Texas Register

TITLE 22 EXAMINING BOARDS
PART 23TEXAS REAL ESTATE COMMISSION
CHAPTER 537PROFESSIONAL AGREEMENTS AND STANDARD CONTRACTS
RULE §537.11Use of Standard Contract Forms; Unauthorized Practice of Law
ISSUE 11/25/2022
ACTION Proposed
Preamble Texas Admin Code Rule

(a)When negotiating contracts binding the sale, exchange, option, or lease [or rental] of any interest in real property, a [real estate] license holder shall use only those contract forms approved for mandatory use by the [Texas Real Estate] Commission [(the Commission)] for that type of transaction with the following exceptions:

  (1)transactions in which the license holder is functioning solely as a principal, not as an agent;

  (2)transactions in which an agency of the United States government requires a different form to be used;

  (3)transactions for which a contract form [, or addendum to a contract form,] has been prepared by the [ a] property owner or prepared by an attorney [a lawyer] and required by a property owner; or

  (4)transactions for which no [mandatory] contract form [or addendum] has been approved for mandatory use by the Commission, and the license holder uses a form:

    (A)prepared by [a lawyer licensed by this state, or] a trade association in consultation with an attorney [ one or more lawyers] licensed by this state [, for the particular type of transactions involved] that contains:

      (i)the name of the [lawyer or] trade association who prepared the form;

       [(ii)the name of the broker or trade association for whom the form was prepared;]

      (ii)[(iii)] a statement indicating the type of transaction for which the [lawyer or] trade association has approved the use of the form; and

       [(iv)any restrictions on the use of the form; and]

      (iii)[(v)] if applicable, an explanation of how the form [it is an addendum that] changes the rights, obligations, or remedies of a party under a contract [or addendum] form approved for mandatory use by the Commission and [for mandatory use, the form must also include:]

         [(I)a statement about how the addendum changes the rights, obligations or remedies of a party, with a reference to the relevant paragraph number in the mandatory use form;]

         [(II)a statement that the form is not a mandatory Texas Real Estate Commission form; and]

        [(III)]a statement that [Commission rules prohibit real estate] license holders may not practice law or give [from giving] legal advice; or

    (B)prepared by the Texas Real Estate Broker-Lawyer Committee [(the committee)] and approved by the Commission for voluntary use by license holders.

(b)A license holder may not:

  (1)practice law;

  (2)directly or indirectly offer, give or attempt to give legal advice;

  (3)give advice or opinions as to the legal effect of any contract forms [contracts] or other such instruments which may affect the title to real estate;

  (4)give opinions concerning the status or validity of title to real estate;

  (5)draft or recommend language to be included in a contract form defining or affecting the rights, obligations, or remedies of the principals of a real estate transaction, including escalation, appraisal, or [other] contingency clauses;

  (6)add informational items [factual statements or business details] to a form approved by the Commission if the Commission has approved a form [or addendum] for mandatory use for that purpose;

  (7)attempt to prevent or in any manner whatsoever discourage any principal to a real estate transaction from employing an attorney [a lawyer]; or

  (8)obtain legal advice from an attorney [ employ or pay for the services of a lawyer], directly or indirectly, for [to represent] a principal in [to] a real estate transaction in which the license holder is acting as an agent.

(c)This section does not:

  (1)limit a license holder's fiduciary obligation to disclose to the license holder's principals all pertinent facts that are within the knowledge of the license holder, including such facts which might affect the status of or title to real estate;

   (2)prevent the license holder from explaining to the license holder's principals the meaning of informational items or choices in a contract form, as long as the license holder does not practice law or give legal advice;

   (3)limit a license holder from employing and paying for the services of an attorney to represent only the license holder in a real estate transaction; or

   (4)limit a license holder from reimbursing a principal for attorney's fees incurred.

(d)It is not the practice of law for a license holder to:

  (1)add informational items to [ fill in the blanks in] a contract form authorized for use by this section; or[.]

  (2)if specifically instructed in writing by a principal, add language to or strike language from a contract form, as long as any change is made conspicuous, including underlining additions, striking through deletions, or employing some other method which clearly indicates the change being made. [A license holder shall only add factual statements and business details or shall strike text as directed in writing by the principals.]

[(e)This section does not prevent the license holder from explaining to the principals the meaning of the alternative choices, factual statements, and business details contained in an instrument so long as the license holder does not offer or give legal advice.]

(e)[(f)] When a transaction involves unusual matters that should be reviewed by an attorney [ a lawyer] before an instrument is executed, or if the instrument must be acknowledged and filed of record, the license holder shall advise the license holder's principals to [that each should] consult an attorney [a lawyer of the principal's choice] before executing the instrument.

[(g)A license holder may employ and pay for the services of a lawyer to represent only the license holder in a real estate transaction.]

(f)[(h)] A license holder shall advise the license holder's principals that the instrument they are about to execute is binding on them.

(g)Contract forms approved by the Commission are published by and available from the Commission at www.trec.texas.gov.

[(i)Forms approved by the Commission may be reproduced only from the following sources:]

  [(1)electronically reproduced from the files available on the Commission's website;]

  [(2)printed copies made from copies obtained from the Commission;]

  [(3)legible photocopies made from such copies; or]

  [(4)computer-driven printers following these guidelines:]

    [(A)The computer file or program containing the form text must not allow the end user direct access to the text of the form and may only permit the user to insert language in blanks in the forms. Blanks may be scalable to accommodate the inserted language. The Commission may approve the use of a computer file or program that permits a principal of a license holder to strike through language of the form text. The program must be:]

      [(i)limited to use only by a principal of a transaction; and]

      [(ii)in a format and authenticated in manner acceptable to the Commission.]

    [(B)Typefaces or fonts must appear to be identical to those used by the Commission in printed copies of the particular form.]

    [(C)The text and order of the text must be identical to that used by the Commission in printed copies of the particular form.]

    [(D)The name and address of the person or firm responsible for developing the software program must be legibly printed below the border at the bottom of each page in no less than six point type and in no larger than 10 point type.]

(h)[(j)] Contract forms [ Forms] approved [or promulgated] by the Commission may be reproduced, including through use of a software application, provided that the text and format of the form, including the sizing, spacing, and pagination, is identical to the Commission's published version, except that [must be reproduced on the same size of paper used by the Commission with the following changes or additions only]:

  (1)the [The] business name or logo of a broker, trade association, or other organization [or printer] may appear [at the top of a form] outside the form's border; and

  (2)a form may be scaled to accommodate viewing on smaller screens, including mobile devices, as long as the final executed copy of the form otherwise complies with this subsection [ The broker's name may be inserted in any blank provided for that purpose].

[(k)Standard Contract Forms adopted by the Commission are published by and available from the Commission at P.O. Box 12188, Austin, Texas 78711-2188 or www.trec.texas.gov.]

The agency certifies that legal counsel has reviewed the proposal and found it to be within the state agency's legal authority to adopt.

Filed with the Office of the Secretary of State on November 8, 2022

TRD-202204508

Abby Lee

Deputy General Counsel

Texas Real Estate Commission

Earliest possible date of adoption: December 25, 2022

For further information, please call: (512) 936-3057



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