The Texas Real Estate Commission (TREC) licenses and regulates real estate agents and brokers, as well as other real estate-related professionals. As part of its duties, different committees at TREC also work on proposed changes to rules and forms used in the real estate industry. Most recently, the Broker-Lawyer Committee (BLC) recommended several changes to the TREC contract forms. TREC also adopted a new broker succession rule at its August meeting.
Experienced legal counsel can help you stay informed and ahead of any legal changes that affect your industry, as well as handle any problems that may affect your career. A real estate license defense lawyer can represent you before TREC in disciplinary proceedings and help avoid or minimize the potential sanctions you may face.
TREC’s Proposed Changes to the Contract Form
The BLC recommended various changes to the TREC contract form at the August meeting. These proposals relate to compensation language, the One to Four Family Residential (Resale) Form, the Third Party Financing Addendum, the Condominium Resale Certificate, the Unimproved Property Contract, Addendum for “Back-Up” Contract, and a new Addendum for Section 1031 Exchange Form.
Compensation Language
A major lawsuit has led to significant nationwide changes in broker compensation. Section 12 of the contract has added paragraphs to the extent that:
- Each party pays the brokerage fees they agreed to pay; and
- A seller may make a specific contribution to the buyer’s brokerage fees.
The proposal also eliminates any specifications on the order in which contributions are to be paid and any limitations on the type of fee that could be paid. Identical changes were made to the Amendment to Contract.
One to Four Family Residential (Resale) Form
This form contains various additions needed to comply with Texas law, including:
- Adding the term “geothermal” to Natural Resource Leases due to a new law concerning ownership of geothermal energy below the surface of one’s property;
- Including the option of providing T-47.1 Declaration instead of the Affidavit when the seller provides the buyer with an existing survey; also amends the language to read that buyer may obtain a new survey, but if the buyer fails to do so, they may not terminate the contract due to the lack of a survey;
- Adding language concerning the requirement that sellers provide buyers with a copy of any mold remediation certificate issued within the previous five years before the sale of the property;
- Modifying Paragraph 6(E)(12) to include specific examples of the types of notices that should be listed, and adding a caution that a seller’s failure to provide such a notice may provide a buyer with certain remedies;
- Adding a statement that brokers’ fees are negotiable and not set by law; and
- Changing Paragraph 20’s title to “Federal Tax Requirements” and adding information in the Farm and Ranch Contract concerning the federal Agriculture Foreign Investment Disclosure Act.
Third Party Financing Addendum
Paragraph 2(A), Buyer Approval, was changed to require both a notice of termination and a copy of the written statement of the lender’s determination to conform with other contract provisions.
Condominium Resale Certificate
Amendments to Paragraphs K and L were made to comply with Section 82.157 of the Texas Property Code.
Unimproved Property Contract
Paragraph 3D is changed to include the same sales price adjustment language as in the Farm and Ranch Contract.
Addendum for “Back-Up” Contract
Modifications to the “Back-Up” Contract are designed to clarify the timing and payment of the earnest money and option fee, as well as additional fees.
Addendum for Section 1031 Exchange Form
This new form allows the seller or buyer to disclose an intent to use the subject project as a 1031 exchange. It includes a statement that the parties will reasonably cooperate with one another.
The BLC will review public comments that it receives and determine whether it should change the proposals or submit them as is to TREC at its November meeting for approval.
New Broker Succession Rule
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During its August meeting, TREC adopted a new broker succession rule, i.e. 535.124, Death of a Designated Broker. The purpose of the new rule is to provide better guidance as to agency practice when the designated broker of a licensed business entity that sponsors sales agents dies. The new rule went into effect on September 11, 2024.
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Under the old rules, the death of a sponsoring or designated broker automatically causes the licenses of any sponsored real estate agents to go inactive. As a result, the agents cannot perform any licensed real estate services, even those that are already occurring. This situation results no matter if a real estate agent’s sponsor is an individual or a business entity.
In contrast, under the new rule, business entities and sponsored real estate agents now have 14 days from the date of the broker’s death before their licenses become inactive. This timeframe allows the agents to designate a new broker that satisfies all requirements without any period of inactivity and no business disruption.
For example, if an agent is sponsored by an individual broker, they can quickly use TREC’s Online Relationship Management Tool and request a new broker with little or no delay. The 14-day timeframe is likely long enough to prevent any disruption to business or ongoing business transactions.
On the other hand, if a business entity wants to obtain a broker’s license, the entity must have a designated broker meeting specific requirements. The broker must hold an active broker’s license in good standing and have managing authority for the business entity.
Therefore, when the designated broker of a business entity dies, the business entity cannot just name anyone as the new designated broker. TREC must verify that the newly designated broker has an active license in good standing and has managing authority for the business entity. With the addition of the 14-day timeframe, the business entity will have time to select a qualified person as a designated broker that TREC can verify.
We Will Represent Your Interests Before the Texas Real Estate Commission
We know how crucial it is for you to maintain your real estate license and continue the career that you have worked so hard to establish. We aim to help you defend yourself against complaints, disciplinary proceedings, and potentially damaging sanctions. The experienced real estate license defense lawyers at Bertolino, LLP, will advocate to protect your license during your disciplinary proceedings. Call us at (512) 980-3751 or contact us online.
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