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(a)When negotiating contracts binding the sale, exchange,
option, or lease of any interest in real property, a license holder
shall use only those contract forms approved for mandatory use by
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 has been
prepared by the property owner or prepared by an attorney and required
by a property owner; or
(4)transactions for which no contract form has been
approved for mandatory use by the Commission, and the license holder
uses a form:
(A)prepared by an attorney licensed by this state,
or a trade association in consultation with an attorney licensed by
this state that contains:
(i)the name of the attorney or trade association who
prepared the form;
(ii)the name of the broker or trade association for
whom the form was prepared;
(iii)a statement indicating the type of transaction
for which the attorney or trade association has approved the use of
the form;
(iv)any restrictions on the use of the form; and
(v)if applicable, an explanation of how the form changes
the rights, obligations, or remedies of a party under a contract form
approved for mandatory use by the Commission and a statement that
license holders may not practice law or give legal advice; or
(B)prepared by the Texas Real Estate Broker-Lawyer
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 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 contingency clauses;
(6)add informational items to a form approved by the
Commission if the Commission has approved another form 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; or
(8)obtain legal advice from an attorney, directly
or indirectly, for a principal in 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 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.
(e)When a transaction involves unusual matters that
should be reviewed by an attorney 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 consult
an attorney before executing the instrument.
(f)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.
(h)Contract forms approved 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:
(1)the business name or logo of a broker, trade association,
or other organization may appear 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 agency certifies that legal counsel has
reviewed the adoption and found it to be a valid exercise of the agency's
legal authority.
Filed with the
Office
of the Secretary of State on May 22, 2023
TRD-202301862 Vanessa E. Burgess
General Counsel
Texas Real Estate Commission
Effective date: June 11, 2023
Proposal publication date: March 3, 2023
For further information, please call: (512) 936-3284
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