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Texas Register Preamble


The Texas Real Estate Commission (TREC) adopts amendments to 22 TAC §537.45, Standard Contract Form TREC No. 38-5, §537.47, Standard Contract Form TREC No. 40-7, and §537.56, Standard Contract Form TREC No. 49-0 in Chapter 537, Professional Agreements and Standard Contracts, without changes to the rule text but with non-substantive clarifying changes to the forms adopted by reference in §537.45 and §537.56, as published in the August 31, 2018, issue of the Texas Register (43 TexReg 5662). The rule text and forms will not be republished.

Texas real estate license holders are generally required to use forms promulgated by TREC when negotiating contracts for the sale of real property. These forms are drafted and recommended for adoption by the Texas Real Estate Broker-Lawyer Committee, an advisory body consisting of six attorneys appointed by the President of the State Bar of Texas, six brokers appointed by TREC, and one public member appointed by the governor.

The Broker Lawyer Committee (Committee) recommended revisions to the contract addenda forms adopted by reference under the rules set out in Chapter 537. The revisions to the Notice of Buyer's Termination of Contract adds a requirement to include lender's written notice setting forth the reasons Property Approval was not obtained when terminating the contract for that reason. A new and an existing item that grant buyer termination rights under the contracts or addenda, and new notice language were also added.

Two comments were received on §535.47 (Notice of Buyer's Termination of Contract) following publication. One stated that it was unfair to the buyer who could not require the lender to provide documentation when the loan was denied due to the property condition. The Committee disagreed with this position, as most lenders already provide the buyer with some type of documentation when property approval is denied. The other wanted the identifier portion "between buyer and seller" removed and objected to the note regarding termination not being an election of remedies. The Committee disagreed with both points since the first item is used solely to identify the contract, not bind the parties, and the second item simply references the parties back to the terms of the contract, which will control the parties' rights on termination. The Committee did make a few non-substantive changes to the language of the form for better clarity.

The Committee rewrote Paragraph 2B, Property Approval, to clarify the intent of the paragraph and to include a timeframe for buyer to give seller notice and evidence of the lender's determination. The Committee also recommended a few clarifying revisions to the Third Party Financing Addendum and reformatted it so that it was consistent with other Commission promulgated addenda and changed the last sentence of Paragraph 5B so that it states "brokers and sales agents provided under Broker Information."

The Committee revised the Addendum Concerning Right to Terminate Due to Lender's Appraisal to improve understanding and use of the form after receiving comments that it was hard to understand.

The revisions to the adopted forms do not change the nature or scope so much that they could be deemed different forms. The adopted forms do not affect individuals other than those contemplated by the rule/forms adopted by reference as proposed. The adopted forms do not impose more onerous requirements than the proposed forms.

The reasoned justification for the amendments is to update the reasons on the form for a buyer to give notice of termination of a contract, to clarify how lender property approval affects a contract, and to improve understanding and use of the appraisal contingency addendum.

The amendments are adopted under Texas Occupations Code, §1101.151, which authorizes the Texas Real Estate Commission to adopt and enforce rules necessary to administer Chapters 1101 and 1102; and to establish standards of conduct and ethics for its license holders to fulfill the purposes of Chapters 1101 and 1102 and ensure compliance with Chapters 1101 and 1102.

The statute affected by these amendments is Texas Occupations Code, Chapter 1101. No other statute, code or article is affected by the amendments.



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