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Texas Register Preamble


The Texas Real Estate Commission (TREC) adopts amendments to 22 TAC §537.20, regarding Standard Contract Form TREC No. 9-8, Unimproved Property Contract; §537.28, regarding Standard Contract Form TREC No. 20-9, One to Four Family Residential Contract (Resale); §537.30, regarding Standard Contract Form TREC No. 23-10, New Home Contract (Incomplete Construction); §537.31, regarding Standard Contract Form TREC No. 24-10, New Home Contract (Completed Construction); §537.32, regarding Standard Contract Form TREC No. 25-7, Farm and Ranch Contract; §537.37, regarding Standard Contract Form TREC No. 30-8, Residential Condominium Contract (Resale); §537.43, regarding Standard Contract Form TREC No. 36-6, Addendum for Property Subject to Mandatory Membership in a Property Owners Association; and §537.47, regarding Standard Contract Form TREC No. 40-4 Third Party Financing Condition Addendum for Credit Approval, with changes to the proposed text and to the forms adopted by reference as published in the September 10, 2010, issue of the Texas Register (35 TexReg 8284). The amendments adopt by reference eight revised contracts for use by Texas real estate licensees.

The difference between the rules and forms as proposed and those adopted are as follows: the proposed new §537.53, regarding Standard Contract form No. 46-0 entitled Non-Realty Items Addenda is not adopted; the title of form No. 40-4 is changed to Third Party Financing Addendum for Credit Approval; references to the title of form No. 40-4 are changed in all relevant forms; the reference to "affidavit" in paragraph 6.C.(1) of all relevant forms is changed to "T-47 Affidavit;" proposed 6.C.(4) "No survey required" is deleted from all relevant forms, except the Farm and Ranch Contract; paragraph 6.E.(2) in all relevant forms is amended to provide notice that the property may be subject to more than one property owners associations if applicable; "if any" is deleted from paragraph 7.D.(2) in all relevant forms; paragraph 15.B in all relevant forms is changed to provide for waiver of buyer's or seller's right to enforce specific performance if the party fails to file a petition for such and provide notice to the escrow agent within 45 days of the closing date; paragraph 22 of all relevant forms is corrected for typographical errors; conforming title changes to relevant forms and to delete the reference to the non-realty items addendum are made; the reference to "broker or designee" on page eight of all relevant forms is changed to "licensed supervisor of associate;" paragraph A.2 of Addendum for Property Subject to Mandatory Membership in a Property Owners Association is rewritten for additional clarification.

Texas real estate licensees are generally required to use forms promulgated by TREC when negotiating contacts 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 amendment to §537.20 adopts by reference Standard Contract Form TREC No. 9-8, Unimproved Property Contract. The adopted revisions are the same as those adopted for Form TREC No. 20-9 as described below, except for paragraph 2.

The amendment to §537.28 adopts by reference Standard Contract Form TREC No. 20-9, One to Four Family Residential Contract (Resale). Paragraph 2.B. is revised to include mounts and brackets for televisions and speakers; the phrase regarding controls in paragraph 2.C. is rewritten and placed at the end of the list of accessories. Paragraph 4.A.(1) is amended to provide examples of underwriting examples to include appraisal, insurability, and lender required repairs; the termination provision under this paragraph is revised. Paragraph 4.A.(2) is revised to change "Financing Approval" to "Credit Approval". The reference to the title of Form TREC No. 40-4 is changed to "Third Party Financing Addendum for Credit Approval". The sentence regarding Sellers failure to timely provide the existing survey or affidavit in paragraph 6.C.(1) is moved from the end of the paragraph to the middle of the paragraph; paragraph 6.E.(2) is revised to delete apostrophes to be consistent with statutory provisions; paragraph 6.E.(2) is amended to provide notice that the property may be subject to more than one property owners associations. Paragraph 7.D.(2) is rewritten to include a blank line for specific repairs and an admonishment telling parties not to insert general phrases. A notice is added to the end of paragraph 7 reminding the parties about the buyer's rights to conduct inspections, negotiate repairs under a subsequent amendment, or terminate during the option period, if any. Paragraph 9.B.(3) is rewritten; new subparagraph 5 regarding leases is added to paragraph 9.B. The two sentences at the end of paragraph 10 are underlined. Paragraph 12.A.(2) is restructured. Paragraph 15.B is changed to provide for waiver of buyer's or seller's right to enforce specific performance if the party fails to file a petition for such and provide notice to the escrow agent within 45 days of the closing date. Paragraph 18.B. is rewritten for clarity. Addenda are added to and deleted from paragraph 22. Option Period is defined in paragraph 23. Paragraph 24 is rewritten. The Broker Information page is rewritten and restructured.

The amendment to §537.30 adopts by reference Standard Contract Form TREC No. 23-10, New Home Contract (Incomplete Construction). The adopted revisions are the same as those adopted for Form TREC No. 20-9, except for paragraph 2, paragraph 6.C.(1), paragraph 7.B., and paragraph 9.B.(5).

The amendment to §537.31 adopts by reference Standard Contract Form TREC No. 24-10, New Home Contract (Completed Construction). The adopted revisions are the same as those adopted for Form TREC No. 20-9, except for paragraph 2, paragraph 6.C.(1), paragraph 7.B., and paragraph 9.B.(5).

The amendment to §537.32 adopts by reference Standard Contract Form TREC No. 25-7, Farm and Ranch Contract. The same amendments are made as those adopted for Form TREC No. 20-9. In addition, paragraph 2.F. is revised to delete "mineral" and "royalty."

The amendment to §537.37 adopts by reference Standard Contract Form TREC No. 30-8, Residential Condominium Contract (Resale). The same amendments are made to Form TREC No. 30-8, Residential Condominium Contract as those adopted for Form TREC No. 20-9. In addition, paragraphs 2.B.(2) and 2.C.(2) are amended by adding a provision regarding Buyer's cancellation of the contract; subparagraph (3) is revised and subparagraph (4) is added to paragraph 12.

The amendment to §537.43 adopts by reference Standard Contract Form TREC No. 36-6, Addendum for Property Subject to Mandatory Membership in a Property Owners Association. Subparagraph A.2. is revised to add a reference providing an updated resale certificate. New paragraph C. is added regarding deposits for reserves.

The amendment §537.47 adopts by reference Standard Contract Form TREC No. 40-4 Third Party Financing Addendum for Credit Approval. The references to "Financing Approval" are changed to "Credit Approval." The reference to "Loan Fees" is changed to "Adjusted Original Charges" in subparagraphs (1) and (2) of paragraph A, and paragraphs C and D. The note regarding HUD 92564-CN is deleted.

The reasoned justification for the amendments and forms adopted by reference is to provide updated contract forms that reflect current law and industry practices for use by licensees, and is further articulated below in response to the comments received.

The commission received 53 comments on the rules and forms as proposed.

Comment: 33 commenters suggested changes to paragraph 6.A.(8).

Response: The commission is unable to make the recommended substantive changes without reposting all the forms for notice and comment. The commission may address the suggestions in future contract revisions.

Comment: One commenter suggested adding ice makers in the Seller's Disclosure Notice.

Response: The commission did not make the change because the TREC Seller's Disclosure Notice tracks the statutory requirements of §5.008 of the Property Code and the commission is not currently reviewing the Seller's Disclosure Notice at this time.

Comment: Two commenters disagreed with changing "financing approval" to "credit approval."

Response: The commission respectfully disagrees with the commenter, but did decide to rephrase the last part of the first sentence of the Third Party Financing Addendum for Credit Approval so that it reads: "make every reasonable effort to obtain credit approval for the financing." Additionally, the commission decided to change the title of the addendum to "Third Party Financing Addendum for Credit Approval" and to make conforming changes in paragraph 4.A.(2) and in paragraph 22 of the contract forms.

Comment: One commenter suggested revising the title of the Third Party Financing Addendum to be consistent with "Credit Approval" changes.

Response: The commission agrees with the commenter and revised the name of the form to Third Party Financing Addendum for Credit Approval as described above.

Comment: One commenter suggested deleting "if any" from paragraph 7.D.(2) and other revisions to proposed text.

Response: The commission agrees with the suggestion to delete "if any" from paragraph 7.D.(2) but respectfully disagrees with the other suggestions for further nonsubstantive editing.

Comment: Two commenters disagreed with adding the proposed paragraph that provides no survey is required.

Response: The commission concurs with the commenter and eliminated that paragraph in all the relevant forms except the Farm and Ranch Contract.

Comment: Four commenters disagreed with promulgating for required use the Non-Realty Items Addendum.

Response: The commission agrees with the commenters and decided not to promulgate the form but, instead, decided to approve the use of the form on a voluntary basis.

Comment: One commenter suggested removing the reference to city in paragraph 2.

Response: The commission respectfully disagrees with the suggestion and decided not to adopt it.

Comment: One commenter suggested changing paragraph 4.A.(1) to include a requirement for buyer to provide notice that the property has met lenders underwriting requirements or waive such requirements within 7 days, to include a reference to the paragraph number in the reference to the option period in paragraph 7.D.(2); to insert the ratification language on page 8 back to the top of the page, and to change the name of the Third Party Financing Condition Addendum as described above.

Response: The commission respectfully disagrees with the suggestions and decided not to adopt them except for the changes to the title of the Third Party Financing Condition Addendum.

Comment: One commenter suggested that the proposed changes to paragraph 15 amounted to changing the statute of limitations for filing an action for specific performance.

Response: The commission respectfully disagrees with the comment and has further clarified paragraph 15 to provide for a waiver of buyer's or seller's right to specific performance if the party fails to file a petition for such, and provide notice to the escrow agent within 45 days of the closing date.

Comment: Two commenters generally disagreed with using the term "designee" on page 8.

Response: The commission agrees with the commenter and changed it to "licensed supervisor of associate."

Comment: One commenter suggested adding a reference to "bonus to selling agent" on page 8.

Response: The commission respectfully disagrees with the commenter and decided not to make the suggested change.

Comment: Three commenters suggested making the cost of providing the subdivision information or resale certificate a choice of expense for buyer or seller.

Response: The commission respectfully disagrees and decided not to take action in response to the comments.

Comment: One commenter suggested referencing additional transfer fees in the Addendum for Property Subject to Mandatory Membership in an Owners' Association.

Response: The commission respectfully disagrees and decided not to take action in response to the comment.

Comment: One commenter suggested increasing the time period for providing the updated resale certificate under paragraph A.2. of the Addendum for Property Subject to Mandatory Membership in an Owners' Association.

Response: The commission respectfully disagrees and decided not to take action in response to the comment.

Comment: One commenter suggested changing "or" to "and" in the bolded sentence in Paragraph 6.C.(1).

Response: The commission respectfully disagrees and decided not to take action in response to the comment.

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 or forms. The rules and forms as adopted do not affect individuals other than those contemplated by the rules as proposed. The rules and forms as adopted do not impose more onerous requirements than the proposed versions and do not materially alter the issues raised in the proposed rules and forms.

The amendments and forms adopted by reference are adopted under Texas Occupations Code, §1101.151, which authorizes the Texas Real Estate Commission to adopt and enforce rules necessary to administer Chapters 1101 and 1102; and to establish standards of conduct and ethics for its licensees to fulfill the purposes of Chapters 1101 and 1102 and ensure compliance with Chapters 1101 and 1102.

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



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