The Texas Real Estate Commission (TREC) adopts amendments to §535.141, concerning initiation of investigation, §535.144, concerning a licensee's conduct when acquiring or disposing of property, §535.154, concerning false advertising, and new §535.148, concerning a licensee's receiving an undisclosed commission or rebate, with changes to the proposed text as published in the May 26, 2000, issue of the Texas Register (23 TexReg 4690). TREC adopts amendments to §535.143, concerning fraudulent procurement of a license, §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, §535.156, concerning dishonesty, bad faith or untrustworthiness, and §533.159, concerning failing properly deposit escrow monies, without changes to the proposed text.

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. The Texas Association of Realtors (TAR) commented that the portion of the proposed amendment permitting a licensee not named in the original complaint to be included in the complaint was in conflict with the law and raised fundamental due process concerns. TAR also suggested moving the definitions to the beginning of the section and removing unnecessary references to registration. The commission determined that it should not adopt the portion to which TAR objected and made the other suggested changes.

The amendment to §535.143 shortened the section by combing two related subsections.

The amendment to §535.144 clarifies when a licensee is considered to be acting on his or her own behalf. On final adoption, the commission deleted a phrase whose meaning TAR questioned, regarding "control" of a business entity. The final version will treat a licensee as acting on his or her own behalf in a transaction if the licensee is acting on behalf of a business entity in which the licensee is more than a 10% owner. The amendment ensures that licensees who thus have a material stake in the transaction disclose their status as licensees so as to prevent advantage being taken by reason of the 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 clarifies 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.

The amendment to §535.146 provides a definition of the term "trust account" consistent with the Act, and requires 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. The amendment also made a nonsubstantive change in order to make the section easier to read. TAR suggested that §535.146, §535.159 and §535.160 be combined to simplify the trust account provisions and minimize the number of provisions licensees must consider. The commission determined that dividing the sections by their appropriate statutory reference was appropriate and declined to make the suggested change.

The amendment to §535.147 addresses the splitting of fees with an unlicensed person, which is prohibited by the Act. The amendment clarifies 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 also requires 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. TAR suggested that the section be rewritten to include fees paid to persons who are not registered as easement or right-of-way agents. Because the statutory provision concerned addresses only persons who are acting as real estate agents, not persons acting as easement or right-of-way agents, however, the commission declined to make the suggested change.

New §535.148 concerns a licensee's acceptance of an undisclosed commission or rebate. The new section prohibits 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. On the suggestion of TAR, the commission modified the section to exclude payments from one licensee to another for a referral, as referrals may occur before the parties are known, as when a prospective buyer is referred to a broker in another city.

The amendment to §535.154 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. The amendment also 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 will 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. TAR suggested that the commission not adopt a provision which would have the effect of increasing the number of communications from licensees which are considered advertisements if the licensee's representation agreement is not in writing. The commission concurred. TAR also suggested a number of grammatical rewrites, rewording of the section and placing disclosure requirements elsewhere and not requiring them in advertisements. The commission determined that the proposed language was appropriate and should be included in the licensees' advertisements and declined to make the requested changes.

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. The amendment also makes 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 requires the person who deposited the funds to receive any interest earned on the funds.

The amendments and new section are adopted 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.