The Texas Real Estate Commission (TREC) adopts new §535.71, concerning mandatory continuing education: approval of providers, courses and instructors, §535.72, mandatory continuing education: presentation of courses, advertising and records, and §535.73, concerning compliance and enforcement with changes to the proposed text as published in the June 25, 2004, issue of the Texas Register (29 TexReg 6038). Changes in the adopted rules and forms respond to public comments as more fully described below, and also reflect nonsubstantive variations from the proposed rules to clarify their intent and improve style and readability.

The adopted rules require all licensees to take a three hour legal update course and a three hour legal ethics course created for and approved by TREC to satisfy the 6 legal hours of mandatory continuing education required by Occupations Code §1101.455 (the Act). Instructors who teach the legal courses must be certified to teach the courses by attending an instructor training course to be offered by the Real Estate Center at Texas A&M University (the Center); instructors must be pre-approved by the Commission prior to attending the instructor training course and obtaining certification to teach the required courses. The required legal update and ethics courses will be replaced at the end of every odd numbered year (3 years for the first set of courses, every 2 years after). The required courses may be modified by certified instructors to supplement the courses with additional material, to create distance learning legal courses or to combine the legal courses with elective courses. Elective courses to be used as credit for the remaining 9 hours required by §1101.455 of the Act must be presentations of relevant issues that impact the practice of real estate or which increase or support the development of skill and competence; providers will be required to register all courses with the Commission. Core and continuing legal education courses may be accepted for satisfying Mandatory Continuing Education (MCE) elective credit only. Distance learning courses may be registered to satisfy elective and required legal credit subject to certain conditions. For elective courses and courses which do not include legal credit hours, a provider may grant partial credit to a student who attends less than the complete course registered with the commission only if the segments of the course for which partial credit may be granted are not less than one hour in length and the student attends the full class hour to get credit for attendance for that hour. Thus if a student is away or late for any portion of a 50 minute class hour the student may not receive credit for that hour except as provided in circumstances described in §535.72(c). The student will receive credit for any other full hours of that course that the student attends. Instructor applicants must satisfy the commission as to the applicant's honesty, trustworthiness and integrity; providers will be responsible for ensuring that instructors are competent to teach a particular subject.

The new sections also adopt by reference 13 MCE new or revised application forms that are consistent with the adopted rules; the forms have also been changed to reference the cites to Chapter 1101 Occupations Code and have been reformatted for style and consistency with other TREC forms.

Licensees on active status will be required to take the required legal update and legal ethics courses for their next and all subsequent renewals of their license after January 1, 2005. Thus a licensee may, but is not required to attend the required legal courses for his or her first renewal after the effective date, but the licensee is required to take the courses for the next and all subsequent renewals. For licenses granted after the effective date, the licensee must attend the required courses to renew a license on active status. Distance learning courses may be offered for required legal course credit on or after July 1, 2005. The purpose of the revisions to the sections is to increase the knowledge base and maintain consistent of current real estate related case law and statutory provisions due to the proposed requirements to attend commission created legal mandatory continuing education courses. In addition, the revisions streamline the MCE instructor approval process.

A draft of the mandatory continuing education rules was released for comment and displayed on the TREC web site for several months prior to the filing of the formal rulemaking proposal to adopt them. Approximately 150 comments were received and considered by the Commission during this period, and a number of changes, primarily regarding the acceptability of distance learning courses for required legal continuing education credit, were made in the draft of the rules prior to proposal as a result of the comments. After the proposed rules appeared in the Texas Register, approximately 20 comments were received. The Texas Association of Realtors (TAR) commented in favor of the proposed rules with some additional recommendations and the Texas Apartment Association (TAA) commented against the rules as proposed. A number of comments did not result in changes to the text of the rules.

The comments and Commission responses to those comments are summarized as follows. All comments regarding this adoption, including any not specifically referenced herein, were fully considered by the commission.

Comment: Several commenters, apparently referring to the first draft of the rules available to the public prior to proposal, commented against the draft provisions that would have required attendance at live courses to obtain credit for the 6 legal hours required by the Act.

Response: The rules as proposed and adopted permit licensees to obtain legal course credit by taking distance learning courses that are approved by the Commission and are substantially similar to the live courses developed for the commission.

Comment: One commenter suggested several non-substantive grammatical revisions to the rules.

Response: The commission agrees with most of the non-substantive grammatical revisions.

Comment: The same commenter suggested changes to permit flexibility as to the number of hours in each of the required legal courses which would still require that the courses have a combined total of 6 hours.

Response: The commission believes that the required legal update course and the required legal ethics course should each be set at 3 hours in length. Should the commission determine in the future that more or less time should be designated to either course, the commission can change the course length by rule. The commission did not make the suggested changes.

Comment: The same commenter suggested that the rules describe the items that are required for the provider to demonstrate that the course subject matter is appropriate to include a course outline, a time line and an explanation statement.

Response: The commission agrees that the provider should provide a statement that describes the objective of the course and explains how the subject matter is related to activities for which a real estate license is required, including but not limited to relevant issues in the real estate market or topics which increase or support the licensee's development of skill and competence. The rule was changed to require such statement.

Comment: The same commenter suggested that the requirements for alternative delivery methods that a provider must use be further simplified to delete provisions regarding "mastery" of the material.

Response: The commission agrees with the suggestions and has modified the alternative delivery methods that a provider must use accordingly.

Comment: The same commenter suggested that a provider who offers a required legal course must provide the students with the required course materials in print or electronic format.

Response: The commission agrees with the suggestions and has revised the relevant provision accordingly.

Comment: The same commenter suggested that the commission permit MCE courses to be offered through proctored video presentations.

Response: The commission agrees with the suggestions with modifications to permit proctored video presentations for both elective and legal credit; however, for legal credit, the video presentations must include a final examination and a certified instructor must be available as necessary for questions. The relevant rule was revised accordingly.

Comment: The same commenter suggested that the percentage of time permitted to be taught by a guest speaker should be increased from 25% to 50%.

Response: The commission agrees with the suggestion and has revised the relevant provision accordingly.

Comment: The same commenter suggested permitting the course completion roster to be signed either by the provider's representative from whom the commission has a signature exemplar on file or the instructor of the course.

Response: The commission agrees with the suggestion and has revised the relevant provision accordingly.

Comment: The same commenter suggested that the rules should permit a provider to advertise a course as pending approval under certain conditions.

Response: The commission agrees with the suggestion and has revised the relevant provision accordingly.

Comment: One commenter disagreed with the rules as proposed to the extent that the required legal update and ethics courses must be based on commission-developed course materials and approved subject matter that may only be taught by commission certified instructors. The commenter suggested that the rule be amended to continue allowing classes which cover the core topics outlined in the Act to be approved by the commission as legal update MCE hours. The commenter believes that the commission may be unable to timely update the course created for and approved by the commission to respond to changes in the industry.

Response: The commission disagrees with the commenter for the following reasons. Based on input from the education task force, the commission has determined that requiring licensees to attend the same legal update and ethics courses would provide much needed consistency in approaches to both learning and teaching current legal and ethics issues relevant to real estate continuing education. The commission intends to update the courses as necessary, at least every 6 months, and the rules require that the providers and instructors provide updated materials to students whenever the commission updates the courses. The two-year period ending on December 31 of every odd-numbered year is merely the time at which the courses will be replaced with new courses if necessary. The rules permit providers to alter a course to provide additional materials as long as the three hour portion of the course is substantially similar to the course approved by the commission. In addition, the rules permit providers to combine the required legal courses with elective courses that may provide additional or supplemental coverage of the course topics.

Comment: One commenter disagreed with the rules as proposed and requested that the commission postpone adoption of the rules until 2006 to provide sufficient time for providers to digest and understand changes they can make to existing approved courses to incorporate the required legal courses. The commenter spoke at the commission meeting held on August 9, 2004, and explained his understanding that currently approved courses might automatically expire on the January 1, 2005 effective date giving him little or no time to create new courses that included the required legal courses.

Response: The commission disagrees with the commenter because the rules as adopted permit providers to combine the required legal courses with elective courses that may provide additional or supplemental coverage of the course topics. In addition, currently approved courses will not automatically expire on January 1, 2005. Currently approved courses expire on the date of their expiration, or two years from the date of original approval. The adopted rules do not contain a provision that automatically expires such courses. Such courses may continue to be offered and used for MCE credit, including legal credit, for the first renewal of an active license on or after January 1, 2005.

The new sections are adopted under Texas Occupations Code, §1101.151, which authorizes the Texas Real Estate Commission to make and enforce all rules and regulations necessary for the performance of its duties and to establish standards of conduct and ethics for its licensees in keeping with the purpose and intent of the Act to insure compliance with the provisions of the Act.

The statute affected by this adoption is Texas Occupations Code, Chapter 1101. No other statute, code or article is affected by the adopted sections.