The Texas Real Estate Commission (TREC) adopts amendments to §535.217, concerning dishonest conduct as grounds for disciplinary action, and §535.223, concerning standard inspection reports with changes to the proposed text as published in the May 28, 2004, issue of the Texas Register (29 TexReg 5247). Changes in the form adopted by reference reflect nonsubstantive variations from the proposed rules to clarify their intent and improve style and readability.

The adopted amendments to §535.217 require that licensed inspectors disclose to all parties to the transaction and obtain the written consent of the client that the inspector intends to receive a fee or other valuable consideration from a person other than the inspector's client. The amendment also requires that the licensee disclose to and obtain the written consent of the client that the inspector is paying a fee to a service provider or a participant in the transaction. The amendments adopt by reference a Fee or Other Valuable Consideration Disclosure Form for required use by licensed inspectors to comply with the disclosure and consent requirements. The amendments to §535.223 revise the requirements regarding the use of the standard inspection report form and permit an inspector to use additional space on page two of the form for commentary that may not fit on page one. The rule revisions and form were recommended by the Texas Real Estate Inspector Committee.

A draft of the form adopted by reference in §535.217 was released for comment for several months prior to the filing of the formal rulemaking proposal to adopt them. Approximately 30 comments were received and considered by the Commission and the Real Estate Inspector Committee (TREIC) during this period. Two written comments and one oral comment were received in response to the notice of the proposed rule as published in the above-referenced issue of the Texas Register. The American Home Inspection Association (AHIA) commented against the rule as proposed. All comments regarding this adoption including those not specifically referenced herein, were fully considered by the commission.

Comment: One commenter believes that the amendments inject consumers into the internal operations of inspectors and unnecessarily suggest by implication that inspectors engage in unethical behavior. The commenter further believes that adoption of the rule will raise unwarranted suspicion of inspectors which may unfairly lead to the reduction or elimination of third party fee arrangements involving Texas licensed inspectors.

Response: The commission disagrees with the comments and believes that the consumer is best served by adopting the form and the revisions to the rule as proposed with minor non-substantive revisions. The TREIC originally recommended that the commission adopt the disclosure statement to provide for better informed consumers regarding fees paid to or by licensed inspectors. The requirements of notice and consent regarding fees paid to or by licensed inspectors have been in the TREC rules for several years. However, concerns expressed by and to TREIC regarding compliance with the disclosure provisions lead TREIC to recommend that the notice and consent be reduced to writing. The commission agrees with TREIC's recommendations as additional safeguards compliance with which will not be unduly burdensome.

Comment: One commenter commented in favor of the revisions to §535.217 and further believes that the written disclosure requirement should be extended to real estate brokers and salespersons.

Response: The commission appreciates the comment in favor of the rule.

Comment: One commenter recommended that the commission should table the recommended revisions to §535.217 for further review. In addition the commenter believes that the existing provisions regarding disclosure and consent are sufficient.

Response: The commission disagrees with the comments and believes that the consumer is best served by adopting the form and the revisions to the rule as proposed with minor non-substantive revisions because there is a public benefit to having more fully informed consumers due to the required written disclosure of fees paid to or by licensed inspectors.

The amendments 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 Chapter 1102 to insure compliance with the provisions of Chapter 1102.

The statutes affected by this adoption are Texas Occupations Code, Chapter 1101 and Chapter 1102. No other statute, code or article is affected by the adopted amendments.