(a) Unless otherwise indicated, this section applies to decisions that relate to lemon law complaints. Decisions shall give effect to the presumptions provided in Occupations Code, §2301.605, where applicable.
  (1) If a hearings examiner finds that the manufacturer, distributor, or converter is not able to conform the motor vehicle to an applicable express warranty by repairing or correcting a defect in the complainant's motor vehicle, creating a serious safety hazard or substantially impairing the use or market value of the motor vehicle after a reasonable number of attempts, and that the affirmative defenses provided under Occupations Code, §2301.606 are not applicable, the hearings examiner shall issue a final order to the manufacturer, distributor, or converter to:
    (A) replace the motor vehicle with a comparable motor vehicle; or
    (B) accept the return of the motor vehicle from the owner and refund the full purchase price of the motor vehicle to the owner, less a reasonable allowance for the owner's use of the motor vehicle and any other allowances or refunds payable to the owner.
  (2) In a decision in favor of the complainant, the hearings examiner will, to the extent possible, accommodate the complainant's request with respect to replacement or repurchase of the motor vehicle.
(b) This subsection applies only to the repurchase of motor vehicles.
  (1) When a refund is ordered, the purchase price shall be the total purchase price of the motor vehicle, excluding the amount of any interest, finance charge, or insurance premiums. The refund amount to the motor vehicle owner shall include reimbursement of the amount of the lemon law complaint filing fee paid by, or on behalf of, the motor vehicle owner. The refund shall be made payable to the motor vehicle owner and to any lienholder, respective to each person's ownership interest in the motor vehicle.
  (2) There is a rebuttable presumption that the expected useful life of a motor vehicle is 120,000 miles. Except in cases where the preponderance of the evidence shows the motor vehicle has a longer or shorter expected useful life than 120,000 miles, the reasonable allowance for the owner's use of the motor vehicle shall be the sums of the amounts obtained by adding subparagraphs (A) and (B) of this paragraph.
    (A) The product obtained by multiplying the total purchase price, as defined in paragraph (1) of this subsection, of the motor vehicle by a fraction having as its denominator 120,000 and having as its numerator the number of miles that the motor vehicle traveled from the time of delivery to the owner to the date of the date of 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 total purchase price by a fraction having as its denominator 120,000 and having as its numerator the number of miles that the motor vehicle traveled after the first report of the defect or condition forming the basis of the repurchase order through the date of the hearing.
  (3) There is a rebuttable presumption the expected useful life of a towable recreational vehicle is 5,475 days or 15 years. Except in cases where a preponderance of the evidence shows that the vehicle has a longer or shorter expected useful life than 5,475 days or 15 years, the reasonable allowance for the owner's use of the towable recreational vehicle shall be the sum of the amount obtained by adding subparagraphs (A) and (B) of this paragraph.
    (A) The product obtained by multiplying the total purchase price, as defined in paragraph (1) of this subsection, of the towable recreational vehicle by a fraction having as its denominator 5,475 days or 15 years and having as its numerator the number of days from the time of delivery to the owner to the first report of the defect or condition forming the basis of the repurchase order.
    (B) 50% of the product obtained by multiplying the purchase price by a fraction having as its denominator 5,475 days or 15 years and having as its numerator the number of days of ownership after the date of the first report of the defect or condition forming the basis of the repurchase order through the date of the hearing.
    (C) Any day or part of a day that the vehicle is out of service for repair will be deducted from the numerator in determining the reasonable allowance for use of a towable recreational vehicle in this paragraph.
(c) This subsection applies only to the repurchase of a leased motor vehicle.
  (1) Except in cases involving unusual and extenuating circumstances supported by a preponderance of the evidence, when a refund of the total purchase price of a leased motor vehicle is ordered, the refund shall be allocated and paid to the lessee and the vehicle lessor, respectively, in accordance with subparagraphs (A) and (B) of this paragraph.
    (A) The lessee shall receive the total of:
      (i) all lease payments previously paid by the lessee to the vehicle lessor under the terms of the lease; and
      (ii) all sums previously paid by the lessee to the vehicle 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, registration fees, and other documentary fees, if applicable.
    (B) The vehicle lessor shall receive the total of:
      (i) the actual price paid by the vehicle lessor for the motor vehicle, including tax, title, license, and documentary fees, if paid by the vehicle lessor and evidenced in a bill of sale, bank draft demand, tax collector's receipt, or similar instrument; and
      (ii) an additional 5.0% of the purchase price plus any amount or fee paid by the vehicle lessor to secure the lease or interest in the lease.
    (C) A credit reflecting all of the payments made by the lessee shall be deducted from the actual purchase price that the manufacturer, distributor, or converter is required to pay the vehicle lessor, as specified in subparagraph (B)(i) and (ii) of this paragraph.
  (2) When the hearings examiner orders a manufacturer, distributor, or converter to refund the purchase price in a leased vehicle transaction, the motor vehicle shall be returned to the manufacturer, distributor, or converter with clear title upon payment of the sums indicated in paragraph (1)(A) and (B) of this subsection. The vehicle lessor shall transfer title of the motor vehicle to the manufacturer, distributor, or converter, as necessary to effectuate the lessee's rights. The lease shall be terminated without penalty to the lessee.
  (3) Refunds shall be made to the lessee, vehicle lessor, and to any lienholder, respective to their ownership interest in the motor vehicle. The refund to the lessee under paragraph (1)(A) of this subsection shall be reduced by a reasonable allowance for the lessee's use of the motor vehicle. A reasonable allowance for use shall be computed in accordance with subsection (b)(2) or (3) of this section, using the amount in paragraph (1)(B)(i) of this subsection as the applicable total purchase price.
(d) This subsection applies only to replacement of motor vehicles.
  (1) Upon a hearing examiner's issuance of a final order to a manufacturer, distributor, or converter to replace a motor vehicle, the manufacturer, distributor, or converter shall:
    (A) promptly authorize the exchange of the complainant's motor vehicle with the complainant's choice of any comparable motor vehicle; and
    (B) instruct the dealer to contract the sale of the selected comparable motor vehicle with the complainant under the following terms.
      (i) The sales price of the comparable motor vehicle shall be the vehicle's Manufacturer's Suggested Retail Price or Distributor's Suggested Retail Price (MSRP/DSRP), as applicable;
      (ii) The trade-in value of the complainant's motor vehicle shall be the MSRP/DRSP, as applicable, at the time of the original transaction, less a reasonable allowance for the complainant's use of the complainant's motor vehicle.
      (iii) The reasonable allowance for replacement relief shall be calculated in accordance with subsection (b)(2) and (3) of this section.
  (2) Upon a replacement of a complainant's motor vehicle, the complainant shall be responsible for payment or financing of the reasonable allowance for use of the complainant's vehicle, any outstanding liens on the complainant's vehicle, and applicable taxes and fees associated with the new sale of a comparable motor vehicle, excluding documentary fees.
    (A) If the comparable motor vehicle has a higher MSRP/DSRP, as applicable, than the complainant's vehicle, the complainant shall be responsible at the time of sale to pay or finance the difference in the two vehicles' MSRPs/DSRPs, as applicable, to the manufacturer, converter or distributor.
Cont'd...
(B) If the comparable motor vehicle has a lower MSRP/DSRP, as applicable, than the complainant's vehicle, the complainant will be credited the difference in the MSRP/DSRP, as applicable, between the two motor vehicles. The difference credited shall not exceed the amount of the calculated reasonable allowance for use for the complainant's vehicle.
  (3) The complainant is responsible for obtaining financing, if necessary, to complete the transaction.
  (4) The replacement transaction, as described in paragraphs (2) and (3) of this subsection, shall be completed as specified in the final order. If the replacement transaction cannot be completed within the ordered time period, the manufacturer shall repurchase the complainant's motor vehicle in accordance with the repurchase provisions of this section. If repurchase relief occurs, a party may request calculation of the refund price by the hearings examiner.
(e) If the hearings examiner finds that a complainant's motor vehicle does not qualify for replacement or repurchase, the hearings examiner may enter an order requiring repair work to be performed or other action taken to obtain compliance with the manufacturer's, converter's, or distributor's warranty obligations.
(f) If the motor vehicle is substantially damaged or if there is an adverse change in the motor vehicle's condition beyond ordinary wear and tear, from the date of the hearing to the date of repurchase, and the parties are unable to agree on an amount allowed for such damage or condition, either party may request reconsideration by the hearings examiner of the refund amount contained in the final order.
(g) In any award in favor of a complainant, the hearings examiner may require the dealer involved to reimburse the complainant, manufacturer, distributor, or converter for the cost of any items or options added to the motor vehicle by the dealer if one or more of those items or options contributed to the defect that is the basis for the final order. This subsection shall not be interpreted to require a manufacturer, distributor, or converter to repurchase a motor vehicle due to a defect or condition that was solely caused by an item or option added by the dealer.

Source Note: The provisions of this §224.260 adopted to be effective June 1, 2024, 49 TexReg 2771