The Texas Real Estate Commission (TREC) adopts amendments to 22 TAC §§537.11, 537.20, 537.28, 537.30 - 537.32, 537.37, 537.43, 537.44, 537.46, and 537.47, concerning standard contract forms with changes to the proposed text and with changes to the forms adopted by reference as published in the December 23, 2005, issue of the Texas Register (30 TexReg 8585). The amendments adopt by reference ten revised contract forms to be used by Texas real estate licensees.

The contract forms are published by TREC and available at the TREC web site (www.trec.state.tx.us) or at the Texas Real Estate Commission, P.O. Box 12188, 1101 Camino La Costa, Austin, TX 78711-2188. The date for mandatory use of the adopted contract forms is May 1, 2006; however, the forms may be used by licensees on a voluntary basis prior to that date. The changes to the text of the rule as proposed include deletion of two subparagraphs that reference an obsolete control number that is no longer used in the distribution of the promulgated contract forms. Changes were also made to the text of the contract forms in response to comments as described further below.

The revisions to the rules and forms as adopted do not change the nature or scope so much that they could be deemed different rules. The rules as adopted do not affect individuals other than those contemplated by the rules as proposed. The rules as adopted do not impose more onerous requirements that the proposed versions and do not materially alter the issues raised in the proposed rules. Changes in the adopted rules and forms adopted by reference respond to public comments or otherwise reflect nonsubstantive variations from the proposed rules and forms to clarify their intent and improve style and readability.

Texas real estate licensees are generally required to use forms promulgated by TREC when negotiating contracts for the sale of real property. These forms are drafted by the Texas Real Estate Broker-Lawyer Committee, an advisory body consisting of six attorneys appointed by the President of the State Bar of Texas, six brokers appointed by TREC, and a public member appointed by the governor.

The amendments to §537.11 renumber the revised form promulgated by TREC and delete two subsections that reference obsolete control numbers.

The amendment to §537.20 adopts by reference Standard Contract Form TREC No. 9-6, Unimproved Contract Form. 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. Paragraph 6C is reformatted by moving the provision related to the existing survey to Paragraph 6C(1) and by adding a sentence in Paragraph 6C(1) that clarifies that if the seller fails to deliver the existing survey or an acceptable affidavit to the buyer and title company within the time required, the buyer may obtain a new survey no later than three days before the closing date at the seller's expense. If the seller delivers the existing survey and affidavit within the time required, but it is not acceptable to the title company or lender, the parties negotiate (by checking the appropriate box for which party pays for a new, acceptable survey). Paragraph 6C(2) is revised to add a sentence that the buyer is deemed to have received the survey on the date specified in Paragraph 6C(2) or the actual day he or she receives it, whichever date is earlier. The sentence in 6D regarding the time period under which the buyer must object is reformatted to make it clearer. Paragraph 6D is revised to clarify the provisions regarding buyer's right to object to any portion of the property lying in a special flood hazard area (Zone V or A) to parallel language in Federal Emergency Management Agency maps. Paragraph 6E is revised to add two notices. The notice under Paragraph 6E(6) 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. The notice under Paragraph 6E(7) is a statutorily required notice that a seller of property in a public improvement district (PID) must provide to a buyer. The notice cautions the buyer that a PID may make special assessments against property in the PID. Paragraph 7A is reformatted to be consistent with other TREC contract forms. Paragraph 7E is revised regarding seller's disclosures about flooding of the property and environmental hazards or conditions. Paragraph 12 is revised to be consistent with other TREC contract 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 §537.28 adopts by reference Standard Contract Form TREC No. 20-7, One to Four Family Residential 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. Paragraph 6C is reformatted by moving the provision related to the existing survey to Paragraph 6C(1) and by adding a sentence in Paragraph 6C(1) that clarifies that if the seller fails to deliver the existing survey or an acceptable affidavit to the buyer and title company within the time required, the buyer may obtain a new survey no later than three days before the closing date at the seller's expense. If the seller delivers the existing survey and affidavit within the time required, but it is not acceptable to the title company or lender, the parties negotiate (by checking the appropriate box for which party pays for a new, acceptable survey). Paragraph 6C(2) is revised to add a sentence that the buyer is deemed to have received the survey on the date specified in Paragraph 6C(2) or the actual day he or she receives it, whichever date is earlier. 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 two notices. The notice under Paragraph 6E(6) 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. The notice under Paragraph 6E(7) is a statutorily required notice that a seller of property in a public improvement district (PID) must provide to a buyer. The notice cautions the buyer that a PID may make special assessments against property in the PID. Paragraph 7A is reformatted to be consistent with other TREC contract forms. Paragraph 12 is revised to be consistent with other TREC contract 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 18 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 §537.30 adopts by reference Standard Contract Form TREC No. 23-6, New Home Contract (Incomplete Construction). The amendment to §537.31 adopts by reference Standard Contract Form TREC No. 24-6, New Home Contract (Complete Construction). Paragraph 4A of both forms 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. Paragraph 6C of Form No. 24-6 is reformatted by moving the provision related to the existing survey to Paragraph 6C(1) and by adding a sentence in Paragraph 6C(1) that clarifies that if the seller fails to deliver the existing survey or an acceptable affidavit to the buyer and title company within the time required, the buyer may obtain a new survey no later than three days before the closing date at the seller's expense. If the seller delivers the existing survey and affidavit within the time required, but it is not acceptable to the title company or lender, the parties negotiate (by checking the appropriate box for which party pays for a new, acceptable survey). Paragraph 6C(2) is revised to add a sentence that the buyer is deemed to have received the survey on the date specified in Paragraph 6C(2) or the actual day he or she receives it, whichever date is earlier. 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 two notices. The notice under Paragraph 6E(6) 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. The notice under Paragraph 6E(7) is a statutorily required notice that a seller of property in a public improvement district (PID) must provide to a buyer. The notice cautions the buyer that a PID may make special assessments against property in the PID. Paragraph 7A is reformatted to be consistent with other TREC contract forms. Paragraph 7D is revised to include a checkbox to indicate whether the insulation specifications are attached. Paragraph 12 is revised to be consistent with other TREC contract 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 notice required by Chapter 27 of the Texas Property Code adjacent to the signature lines is revised to reflect the current statutory language. 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 §537.32 adopts by reference Standard Contract Form TREC No. 25-5 Farm and Ranch Contract. The form is revised to bold the phrases in Paragraph 2B(1) and (2) 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. Paragraph 6C is revised to rearrange the check boxes for consistency with other TREC contract forms. Paragraph 6C(2) is revised to add a sentence that the buyer is deemed to have received the survey on the date specified in Paragraph 6C(2) or the actual day he or she receives it, whichever date is earlier. The sentence in 6D regarding the time period under which the buyer must object is reformatted to make it clearer. Paragraph 6D is revised to clarify the provisions regarding buyer's right to object to any portion of the property lying in a special flood hazard area (Zone V or A) to parallel language in Federal Emergency Management Agency maps. Paragraph 6G is revised to add two notices. The notice under Paragraph 6G(5) 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. The notice under Paragraph 6G(6) is a statutorily required notice that a seller of property in a public improvement district (PID) must provide to a buyer. The notice cautions the buyer that a PID may make special assessments against property in the PID. Paragraph 7A is reformatted to be consistent with other TREC contract forms. Paragraph 12 is revised to be consistent with other TREC contract 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.