Texas State Lemon Law

Texas Revised Civil Statutes, Art. 4413(36) §§ 3.08(i), 6.07, 7.01

Texas Administrative Code, Title 16 §§ 107.1-107.12

3.08(i) General Warranty Complaints.

The owner of a motor vehicle or the owner's designated agent may make a complaint concerning defects in a motor vehicle which are covered by a manufacturer's, converter's, or distributor's warranty agreement applicable to the vehicle. Any such complaint must be made in writing to the applicable dealer, manufacturer, converter, or distributor and must specify the defects in the vehicle which are covered by the warranty. The owner may also invoke the Commission's jurisdiction by sending the Commission a copy of the complaint. A hearing may be scheduled on all complaints arising under this subsection which are not privately resolved between the owner and the dealer, manufacturer, converter, or distributor.

6.07 Warranty Performance Obligations.

(a) In addition to the other powers and duties provided for in this Act, the Commission shall cause manufacturers, converters, and distributors to perform the obligations imposed by this section. For purposes of this section, the term "owner" means a retail purchaser, lessor, lessee other than a sub lessee, or the person so designated on the certificate of title to a motor vehicle issued by the State Department of Highways and Public Transportation, or an equivalent document issued by the duly authorized agency of any other state, or any person to whom such motor vehicle is legally transferred during the duration of a manufacturer's or distributor's express warranty applicable to such motor vehicle, and any other person entitled by the terms of the manufacturer's, converter's, or distributor's express warranty to enforce the obligations thereof.

(b) If a new motor vehicle does not conform to all applicable manufacturer's, converter's, or distributor's express warranties, the manufacturer, converter, or distributor shall make the repairs necessary to conform the vehicle to the applicable express warranties, notwithstanding that the repairs are made after the expiration of the warranties, if:

(1) the owner or the owner's designated agent reported the nonconformity to the manufacturer, converter, or distributor, its agent, or its franchised dealer during the term of such express warranties; or

(2) a reputable presumption relating to the vehicle was created under Subsection (d) of this section. This section does not in any way limit the remedies available to an owner under a new motor vehicle warranty that extends beyond the provisions of this section.

(c) If the manufacturer, converter, or distributor is unable to conform the motor vehicle to an applicable express warranty by repairing or correcting any defect or condition which creates a serious safety hazard or substantially impairs the use or market value of the motor vehicle after a reasonable number of attempts, the manufacturer, converter, or distributor shall

(1) replace the motor vehicle with a comparable motor vehicle; or

(2) accept return of the vehicle from the owner and refund to the owner the full purchase price less a reasonable allowance for the owner's use of the vehicle and any other allowances or refunds payable to the owner. In this section, "impairment of market value" means a substantial loss in market value caused by a defect specific to the vehicle. In addition to replacing the vehicle or refunding the purchase price, the manufacturer, converter, or distributor shall reimburse the owner for reasonable incidental costs resulting from loss of use of the motor vehicle because of the nonconformity or defect. As necessary to promote the public interest, the Commission by rule shall define the incidental costs that are eligible for reimbursement, shall specify other requirements necessary to determine an eligible cost, and may set a maximum amount that is eligible for reimbursement, either by type of eligible cost or a total for all costs. Refunds shall be made to the owner and lien holder, if any, as their interests may appear. A reasonable allowance for use shall be that amount directly attributable to use of the motor vehicle when the vehicle is not out of service for repair. An order to refund or to replace may not be issued by the Executive Director against a manufacturer, converter, or distributor unless the manufacturer, converter, or distributor has been mailed prior written notification of the alleged nonconformity or defect from or on behalf of the owner and has been given an opportunity to cure the alleged defect or nonconformity. In any hearing before the Executive Director under this section, a manufacturer, converter, or distributor may plead and prove as an affirmative defense to the remedies provided hereunder that

(1) the nonconformity is the result of abuse, neglect, or unauthorized modifications or alterations of the motor vehicle; or

(2) the nonconformity does not substantially impair the use or market value of the motor vehicle. In this section, "serious safety hazard" means a life-threatening malfunction or nonconformity that substantially impedes a person's ability to control or operate a motor vehicle for ordinary use or intended purposes or that creates a substantial risk of fire or explosion.

(d) There is a reputable presumption that a reasonable number of attempts have been undertaken to conform a motor vehicle to the applicable express warranties if

(1) the same nonconformity has been subject to repair four or more times by the manufacturer, converter, or distributor, its agent, or its franchised dealer and two of the repair attempts have been made within a period of 12 months following the date of original delivery to an owner, or 12,000 miles, whichever occurs first, and the other two repair attempts occur within the 12 months or 12,000 miles immediately following the date of the second repair attempt, whichever occurs first, but such nonconformity continues to exist;

(2) the same nonconformity creates a serious safety hazard and has caused the vehicle to have been subject to repair two or more times by the manufacturer, converter, or distributor, or an authorized agent or franchised dealer, and at least one attempt to repair the nonconformity was made in the period of 12 months or 12,000 miles, whichever occurs first, and at least one other attempt made in the period of 12 months or 12,000 miles after the first repair attempt, whichever occurs first, but the nonconformity continues to exist; or

(3) the vehicle is out of service for repair for a cumulative total of 30 or more days in the 24 months or 24,000 miles, whichever occurs first, and at least two repair attempts were made in the first 12 months or 12,000 miles immediately following the date of original delivery to an owner and a nonconformity still exists that substantially impairs the vehicle's use or market value. The initial 12-month period or 12,000 mile limit, the subsequent 12-month period or 12,000 mile limit, and the 30-day period shall be extended by any period of time during which repair services are not available to the owner because of a war, invasion, strike or fire, flood, or other natural disaster. During any period of time that the manufacturer or distributor lends a comparable motor vehicle to the owner during the time the vehicle is being repaired by a franchised dealer, the 30-day period provided for in this subsection is tolled.

(e)

(1) The Commission shall adopt rules for the enforcement and implementation of this section.

(2) The Executive Director shall, in accordance with rules adopted by the Commission, conduct hearings and issue final orders for the enforcement and implementation of this section. Orders issued by the Executive Director under this section are considered final orders of the Commission.

(3) Except as provided by Subdivision (6) of this subsection, the provisions of this section are not available to an owner in an action seeking a refund or replacement based upon the alleged nonconformity of a motor vehicle to an express warranty applicable to the motor vehicle unless the owner has first exhausted the administrative remedies provided herein.

(4) The provisions of this section are not available to a party in an action against a seller under Chapter 2 or Chapter 17, Business & Commerce Code, as amended.

(5) Except as provided by Subdivision (6) of this subsection, the provisions of this section are available in an action against a manufacturer, converter, or distributor brought under Chapter 17, Business & Commerce Code, after the owner has exhausted the administrative remedies provided by this section.

(6) If, after a complaint has been filed under this section, the Hearing Examiner has not issued a proposal for decision and recommended to the Executive Director a final order before the expiration of the 150th day after the date the complaint was filed, the Executive Director shall, in writing sent by certified mail, so inform the complainant and the manufacturer, converter, or distributor of the expiration of the 150-day period and of the complainant's right to file a civil action. The Commission shall extend the 150-day period if a delay is requested or is caused by the complainant.

(7) After receipt of the notice of the right to file a civil action, the complainant may file a civil action against one or more of the persons complained of in the complaint.

(8) A failure by the Commission to issue a notice of the right to file a civil action does not affect a complainant's right to bring an action under this Act.

(9) Any party to a proceeding under this section before the Executive Director that is affected by a final order of the Executive Director is entitled to judicial review of the order under the substantial evidence rule in a District Court of Travis County, Texas. The judicial review is subject to the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes) except to the extent that that Act is inconsistent with this Act.

(f) This section does not limit the rights or remedies otherwise available to an owner under any other law.

(g) In a hearing under this section, the Executive Director shall make its order with respect to responsibility for payment of the cost of any refund or replacement and no manufacturer, converter, or distributor may cause any franchised dealer to pay directly or indirectly any sum not specifically so ordered by the Executive Director. If the Executive Director orders a manufacturer, converter, or distributor to refund or replace a motor vehicle because it meets the criteria set forth in this section, the Executive Director may order the franchised dealer to reimburse the owner, lien holder, manufacturer, converter, or distributor only for items or options added to the vehicle by the franchised dealer and only to the extent that one or more of such items or options contributed to the defect that served as the basis for the Executive Director's order of refund or replacement. In a case involving a leased vehicle, the Executive Director may terminate the lease and apportion the allowance for use and other allowances or refunds between the lessee and lessor of the vehicle.

(h) A proceeding brought under this section shall be commenced within six months following the earlier of (1) expiration of the express warranty term or (2) 24 months or 24,000 miles following the date of original delivery of the motor vehicle to an owner.

(i) A contractual provision that excludes or modifies the remedies provided for in this section is prohibited and shall be deemed null and void as against public policy unless the exclusion or modification is done with respect to a settlement agreement between the owner and the manufacturer, converter, or distributor.

(j)

(1) A manufacturer, distributor, or converter that has been ordered to repurchase or replace a vehicle shall, through its franchised dealer, issue a disclosure statement stating that the vehicle was repurchased or replaced by the manufacturer, distributor, or converter under this section. The disclosure statement must accompany the vehicle through the first retail purchase. The manufacturer, distributor, or converter must restore the cause of the repurchase or replacement to factory specifications and issue a new 12-month, 12,000-mile warranty on the vehicle. The disclosure statement must include a toll-free telephone number of the Commission that will enable a purchaser of a repurchased or replaced vehicle to obtain information about the condition or defect that was the basis of the order for repurchase or replacement. The Commission shall adopt rules for the enforcement of this subdivision.

(2) The Commission shall provide a toll-free telephone number for providing information to persons who request information about a condition or defect that was the basis for repurchase or replacement by an order of the Executive Director. The Commission shall maintain an effective method of providing information to persons who make the requests.

(k) The Commission shall publish an annual report on the motor vehicles ordered repurchased or replaced under this section. The report must list the number of vehicles by brand name and model and include a brief description of the conditions or defects that caused the repurchase or replacement. The Commission shall make the report available to the public. The Commission may charge a reasonable fee to recover the cost of the report.

(l) Information filed with the Board under this section is not a public record and is not subject to release under the open records law, Chapter 552, Government Code, until the complaint is finally resolved by order of the Board.

7.01 Judicial Review; Appeal.

(a) Any party to a proceeding before the Commission that is affected by a final order, rule, decision, or other final action of the Commission is entitled to judicial review of any such final Commission action, under the substantial evidence rule, in a District Court of Travis County, Texas, or in the Court of Appeals for the Third Court of Appeals District, and to the extent not in consistent herewith, pursuant to the Administrative Procedure and Texas Register Act (Article 6252-13a, Vernon's Texas Civil Statutes). Appeals initiated in the District Courts of Travis County shall be removable to the Court of Appeals upon notice of removal to any such district court by any party at any time prior to trial in the district court. Appeals initiated in or removed to the Court of Appeals shall be initiated under the Administrative Procedure and Texas Register Act as if initiated in a Travis County District Court and shall, upon the filing thereof, be thereafter governed by the Texas Rules of Appellate Procedure.

(b) A final action, ruling, order, or decision of the Motor Vehicle Board of the Texas Department of Transportation, or the Director of the Motor Vehicle Division of the Texas Department of Transportation, as appropriate under the terms of this Act or other law, is the final action with respect to a matter arising under this Act, and is subject to review only by judicial review as provided by this Act. The petition for judicial review must be filed within 30 days of the date on which an action, ruling, order, or decision of the Board or the director first becomes final and appealable.

(c) Citation must be served on the Executive Director. Citation must also be served on all other parties of record before the Commission. For appeals initiated in the Court of Appeals, the court shall cause citation to be issued.

(d) Appeals in which evidence outside the Commission's record is to be taken under Section 19(d)(3), Administrative Procedure and Texas Register Act (Article 6252-13a,Version's Texas Civil Statutes), or otherwise, shall be initiated in a Travis County District Court, or having been initiated in the Court of Appeals, shall be subject to remand to a Travis County District Court for proceedings in accordance with instructions from the Court of Appeals.

(e) Appellants shall pursue appeals with reasonable diligence. If an appellant fails to prosecute an appeal within six months after the appeal is filed, the court shall presume that the appeal has been abandoned. The court shall dismiss any such appeal on a motion for dismissal made by the Attorney General or other party unless the appellant, after receiving due notice, demonstrates good cause for the delay.

(f) Appeal shall not affect the enforcement of a final Commission order unless its enforcement is enjoyable under Section 65.001 et seq., Civil Practice and Remedies Code, and under principles of primary jurisdiction.

107.1 Objective.

It is the objective of these sections to implement the intent of the legislature as declared in the Texas Motor Vehicle Commission Code, 3.06 and 6.07(e), by prescribing rules to provide a simplified and fair procedure for the enforcement and implementation of the Texas lemon law and consumer complaints covered by general warranty agreements, including the processing of complaints, the conduct of hearings, and the disposition of complaints filed by owners of new motor vehicles seeking relief under these provisions of the Code.

107.2 Filing of Complaints.

(a) Complaints for relief under the lemon law must be in writing and filed with the commission at its office in Austin. Complaints may be in letter form or any other written format or may be submitted on complaint forms provided by the commission.

(b) Complaints should state sufficient facts to enable the commission and the party complained against to know the nature of the complaint and the specific problems or circumstances which form the basis of the claim for relief under the lemon law.

(c) Complaints must provide the following information:

(1) name, address, and phone number of vehicle owner;

(2) identification of vehicle by make, model, and year, and manufacturer's vehicle identification number;

(3) type of warranty coverage;

(4) name and address of dealer, or other person, from whom vehicle was purchased or leased, including the name and address of the current lessor, if applicable;

(5) date of delivery of vehicle to original owner; and in the case of a demonstrator, the date the vehicle was placed into demonstrator service;

(6) vehicle mileage at time vehicle was purchased or leased, mileage when problems with vehicle were first reported, name of dealer or manufacturer's or distributor's agent to whom problems were first reported, and current mileage;

(7) identification of existing problems and brief description of history of problems and repairs on vehicle, including date and mileage of each repair, with copies of repair orders where possible;

(8) date on which written notification of complaint was given to the vehicle manufacturer or distributor, and if vehicle has been inspected by manufacturer, the date and results of such inspection;

(9) any other information which the complainant believes to be pertinent to the complaint.

(d) The commission's staff will provide information concerning the complaint procedure and complaint forms to any person requesting information or assistance.

(e) The lemon law complaint filing fee of $75 should be remitted with the complaint by check or money order payable to the Texas Motor Vehicle Commission. The filing fee is nonrefundable, but a complainant who prevails in a lemon law case is entitled to reimbursement of the amount of the filing fee. Failure to remit the filing fee with the complaint will result in delaying the commencement of the 150-day requirement provided in 107.6(11) of this title (relating to Hearings).

107.3 Review of Complaints.

All complaints will be reviewed promptly by the commission's staff to determine whether they satisfy the requirements of the lemon law.

(1) If it cannot be determined whether a complaint satisfies the requirements of the lemon law, the complainant will be contacted for additional information.

(2) If it is determined that the complaint does not meet the requirements of the lemon law, the complainant will be notified of this fact.

(3) If it is determined that the complaint does meet the requirements of the lemon law, the complaint will be processed in accordance with the following procedures in 107.4-107.9 of this title (relating to Notification of Manufacturer and Distributor; Mediation, Settlement; Hearings; Hearing Officer's Report; Decisions; and Compliance).

(4) For purposes of 6.07(h), the commencement of a proceeding means the filing of a complaint with the commission, and the date of filing is determined by the date of receipt by the commission.

107.4 Notification to Manufacturer and Distributor.

Upon receipt of a complaint for relief under the lemon law, notification thereof, with a copy of the complaint, will be given to the appropriate manufacturer or distributor against whom the complaint is made, and a response to the complaint will be requested. Notification of the complaint and a request for a response will also be given to the selling dealer and any other dealer that has been involved with the complaint.

107.5 Mediation; Settlement.

If, from a review of the complaint and the responses received from the manufacturer, distributor, or dealer, it appears to the commission staff that a settlement or resolution of the complaint may be possible without the necessity for a hearing, the commission staff will contact all parties and attempt to effect a settlement or resolution of the complaint in a manner satisfactory to the parties.

107.6 Hearings.

Complaints which satisfy the jurisdictional requirements of the Texas Motor Vehicle Commission Code, 3.08(i) and 6.07, will be set for hearing and notification of the date, time, and place the hearing will be given to all parties by certified mail.

(1) Where possible, and subject to the availability of commission personnel and funds, hearings will be held in the city where the complainant resides or at a location reasonably convenient to the complainant.

(2) Hearings will be scheduled at the earliest date possible, provided that ten days prior notice, or as otherwise provided by law, must be given to all parties. A notice of hearing will also be provided to a dealer identified as a party who will be requested to have a representative appear at the hearing.

(3) Hearings will be conducted by commission staff hearing officers or by independent hearing officers designated by the executive director of the commission.

(4) Hearings will be informal in nature, it being the intent of the lemon law to provide a procedure and forum which does not necessitate the services of attorneys and which does not involve strict legal formalities applicable to trials in county or district court.

(5) The parties have the right to be represented by attorneys at a hearing, although attorneys are not necessary in hearings on lemon law complaints. Any party who intends to be represented by an attorney at a hearing must notify the commission and the other party at least five days prior to the hearing and failure to do so will constitute grounds for postponement of the hearing if requested by the other party.

(6) The parties have the right to present their cases in full, including testimony from witnesses; documentary evidence such as repair orders, warranty documents, vehicle sales contract, etc.

(7) Each party will be subject to being questioned by the other party, within limits to be governed by the hearing officer.

(8) The complainant will be required to bring the vehicle in question to the hearing for the purpose of having the vehicle inspected and test driven, unless otherwise ordered by the hearing officer upon a showing of good cause as to why the complainant should not be required to bring the vehicle to the hearing.

(9) The commission may have the vehicle in question inspected prior to the hearing by an independent expert, where the opinion of such expert will be of assistance to the hearing officer and the commission in arriving at a decision. Any such inspection shall be made upon prior notice to all parties who shall have the right to be present at such inspection, and copies of any findings or report resulting from such inspection will be provided to all parties prior to the hearing. Any such expert will be present at the hearing to present his report on the inspection of the vehicle and to respond to questions by the parties.

(10) All hearings will be recorded on tape by the hearing officer. Copies of the tape recordings of a hearing will be provided to any party upon request and upon payment for the cost of the tapes.

(11) All hearings will be conducted expeditiously. However, if a commission hearings officer has not issued a proposal for decision within 150 days after the complaint and filing-fee were received, commission staff shall notify the parties by certified mail that complainant has a right to file a civil action in state district court to pursue his rights under the lemon law. The 150-day period shall be extended upon request of the complainant or if a delay in the proceeding is caused by the complainant. The notice will inform complainant of his right to continue his lemon law complaint through the commission if he chooses.

107.7 Contested Cases: Decisions and Final Orders.

To expedite the resolution of lemon law cases, the executive director is authorized to delegate final decision-making authority to hearings officers. Review of the hearings officers' decisions and final orders shall be according to the procedures set forth as follows:

(1) A hearings officer will prepare a written decision and final order as soon as possible but not later than 60 days after the hearing is closed. The decision and order will include the hearings officer's findings of fact and conclusions of law.

(2) The decision and final order shall be sent to all parties of record by certified mail.

(3) The decision and order is final and binding on the parties, in the absence of a timely motion for rehearing, on the expiration of the period for filing a motion for rehearing.

(4) A party who disagrees with the decision and final order may file a motion for rehearing within 20 days from the date of the mailing of the final order. A motion for rehearing must include all the specific reasons, exceptions, or grounds that are asserted by a party as the basis of the request for a rehearing. It shall recite, if applicable, the specific findings of fact, conclusions of law, or any other portions of the decision to which the party objects. Replies to a motion for rehearing must be filed with the agency within 30 days after the date of the mailing of the final order.

(5) A motion for rehearing may be directed either to the executive director or to the commission, as a body, at the election of the party filing the motion. If the party filing the motion does not include a specific request for a rehearing by the members of the commission, the motion shall be deemed to be a request for a rehearing by the executive director.

(6) The executive director or the commission, as appropriate, must act on the motion within 45 days after the mailing of the final order or it is overruled by operation of law. The executive director or the commission, as appropriate, may, by written order, extend the period for filing, replying to, and taking action on a motion for rehearing, not to exceed 90 days after the date of mailing the final order. In the event of an extension of time, the motion for rehearing is overruled by operation of law on the date fixed by the written order of extension, or in the absence of a fixed date, 90 days after the mailing of the final order.

(7) If the executive director or the commission grants a motion for rehearing, the parties will be notified by first class mail. A rehearing before the executive director will be scheduled as promptly as possible. A rehearing before the commission will be scheduled at the earliest possible meeting of the commission. After rehearing, the executive director or commission shall issue a final order any additional findings of fact or conclusions of law necessary to support the decision. The executive director or the commission may also issue an order granting relief requested in a motion for rehearing or replies thereto without the need for a rehearing. If a motion for rehearing and the relief requested is denied, an order so stating will be issued.

(8) A person who has exhausted all administrative remedies, and who is aggrieved by a final decision in a contested case from which appeal may be taken is entitled to judicial review under the substantial evidence rule. The petition shall be filed in a district court of Travis County within 30 days after the decision or order of the agency is final and appealable. A copy of the petition must be served on the agency and any other parties of record. After service of the petition on the agency and within the time permitted for filing an answer, the agency shall transmit to the reviewing court the original or a certified copy of the entire record of the proceeding. If the court orders new evidence to be presented to the agency, the agency may modify its findings and decision or order by reason of the new evidence, and shall transmit the additional record to the court.

107.8 Decisions.

Any decisions by the commission and recommended decision by a hearing officer shall give effect to the presumptions provided in the Texas Motor Vehicle Commission Code, 6.07(d), where applicable.

(1) If it is found that the manufacturer, distributor, or converter is not able to conform the vehicle to an applicable express warranty by repairing or correcting a defect in the complainant's vehicle which substantially impairs the use, market value, or safety of the vehicle after a reasonable number of attempts, and that the affirmative defenses provided under the Texas Motor Vehicle Commission Code, 6.07(c), are not applicable, the commission shall order the manufacturer, distributor, or converter to replace the vehicle with a comparable vehicle, or accept the return of the vehicle from the owner and refund to the owner the full purchase price of the vehicle, less a reasonable allowance for the owner's use of the vehicle.

(A) In a complaint involving a defect or condition that creates a serious safety hazard in the vehicle, an owner shall be deemed to have given the manufacturer, distributor, or converter a reasonable number of attempts to repair the vehicle if he reported and allowed an opportunity to repair the defect or condition at least once during the period of 12 months or 12,000 miles, whichever occurs first, immediately following the date of delivery and at least once more in the period of 12 months or 12,000 miles, whichever occurs first, following the first repair attempt.

(B) A defect or condition that creates a serious safety hazard is one that results in a life threatening malfunction or nonconformity that substantially impedes a person's ability to control or operate a motor vehicle for ordinary use or intended purposes or that creates a substantial risk of fire or explosion.

(2) In any decision in favor of the complainant, the commission will accommodate the complainant's request with respect to replacement or repurchase of the vehicle, to the extent possible.

(3) Where a refund of the purchase price of a vehicle is ordered, the purchase price shall be the amount of the total purchase price of the vehicle, and shall include the amount of the sales taxes and title, registration, and documentary fees, but shall not include the amount of any interest or finance charge or insurance premiums. The award to the vehicle owner shall include reimbursement for the amount of the lemon law complaint filing fee paid by or on behalf of the vehicle owner. The refund shall be made payable to the vehicle owner and the lien holder, if any, as their interests require.

(4) Except in cases where clear and convincing evidence shows that the vehicle has a longer or shorter expected useful life than 100,000 miles, the reasonable allowance for the owner's use of the vehicle shall be that amount obtained by adding the following:

(A) the product obtained by multiplying the purchase price of the vehicle, as defined in paragraph (3) of this section, by a fraction having as its denominator 100,000 and having as its numerator the number of miles that the vehicle traveled from the time of delivery to the owner to the first report of the defect or condition forming the basis of the repurchase order; and

(B) 50% of the product obtained by multiplying the purchase price by a fraction having as its denominator 100,000 and having as its numerator the number of miles that the vehicle traveled after the first report of the defect or condition forming the basis of the repurchase order. The number of miles during the period covered in this paragraph shall be determined from the date of the first report of the defect or condition forming the basis of the repurchase order through the date of the TMVC hearing.

(5) Except in cases involving unusual and extenuating circumstances, supported by a preponderance of the evidence, where refund of the purchase price of a leased vehicle is ordered, the purchase price shall be allocated and paid to the lessee and the lessor, respectively as follows.

(A) The lessee shall receive the total of:

(i) all lease payments previously paid by him to the lessor under the terms of the lease; and

(ii) all sums previously paid by him to the lessor in connection with entering into the lease agreement, including, but not limited to, any capitalized cost reduction, down payment, trade-in, or similar cost, plus sales tax, license and registration fees, and other documentary fees, if applicable.

(B) The lessor shall receive the total of:

(i) the actual price paid by the lessor for the vehicle, including tax, title, license, and documentary fees, if paid by lessor, and as evidenced in a bill of sale, bank draft demand, tax collector's receipt, or similar instrument; plus

(ii) an additional 5.0% of such purchase price plus any amount or fee, if any, paid by lessor to secure the lease or interest in the lease;

(iii) provided, however, that a credit, reflecting all of the payments made by the lessee, shall be deducted from the actual purchase price which the manufacturer is required to pay the lessor, as specified in clauses (i) and (ii) of this subparagraph.

(C) When the commission orders a manufacturer to refund the purchase price in a lease vehicle transaction, the vehicle shall be returned to the manufacturer with clear title upon payment of the sums indicated in subparagraphs (A) and (B) of this paragraph. The lessor shall transfer title of the vehicle to the manufacturer, as necessary in order to effectuate the lessee's rights under this rule. In addition, the lease shall be terminated without any penalty to the lessee.

(D) Refunds shall be made to the lessee, lessor, and any lien holders as their interests may appear. The refund to the lessee under subparagraph (A) of this paragraph shall be reduced by a reasonable allowance for the lessee's use of the vehicle. A reasonable allowance for use shall be computed according to the formula in paragraph (4) of this section, using the amount in subparagraph (B)(i) of this paragraph as the applicable purchase price.

(6) In any award in favor of a complainant, the executive director may require the dealer involved to reimburse the complainant, manufacturer, distributor, or converter for the cost of any items or options added to the vehicle but only to the extent that one or more of such items or options contributed to the defect that served as the basis for the order of repurchase or replacement. In no event shall this paragraph be interpreted to mean that a manufacturer, distributor, or converter will be required to repurchase a vehicle due to a defect or condition that was solely caused by a dealer add-on item or option.

(7) If it is found by the commission that a complainant's vehicle does not qualify for replacement or repurchase, then the commission shall enter an order dismissing the complaint insofar as relief under the lemon law is concerned. However, the commission may enter an order in any proceeding, where appropriate, requiring repair work to be performed or other action taken to obtain compliance with the manufacturer's, distributor's, or converter's warranty obligations.

(8) If the vehicle is substantially damaged or there is an adverse change in its condition, beyond ordinary wear and tear, from the date of delivery to the owner to the date of repurchase, and the parties are unable to agree on an amount of an allowance for such damage or condition, either party shall have the right to request reconsideration by the commission of the repurchase price contained in the final order.

(9) The commission will issue a written order in each case in which a hearing is held and a copy of the order will be sent to all parties.

107.9 Incidental Expenses.

(a) When a refund of the purchase price of a vehicle is ordered, the complainant shall be reimbursed for certain incidental expenses incurred by the complainant from loss of use of the motor vehicle because of the defect or nonconformity which is the basis of the complaint. The expenses must be verifiable through receipts or similar written documents. Reimbursable incidental expenses include:

(1) reasonable cost of alternate transportation;

(2) charges for towing;

(3) costs of telephone calls or mail charges directly attributable to contacting the manufacturer, distributor, converter, or dealer regarding the vehicle; and

(4) reasonable costs of meals and lodging necessitated by the vehicle's failure during out-of town trips.

(b) Only reasonable incidental expenses shall be reimbursed to a complainant. Incidental expenses shall be included in the final repurchase price required to be paid by a manufacturer, distributor, or converter to a prevailing complainant or in the case of a vehicle replacement, shall be tendered to the complainant at the time of replacement.

107.10 Compliance.

Compliance with the commission's order will be monitored by the commission.

(1) A complainant is not bound by the commission's decision and order and may either accept or reject the decision.

(2) If a complainant does not accept the commission's final decision, the proceeding before the commission will be deemed concluded and the complaint file closed.

(3) If the complainant accepts the commission's decision, then the manufacturer, distributor, or converter and the dealer to the extent of the dealer's responsibility, if any, shall immediately take such action as is necessary to implement the commission's decision and order.

(4) If complainant's vehicle is replaced or repurchased pursuant to a commission order, the manufacturer, distributor, or converter shall, through its representative dealer, issue a disclosure statement in the format of Attachment 1 or on a form approved by the commission, which must accompany the vehicle through the first retail purchase after the commission order. In addition, the manufacturer, distributor, or converter must repair the defect or condition in the vehicle that resulted in the repurchase and issue, at a minimum, a basic warranty (12 months/12,000 mile, whichever comes first) on a form approved by the commission, which warranty shall be provided to the first retail purchaser of the vehicle following the commission order.

(5) The failure of any manufacturer, distributor, converter, or dealer to comply with a decision and order of the commission within the time period prescribed in the order may subject the manufacturer, distributor, converter, or dealer to formal action by the commission and the assessment of civil penalties or other sanctions prescribed by the Texas Motor Vehicle Commission Code for failure to comply with an order of the commission.

107.11 Reports to Commission.

The executive director shall inform the commission concerning the administration and enforcement of the lemon law. He shall provide monthly reports to the commission which include data about the number of complaints received, number of complaints resolved informally and formally, pursuant to written orders, number of vehicles ordered repurchased, and any other information that may be requested by the commission.

107.12 Contested Cases under General Warranty.

Provisions: Decisions and Final Orders.

To expedite the resolution of general warranty complaints filed under 3.08(i) of the Texas Motor Vehicle Commission Code, the executive director is authorized to conduct hearings and issue final orders for the enforcement and implementation of this section. Orders issued by the executive director under this section are considered final orders of the Commission.