the applicant.

(11) "Owner", as defined in Subsection 38-11-102(17), does not include any person or developer who builds residences that are offered for sale to the public.

(12) "Permissive party" includes:

(a) with respect to claims for payment: the nonpaying party, the homeowner, and any entity who may be required to reimburse the fund if a claimant's claim is paid from the fund;

(b) with respect to an application for a certificate of compliance: the original contractor and any entity who has demanded from the homeowner payment for qualified services.

(13) "Qualified services", as used in Subsection 38-11-102(20) do not include:

(a) services provided by the claimant to cure a breach of the contract between the claimant and the nonpaying party; or

(b) services provided by the claimant under a warranty or similar arrangement.

(14) "Totals no more", as used in Subsection 38-11-107(1)(b)(ii)(A), means the inclusion of all changes or additions.

(15) "Written contract", as used in Subsection 38-11-204(4)(a)(i), means one or more documents for the same construction project which collectively contain all of the following:

(a) an offer or agreement conveyed for qualified services that will be performed in the future;

(b) an acceptance of the offer or agreement conveyed prior to the commencement of any qualified services; and

(c) identification of the residence, the parties to the agreement, the qualified services that are to be performed, and an amount to be paid for the qualified services that will be performed.

 

[ R156-38a-202a. Initial Assessment Procedures.

The initial assessment shall be a flat or identical assessment levied against all qualified beneficiaries to create the fund.

 

R156-38a-202b. Special Assessment Procedures.

(1) Special assessments shall take into consideration the claims history against the fund.

(2) The amount of special assessments shall be established by the Division and Board in accordance with the procedures set forth in Section 38-11-206.]

 

R156-38a-301a. Contractor Registration as a Qualified Beneficiary - All License Classifications Required to Register Unless Specifically Exempted - Exempted Classifications.

(1) All license classifications of contractors are determined to be regularly engaged in providing qualified services for purposes of automatic registration as a qualified beneficiary, as set forth in Subsections 38-11-301(1) and (2), with the exception of the following license classifications:

 

TABLE II

     Primary

     Classification   Subclassification

     Number           Number             Classification



      E100                       General Engineering Contractor

                 [S211]P202      Boiler Installation Contractor

                 [S213]P204      Industrial Piping Contractor

                       S262      Gunnite and Pressure Grouting

                                   Contractor

      S320                       Steel Erection Contractor

                       S321      Steel Reinforcing Contractor

                       S322      Metal Building Erection

                                   Contractor

                       S323      Structural Stud Erection

                                   Contractor

      S340                       Sheet Metal Contractor

      S360                       Refrigeration Contractor

      S440                       Sign Installation Contractor

                       S441      Non Electrical Outdoor

                                   Advertising Sign Contractor

      S450                       Mechanical Insulation Contractor

      S470                       Petroleum System Contractor

      S480                       Piers and Foundations Contractor

      I101                       General Engineering Trades

                                   Instructor

      I102                       General Building Trades

                                   Instructor

      I103                       General Electrical Trades

                                   Instructor

      I104                       General Plumbing Trades

                                   Instructor

      I105                       General Mechanical Trades

                                   Instructor

 

 

[(2) A licensee with a license classification that requires registration in the fund whose license is on inactive status on the assessment date of any special assessment of the fund, is not required to pay the special assessment during the time the license remains on inactive status.

(3) Before a licensee can reactivate the license, the licensee must pay any special assessment or assessments within the two years prior to the reactivation date.]

 

[ R156-38a-302. Renewal and Reinstatement Procedures.

(1) Renewal notices required in connection with a special assessment shall be sent to each registrant at least 30 days prior to the expiration date for the existing registration established in the renewal notice. Unless the registrant pays the special assessment by the expiration date shown on the renewal notice, the registrant's registration in the fund automatically expires on the expiration date.

(2)(a) Renewal notices shall be sent by letter deposited in the post office with postage prepaid, addressed to the last address shown on the Division's records. Such mailing shall constitute legal notice. It shall be the duty and responsibility of the registrant to maintain a current mailing address with the Division; or

(b) If a registrant has authorized the Division to send a renewal notice by email, the email shall be sent to the last email address shown on the Division's records. Such mailing shall constitute legal notice. It shall be the duty and responsibility of the registrant to maintain a current email address with the Division.

(3) Renewal notices shall specify the amount of the special assessment, the application requirement, and other renewal requirements, if any; shall require that each registrant document or certify that the registrant meets the renewal requirements; and shall advise the registrant of the consequences of failing to renew a registration.

(4) Renewal applications must be received by the Division in its ordinary course of business on or before the renewal application due date in order to be processed as a renewal application. Late applications will be processed as reinstatement applications.

(5) A registrant whose registration has expired may have the registration reinstated by complying with the requirements and procedures specified in Subsection 38-11-302(5).]

 

KEY: licensing, contractors, liens

Date of Enactment or Last Substantive Amendment: [September 9, 2010]2018

Notice of Continuation: December 9, 2014

Authorizing, and Implemented or Interpreted Law: 38-11-101; 58-1-106(1)(a); 58-1-202(1)(a)