The Texas Real Estate Commission (TREC) proposes amendments to §§535.141, concerning initiation of investigation, 535.143, concerning fraudulent procurement of a license, 535.144, concerning a licensee's conduct when acquiring or disposing of property, 535.145, concerning false promises, 535. 146, concerning failure to properly account for or remit money and commingling, 535.147, concerning splitting a fee with an unlicensed person, 535.154, concerning false advertising, 535.156, concerning dishonesty, bad faith or untrustworthiness, 533.159, concerning failing properly deposit escrow monies and new §535.148, concerning a licensee's receiving an undisclosed commission or rebate. The amendments and new section are proposed in connection with TREC's on-going review of its rules and are generally intended to update and to clarify the grounds for disciplinary action against Texas real estate licensees.

The amendment to §535.141 clarifies that easement and right-of-way agents registered with TREC are "licensees" for the purposes of the section, which relates to the investigation of complaints and the effect of a suspension or revocation on a licensee's business. To streamline the resolution of complaints, the amendment also would permit a licensee not named in the original complaint to be included in the investigation if reasonable cause has been found in the course of the investigation to believe that the licensee has engaged in a violation of the law or a TREC rule. In some cases, all the licensees who were involved in a transaction are unknown to the complainant and may not be named in the original complaint. Before the licensee could be added to the investigation, however, the section would require TREC to notify the licensee and provide the licensee with a copy of the complaint. Currently, these matters are presented to the members of the commission at a public meeting; adoption of the amendment would permit investigations to be concluded more quickly.

The amendment to §535.143 would shorten the rule to make it easier to read by combing two related subsections.

The amendment to §535.144 would clarify when a licensee is considered to be acting on his or her own behalf. Licensees who are acting on their own behalf in a real estate transaction are subject to discipline by TREC if they engage in misrepresentation, fraud or dishonesty. The section requires a licensee acting on his or her on behalf to disclose in writing the fact that the person is licensed as a real estate broker or salesperson, either in the contract of sale or rental agreement, or in a writing given prior to entering into any contract. The amendment would treat a licensee as acting on his or her own behalf if the licensee is acting on behalf of a business entity controlled by the licensee or in which the licensee is more than a 10% owner. The amendment would ensure that licensees who either control the entity acting as a party to the contract or have a material stake in the transaction disclose their status as licensees so as to prevent advantage being taken by reason of their position and expertise.

The amendment to §535.145 concerns false promises by a licensee, which are a basis for disciplinary action under Texas Civil Statutes, Article 6573a (the Act), §15(a)(6)(B). The amendment would clarify that it is not necessary for a party to a real estate transaction to have relied upon a false promise made by a licensee for TREC to discipline the licensee. While reliance or lack of reliance upon the promise may be considered in determining the appropriate discipline, the Act does not require proof of reliance to establish grounds for disciplinary action. Adoption of the amendment would ensure that the section is consistent with the Act.

The amendment to §535.146 would provide a definition of the term "trust account" consistent with the Act, and require a licensee maintaining a trust account to retain a documentary record of each deposit or withdrawal from the account for a period of four years. TREC is authorized by the Act to initiate investigations of complaints concerning a licensee's conduct within four years after the transaction, and this change would ensure that pertinent records would be available if needed to resolve a complaint. Other changes to the section would require a licensee to remove money belonging to the licensee from a trust account within 30 days after the licensee acquires ownership of the money in the account, regardless of the reason the licensee acquires ownership of the money. Nonsubstantive changes also are proposed in order to make the section easier to read.

The amendment to §535.147 addresses the splitting of fees with an unlicensed person, which is prohibited by the Act. The amendment would clarify that the Act is not violated in this regard if the licensee pays a portion of the licensee's fee to a party in the transaction, since the Act does not require a person to be licensed as a real estate broker or salesperson to act as a principal in a transaction. The amendment would require the licensee who intends to pay a portion of the licensee's fee to a party the licensee does not represent in the transaction to obtain the consent of the party represented by the licensee before making the payment. This change would incorporate into the section the common law rules that, as a fiduciary, a real estate licensee is charged with the responsibility of acting in the best interests of the licensee's principal and not acting on the behalf of an adverse party without the principal's consent.

New §535.148 concerns a licensee's acceptance of an undisclosed commission or rebate. The new section would prohibit a licensee from receiving a commission, rebate, or fee in a transaction from a person other than the person the licensee represents without first disclosing the licensee's intention to all parties and obtaining the consent of all parties. The section would implement the Act, §15(a)(6)(H), which authorizes disciplinary action against licensees who accept, receive, or charge an undisclosed commission or rebate and §15(a)(D), which authorizes disciplinary action against licensees who fail to make it clear for whom they are acting or who receive compensation from more than one party except with the knowledge and consent of all parties. The amended section would also be consistent with the common rule that an agent must deal fairly with his principal in all matters related to the transaction between them.

The amendment to §535.154 would clarify that communications from a licensee to a member of the public are not advertisements subject to statutory disclosure requirements if the communication is made after the member of the public has signed a written agreement for the licensee to provide services. The Act, §15(a)(6)(P), authorizes disciplinary action against a licensee who fails to disclose that the licensee is acting as a real estate broker or agent in an advertisement. If the licensee has entered into a written agreement to represent a consumer, the consumer would no longer need to be notified of the capacity in which the licensee is acting. In the absence of such an agreement, it may not be clear to the member of the public that the communication is from a licensee. The amendment also clarifies that any advertisement that does not readily identify the licensee as a real estate agent must include an additional designation such as "agent" or "broker." The amendment deletes as unnecessary a provision that encouraged licensees to use a broker's name first in a business name including the name of a salesperson. Finally, the amendment addresses advertisements which offer a rebate of the licensee's commission or which promote the use of a service provider with an expectation that the licensee will be paid by the service provider. In such cases, the licensee would be required to include disclosures in the advertisement that payment of the rebate is subject to the consent of the person the licensee represents in the transaction, and that the payment of the rebate is subject to restrictions if use of a specific service provider is required to receive the rebate. The amendment also would require the licensee to disclose in the advertisement that the licensee may receive compensation from the service provider.

The amendment to §535.156 revises the section to require a licensee to provide information to a principal considering whether to make an offer, as well as to a principal considering whether or not to accept or reject an offer. If the principal is a buyer, or a seller who is initiating the negotiations, it would be consistent also to require information to be provided to that principal relative to the making of an offer. The amendment also would make the section consistent with current industry practice of obtaining written consent from a principal if the licensee is not to submit an offer to the principal after the principal has accepted an offer to buy, sell, rent or lease the property.

The amendment to §535.159 clarifies that a person depositing funds with a broker may authorize the broker in writing to retain any interest on the deposited funds. In the absence of a written agreement, the section would continue to require the person who deposited the funds to receive any interest earned on the funds. The amendment could relieve the broker of accounting for nominal amounts of interest earned on small deposits or deposits held for short periods of time, while ensuring that the owner of the funds would have to consent for the broker to retain any accrued interest.

Mark A. Moseley, general counsel, has determined that for the first five-year period the sections are in effect there will be no fiscal implications for the state or for units of local government as a result of enforcing or administering the sections. There is no anticipated impact on small businesses, micro businesses or local or state employment as a result of implementing the sections.

Mr. Moseley also has determined that for each year of the first five years the sections as proposed are in effect the public benefit anticipated as a result of enforcing the sections will be a simplified process for accrediting existing schools. There is no anticipated economic cost to persons who are required to comply with the proposed sections.

Comments on the proposal may be submitted to Mark A. Moseley, General Counsel, Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188.

The amendments are proposed under Texas Civil Statutes, Article 6573a, §5(h), which authorize the Texas Real Estate Commission to make and enforce all rules and regulations necessary for the performance of its duties.

The statute which is affected by this proposal is Texas Civil Statutes, Article 6573a.