The amendment to §537.37 adopts by reference Standard Contract Form TREC No. 30-5, Residential Condominium Contract (Resale). The form is revised to bold the phrase in Paragraph 2B to further emphasize that the list of items in Paragraph 2B are those items that are permanently installed or built in. Paragraph 4A is reformatted to clarify that the contract is made subject to the approval of the property and if Paragraph 4A(2)(a) applies, the contract is also subject to the lender approving the buyer's financial condition pursuant to the Third Party Financing Condition Addendum. The sentence in 6D regarding the time period under which the buyer must object is reformatted to make it clearer. Paragraph 6E is revised to add a notice as 6E(5) which is a statutorily required notice that a seller of property located in a certificated service area of a utility service provider must give to a buyer. The notice cautions the buyer that the property may be located in such a district and that special costs to obtain service may apply. Paragraph 7A is reformatted to be consistent with other TREC contract forms. Paragraph 12 is revised to be consistent with other TREC contract forms; paragraph 12A is revised to conform to similar provisions in other TREC forms. A sentence is added to paragraph 13 which provides that tax proration may be calculated taking into consideration any change in exemptions that will affect the current year's taxes. Paragraph 18 is reformatted to clarify obligations of the parties related to the earnest money and to provide for additional incentives for prompt release of the earnest money. Paragraph 18C provides that upon termination of the contract, either party may send a release to the other party and the escrow agent and the parties will execute the appropriate documents and return them to the escrow agent. If one party makes demand on the escrow agent for the return of the earnest money, the escrow agent should send the demand to the other party. If the other party does not object within 15 days (shortened from 30 days), the escrow agent may disburse the earnest money to the demanding party. Paragraph 18D is added to provide that if a party wrongfully refuses or wrongfully fails to sign a release, the party entitled to the earnest money is entitled to liquidated damages of three times the amount of the earnest money. A line for e-mail addresses is added under Paragraphs 21 and 24, and to the Broker Information and Ratification of Fee Box on the last page. Paragraph 23 is modified to provide that the option fee may be paid within two days after the effective date of the contract. If the buyer fails to timely pay the option fee, the buyer will not have an option under the contract. Consideration supporting the option is in two parts: the option fee and nominal consideration, receipt of which is acknowledged. A box is placed around the effective date to call more attention to the brokers to complete the effective date upon final acceptance of the contract. The blanks for the parties' initials are deleted from the signature page. The seller's receipt of the option fee on the last page is clarified so that the listing broker may acknowledge receipt of the option fee for a proper tendering of the fee.

The amendment to §537.43 adopts by reference Standard Contract Form TREC No. 36-4, Addendum for Property Subject to Mandatory Membership in an Owners' Association. The form is revised to delete the requirement in Paragraph A that the Subdivision Information not be more than three months as such is not required by the statute. Paragraph B is modified to change the title to "Fees" rather than "Transfer Fees" and to provide that the buyer will pay a certain amount of any fees resulting from the transfer and the seller will pay the remainder. The revisions will clarify that the fees at issue in the paragraph include any Owners' Association fees resulting from the transfer, which may also include initiation or other fees.

The amendment to §537.44 adopts by reference Standard Contract Form TREC No. 37-2, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owners' Association. Paragraph K is revised to conform to similar provisions in other TREC forms and a line for an e-mail address is included for the managing agent of the subdivision.

The amendment to §537.46 adopts by reference Standard Contract Form TREC No. 39-6, Amendment. In Paragraph 6, the word "nonrefundable" is struck before the word "Option." A bold box is added around the execution date of the amendment to call the licensee's attention to the need to complete the date.

The amendment to §537.47 adopts by reference Standard Contract Form TREC No. 40-2, Third Party Financing Condition Addendum. The form is revised to include a provision concerning availability of the described loan terms to the definition of financing approval. Specifically, financing approval is obtained when the terms of the described loan are available; and the lender determines that the buyer has met the lender's financial requirements (creditworthiness, assets and income). This clarifies that the buyer may terminate the contract under the addendum, within the time specified in the addendum, if the described loan terms are not available (for example, interest rate increase over the stated amount). A note was added to the first paragraph to clarify that financing approval under the addendum does not include approval of the property.

Drafts of the contract forms were released for comment and displayed on the TREC web site during the notice and comment period after posting in the Texas Register. Approximately 47 comments were received and considered by the commission during this period, and several changes were made in the drafts as a result of the comments. The Metrotex Association of Realtors, the Houston Center for Independent Living, and the San Antonio Board of Realtors commented on the proposed forms.

The commission made typographical corrections to the forms adopted by reference and made other changes to the text of the forms in response to comments and further review and recommendation by the Broker Lawyer Committee. The following changes were made in response to comments: In all the contract forms except for the Residential Condominium form, the sentence regarding the date in which the buyer is deemed to receive the survey is moved from paragraph 6D to paragraph 6C(2); the sentence in paragraph 6D in all the contract forms regarding the time period under which the buyer must object is reformatted to make it clearer; paragraph 7D in Form Nos.23-6 and 24-6 is revised to include a checkbox to indicate whether the insulation specifications are attached; paragraph 12A in Form No. 30-5 is revised to conform to similar provisions in other TREC forms; paragraph K in Form No. 37-2, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owners' Association, is revised to conform to similar provisions in other TREC forms; the last page of the contract form is rearranged for clarity and to include additional lines for addresses; an obsolete control number is removed from all forms; and the page number format is revised in all forms. A number of comments did not result in changes to the text of the forms. All comments regarding this adoption, including any not specifically referenced herein, were fully considered by the commission.

The comments and commission responses to those comments are summarized as follows.

Comment: One commenter suggested that the seller's disclosure should be revised to include a statement that reveals whether the seller holds a real estate license.

Response: The commission notes that the Seller's Disclosure Form is not currently under consideration. The commission will consider this comment if it decides to revise the Seller's Disclosure Form in the future.

Comment: One commenter recommended that the commission include a deemed objection of Schedule C items in paragraph 6 so that a buyer can recover earnest money and additional costs in cases where the seller fails to cure Schedule C items. The commenter believes that the remedies in the default paragraph are insufficient to compensate buyer in such cases.

Response: The commission respectfully disagrees and believes that the remedies in the default paragraph are sufficient to address the commenter's concerns in cases where the seller fails to timely cure Schedule C items.

Comment: Several commenters recommended that there should not be a two-day period in which to deliver the option fee in paragraph 23, that the term "nominal" should be deleted, and questioned whether a buyer may terminate within the two-day period never having tendered the option fee.

Response: The commission respectfully disagrees and believes that the best interest of the public is served by providing for a two day period after the effective date of the contract in which to deliver the option fee. Please note, however, a buyer cannot terminate under the option paragraph in that two-day period if the buyer has not paid the option fee. The buyer may terminate during that period only if he or she also pays the option fee.

Comment: Several commenters suggested that various items such as bathroom mirrors, playsets, and chandelier shades should be added, and satellite controls should be deleted in paragraph 2C as accessories.

Response: The commission respectfully disagrees and believes that the best interest of the public is served with the current list of accessories in paragraph 2C.

Comment: Two commenters suggested that additional lines for the broker's city, state and zip should be included on the last page of the contract forms.

Response: The commission agrees and has revised the forms accordingly.

Comment: One commenter requested that the Third Party Financing Condition Addendum should ask whether buyer's financing is contingent upon the sale of another property.

Response: The commission respectfully disagrees and believes that the best interest of the public is served by not requesting such information in the addendum.

Comment: Several commenters requested that the checkbox that indicates that the buyer does not require delivery of the Subdivision Information should be put back into Form No. 36-4, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owners' Association.

Response: The commission agrees and has revised the form accordingly.

Comment: Several commenters suggested adding a line in the contract to require a response time from the seller.

Response: The commission respectfully disagrees and believes that the best interest of the public is served by not requesting such information in the forms.

Comment: One commenter suggested that the text of paragraph 20 regarding an affidavit stating that the seller is not a foreign person should be revised to not require an affidavit but to include a statement regarding perjury.

Response: The commission respectfully disagrees and believes that the best interest of the public is served by not changing paragraph 20.

Comment: One commenter suggested revising the list of addenda in paragraph 22 to put the most important ones first.

Response: The commission respectfully disagrees as the relative degree of importance is subjective.

Comment: One commenter suggested that paragraph 5 regarding earnest money should stipulate an exact number of days in which to tender the earnest money; that seller should be responsible for the cost of providing a copy of restrictive covenants rather than permitting the parties to negotiate who pays; that the buyer should be responsible for paying for the survey rather than permitting the parties to negotiate who pays; that the cost of turning on the utilities should be a buyer's expense under paragraph 7 rather than a seller's expense; that paragraph 7H regarding Residential Service Contracts should be rewritten; that paragraph 12 should be rewritten; and that the Third Party Financing Condition Addendum should be rewritten to provide that the buyer will be in default if he fails to timely provide a notice that he cannot obtain financing approval.

Response: The commission respectfully disagrees and believes that the best interest of the public is served by not revising the forms as suggested by the commenter. In each case, the commission believes that it is more appropriate to give the parties as much flexibility as possible to negotiate who pays for various expenses related to the transaction. Regarding the commenter's suggestions to rewrite various paragraphs, the commission believes that the paragraphs as written are sufficiently clear.

Comment: One commenter suggested various non-substantive formatting, punctuation, grammar, and typographical revisions to the forms.

Response: The commission respectfully disagrees with the suggestions.

Comment: One commenter suggested that the commission change the term "may" to "shall" in paragraph 18C to require the escrow agent to disburse the earnest money to the person making the demand if there is no written objection.

Response: The commission respectfully disagrees as the escrow agent is not a party to the contract and is therefore not bound by mandatory terms of the contract.

Comment: One commenter suggested that paragraph 13 should be revised to require the seller to provide the buyer and title company with a copy of any increase in tax notification to calculate tax proration accordingly.

Response: The commission respectfully disagrees and believes that the best interest of the public is served with the new sentence in paragraph 13 which provides that tax proration may be calculated taking into consideration any change in exemptions that will affect the current year's taxes.

Comment: One commenter suggested revising the lists of accessories and improvements in paragraph 2 to include disability features to indicate whether such features are present on the property. The commenter also suggested revising the Seller's Disclosure Form and temporary lease forms to disclose whether such features are present. At a meeting of the Broker Lawyer Committee, the commenter offered to provide to the Broker Lawyer Committee a draft "Disability Features Addendum" for consideration by the commission at a future date.

Response: The commission respectfully disagrees with the commenter's suggestion to revise paragraph 2 as the improvements and accessories subparagraphs are not a recitation of current improvements or accessories conveyed with the property. They are merely a non-exhaustive list of improvements and accessories that may usually be found in that type of property. Note that subparagraph 2B includes the phrases "All fixtures and improvements" and "if any." Thus, even if grab bars and ramps were added to the list that would not mean that the features were present on the property under contract. In the current and proposed forms, parties are free to use paragraph 11 or paragraph 7 to insert relevant information regarding disability features. The Seller's Disclosure Form and the temporary lease forms are not currently under consideration. The commission will consider the comments regarding such forms if it decides to revise the forms in the future.

Comment: One commenter suggested that the contract forms should have a default time period where there is a blank to be filled in with a set number of days. Also, when the effective date is not filled in, the effective date should be the date the earnest money is received by the escrow agent. The commenter also suggested a default delivery address to the agent if the parties neglect to fill in paragraph 21 regarding delivery addresses.

Response: The commission respectfully disagrees and believes that the best interest of the public is served without the suggested revisions regarding default time periods and delivery addresses as it is more appropriate to give the parties as much flexibility as possible to negotiate such terms.

Comment: One comment suggested revising Form No. 37-2, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in an Owners' Association, to state the cost of the Resale Certificate and whether the fee has already been paid.

Response: The commission respectfully disagrees because seller pays for the cost of providing the Subdivision Information under Form No. 36-4, Addendum for Property Subject to Mandatory Membership in an Owners' Association; therefore, information regarding the cost and whether it has been paid is not relevant.

Comment: One commenter noted that language in paragraph 6E2 appears to be redundant with language in paragraph 6B regarding restrictive covenants and suggests removing the statement in paragraph 6E2.

Response: The commission respectfully disagrees as the text of the notice in paragraph 6E(2) is required by statute to be given from the seller to the buyer and is not inconsistent with the promises that the seller makes to deliver certain documents in paragraph 6B.

Comment: Some commenters expressed concerns that the revisions in paragraph 18 give too much authority to the escrow agent to determine whether a party wrongfully fails or refuses to sign a release.

Response: The commission notes that the escrow agent does not decide whether a party has wrongfully failed or refused to release earnest money. The new liquidated damage clause in paragraph 18 allows a party to obtain additional damages if a lawsuit is filed regarding the transaction.

Comment: One commenter suggested changing the new language in the Third Party Financing Condition Addendum to require rather than permit the buyer to give written notice to the seller within a negotiated number of days that the buyer cannot obtain financing approval.

Response: The commission respectfully disagrees and believes that the best interest of the public is served without the suggested revision. The notice is meant to be permissive as failure to timely give the notice is provided for in the addendum such that the contract will not longer be subject to financing approval. If the buyer gives timely notice, the contract will terminate and the earnest money will be refunded to the buyer.

Comment: One commenter pointed out a typographical error in the public improvement district notice in paragraph 6.

Response: The commission acknowledges the error and has revised the forms accordingly.

Comment: One commenter suggested that the commission modify paragraph 9 in Form No. 39-6, Amendment, to mirror the language in paragraph 11 of the contract forms.

Response: The commission respectfully disagrees and believes that the best interest of the public is served without the suggested revision as paragraph 9 in the Amendment Form serves multiple purposes other than modification of paragraph 11.

Comment: One commenter suggested that the commission further modify paragraph 18D to provide for "release of earnest money" to mirror the Texas Association of Realtors (TAR) form entitled "Termination of Contract and Release of Earnest Money."

Response: The commission respectfully disagrees and believes that the best interest of the public is served without the suggested revisions as not all persons have access to the TAR form and other types of releases can be used by the parties.