The Texas Real Estate Commission (TREC) adopts amendments to §543.1, concerning Registration, §543.2, concerning Amendments, §543.3, concerning Fees, §543.4, concerning Forms, §543.5, concerning Violations, §546.6, concerning Complaints and Disciplinary Proceedings, and adopts new §543.7, concerning Contract Requirements, §543.8, concerning Disclosure Requirements, §543.9, concerning Exemptions, §543.10, concerning Escrow Requirements, and §543.11, concerning Maintenance of Registration. Sections 543.1, 543.2, and 543.4 - 543.6 are adopted with changes to the proposed text as published in the November 4, 2005, issue of the Texas Register (30 TexReg 7163). The forms to §543.4 are also adopted with changes from the proposal as submitted to the Texas Register. Sections 543.3, and 543.7 - 543.11 are adopted without changes and will not be republished.

The amendments and new rules implement revisions to the Texas Timeshare Act, Chapter 221, Texas Property Code enacted during the 79th Legislative Session, Regular Session, by House Bill 1045. The amendments are also adopted in connection with TREC's on-going review of its rules. The amendments conform the sections to the language used in other TREC rules, and adopt by reference revised and new forms to be used by timeshare developers when registering a timeshare plan, amending a registration, obtaining authorization to conduct pre-sales of timeshares, and registering under an abbreviated registration process under limited circumstances.

The modifications to the existing rules, among other things, revise the registration form to verify the content of the timeshare disclosure statement that a developer must provide to a purchaser prior to the sale of a timeshare interest; verify required purchase contract provisions, including the purchaser's rescission period, processing of purchaser refunds, and disclosure of the rescission period in the purchase contract; and verify that a developer provides a statement to the purchaser that, on an annual basis, the sum of the nights that purchasers are entitled to use the accommodations does not exceed the number of nights the accommodations are available for use by the purchasers.

The rules also adopt by reference a new application for pre-sale authorization form which a developer must use if authorized by TREC to conduct pre-sales prior to completion of registration if the application is administratively complete and if the developer otherwise complies with specific statutory requirements. The rules adopt by reference a new form to be used in an abbreviated registration process for an out-of-state developer whose plan is appropriately registered in another jurisdiction and who provides certain documentation to TREC. The rules and revisions to the existing amendment form clarify when amendments to a timeshare plan registration must be filed. Finally, the amendments revise the fee provisions that are applicable for each type of registration and clarify TREC's powers to conduct hearings, initiate disciplinary actions and assess administrative penalties.

Comments were received from the American Resort Development Association (ARDA).

The adopted amendments, new rules and forms adopted by reference differ from the proposed rules and forms to correct various non-substantive typographical errors and spacing in the forms, and to include multiple suggestions based on comments received from ARDA. In addition, three forms that were included with the registration form were separated from the form and given new form numbers. The three additional forms are the Escrow Surety Bond, Construction Surety Bond, and Consent to Service of Process.

In addition to pointing out spacing and typographical errors, ARDA suggested the following revisions to the forms and rules:

Comment: In section G, page 1 of TSR1-4, Application to Register a Timeshare Plan, regarding ownership options that are being sold, a question is asked as to whether all of the check boxes are necessary.

Response: If any of the options apply to the plan being registered, then all relevant boxes should be checked.

Comment: In Part I (A), item 8 of TSR1-4, ARDA suggests clarification regarding whether the seven questions apply only to the three persons listed in item 8 or to all officers and directors. In addition, ARDA suggests that questions (f) and (g) regarding past disciplinary actions may not be required by Chapter 221, Property Code (the Act).

Response: The Commission agrees with the suggestion and has clarified that the questions do not apply to all officers and directors. Regarding sections (f) and (g), the Commission requests additional information regarding disciplinary actions pursuant to §221.032(b)(26), (c)(9), and (d)(32) of the Act.

Comment: Regarding item 9 of Part I (A), TSR1-4, ARDA suggests clarification as to whether item 9 requires information on every state in which the timeshare plan is registered.

Response: The Commission has clarified in the form that item 9 requires information on every jurisdiction in which the timeshare plan is registered.

Comment: Regarding item 15 of Part I (A), TSR1-4, ARDA suggests that the Commission clarify that an escrow agreement is not required if an alternate assurance such as a bond is used by inserting the phrase "If applicable, " at the beginning to account for that possibility.

Response: The Commission agrees with ARDA's suggestion and has revised the form accordingly.

Comment: Regarding item 16 of Part I (A), TSR1-4, ARDA suggestions inserting the phrase "in Texas" immediately following the word "conducted".

Response: The Commission agrees with ARDA's suggestion and has revised the form accordingly.

Comment: Regarding Item Q of Part II, TSR1-4, ARDA suggests that the Commission clarify that the receipt acknowledgment need only be separate from the exchange disclosure statement required by the Act.

Response: The Commission agrees with ARDA's suggestion and has revised the form accordingly. In addition, the Commission made a similar change to Item N regarding the timeshare disclosure statement.

Comment: Regarding Part IV, Oath of TSR1-4, ARDA suggests that the first (1) should include the language "or another provision of the" inserted following Section 221.021, and that the second (1) should be reworded to read: "Where required by the Texas Timeshare Act, escrow 100% of any deposits received from purchaser or provide alternative financial assurances where permitted." ARDA also recommends that the second (4) should be revised to be consistent with the provisions of §221.024 by replacing the word "occurrence" with the phrase "developer knows or should know."

Response: The Commission agrees with ARDA's suggestions and has revised the form accordingly. In addition, the Commission has revised similar language in the Oath on the Abbreviated Registration Form.

Comment: Regarding, Part IV, Oath of TSR1-4, a suggestion was made to clarify that the second (5) applies to purchasers who request an accounting only for timeshare plans in which the purchaser owns a timeshare interest pursuant to §221.074 of the Act.

Response: The Commission believes it is unnecessary to further clarify because it is clear in §221.074 of the Act that the requirement applies only to the timeshare plans in which the purchaser owns an interest.

Comment: Regarding the Escrow Surety Bond Form TSR 5-0, ARDA suggests that the bond should provide that the purchaser should first look to the Principal for payment before going to the Surety, and recommends that the form should be rewritten with language similar to that contained in the Construction Surety Bond.

Response: The Commission agrees with ARDA's suggestion and has revised the form accordingly.

Comment: Regarding the Presale Authorization for a Timeshare Plan TSR 4-0, ARDA suggests that the last sentence should be reworded to read: "I confirm that I am providing an administratively complete Application to Register a Timeshare Plan, Abbreviated Registration of a Timeshare Plan, or Application to Amend a Timeshare Registration, and the applicable filing fee concurrently with this written request for pre-sale authorization."

Response: The Commission agrees with ARDA's suggestion and has revised the form accordingly.

Comment: Regarding amendments to §543.1(c), ARDA suggests adding the word "promptly" to require the Commission to promptly notify the applicant if the applicant has failed to satisfy any requirement for registration; and suggests that the phrase "if the applicant fails to submit a response to the commission within" be added to the last sentence of the subsection.

Response: The Commission agrees with ARDA's suggestion and has revised the rule accordingly.

Comment: Regarding amendments to §543.2(b), ARDA suggests revisions to clarify the types of information that will be considered "materially adverse" and "material" and which must be provided to the commission by amendment to an existing registration; suggests adding cites to §221.032(b)(26) and (d)(32) which permit the Commission to request additional information; suggests amending the subsection that defines "promptly" as that term is no longer in the Act; and suggests adding the term "promptly" to subsection (g) to require the Commission to promptly notify the applicant if the applicant has failed to satisfy any requirement to amend the registration.

Response: The Commission agrees with ARDA's suggestions and has revised the rule accordingly. In addition, the Commission further revised §543.2(c)(7) and (8) to require a developer to notify the Commission of a change of more than 20% in the amount of an original surety bond or original alternative assurance.

Comment: Regarding amendments to §543.5, ARDA comments that certain acts defined as material violations may be beyond the scope of §221.024 of the Act.

Response: The Commission respectfully disagrees with this statement. The Commission believes that it is in the best interest of the public to further clarify certain acts for which disciplinary action may be taken against developers and further believes that defining such acts in the rules is within the scope of the Commissions powers under §221.024 of the Act. In addition, the Commission notes that subsections (c) and (d) are existing rules promulgated under existing language in §221.024 that was not amended by House Bill 1045.

Comment: Regarding amendments to §543.6, ARDA suggests adding a cite to §221.024 of the Act.

The Commission agrees with ARDA's suggestions and has revised the rule accordingly.

The amendments and new sections are adopted under the Texas Government Code, §221.024, which authorizes the Texas Real Estate Commission to prescribe and publish forms and adopt rules necessary to carry out the provisions of The Texas Timeshare Act.

The statute affected by this adoption is the Texas Government Code, Chapter 221.