The Texas Real Estate Commission (TREC or commission) adopts amendments to 22 TAC §537.20, concerning Standard Contract Form TREC No. 9-9; §537.21, concerning Standard Contract Form TREC No. 10-5; §537.22, concerning Standard Contract Form TREC No. 11-6; §537.23, concerning Standard Contract Form TREC No. 12-2; §537.26, concerning Standard Contract Form TREC No. 15-4; §537.27, concerning Standard Contract Form TREC No. 16-4; §537.28, concerning Standard Contract Form TREC No. 20-10; §537.30, concerning Standard Contract Form TREC No. 23-11; §537.31, concerning Standard Contract Form TREC No. 24-11; §537.32, concerning Standard Contract Form TREC No. 25-8; §537.33, concerning Standard Contract Form TREC No. 26-5; §537.35, concerning Standard Contract Form TREC No. 28-1; §537.37, concerning Standard Contract Form TREC No. 30-9; §537.39, concerning Standard Contract Form TREC No. 32-2; §537.40, concerning Standard Contract Form TREC No. 33-1; §537.41, concerning Standard Contract Form TREC No. 34-3; §537.44, concerning Standard Contract Form TREC No. 37-3; §537.45, concerning Standard Contract Form TREC No. 38-3; §537.46, concerning Standard Contract Form TREC No. 39-6; §537.47, concerning Standard Contract Form TREC No. 40-4; §537.48, concerning Standard Contract Form TREC No. 41-1; §537.51, concerning Standard Contract Form TREC No. 44-0; and §537.52, concerning Standard Contract Form TREC No. 45-0. Sections 537.21 - 537.23, 537.33, 537.35, 537.39 - 537.41, 537.44 - 537.46, 537.48, 537.51, and 537.52 are adopted without changes to the proposed text as published October 28, 2011, issue of the Texas Register (36 TexReg 7262) and there were no changes to the forms adopted by reference. Sections 537.20, 537.26 - 537.28, 537.30 - 537.32, 537.37, and 537.47 are adopted without changes to the proposed rule text as published, but with changes to the forms adopted by reference.

The difference between the forms as proposed and as adopted are as follows: Paragraph 7.F. regarding repairs and treatments is changed to clarify that the buyer may extend the closing date up to 15 days so that the seller may complete repairs pursuant to the paragraph. The phrase "smoke detectors" is changed to "smoke alarms" in paragraph 21 of TREC Form Nos. 15-5 and 16-5. "Financing Approval" is changed to "Credit Approval" in TREC Form No. 40-5, Third Party Financing Addendum for Credit Approval, to be consistent with other forms. Typographical errors in various forms are corrected.

The amendments propose to adopt by reference six revised contract forms and 17 assorted addenda for use by Texas real estate licensees.

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.

Amendments to all of the forms adopted by reference change the main telephone number and website address for TREC located in the box on the penultimate and/or last page of each of the forms. Unless specifically referenced below, such changes are the only changes made to the forms adopted by reference.

The amendment to §537.20 adopts by reference Standard Contract Form TREC No. 9-10, Unimproved Property Contract. The proposed revisions are the same as those proposed for TREC Form No. 20-11, except that the transfer fee notice is new subparagraph 6.E.(9).

The amendment to §537.28 adopts by reference Standard Contract Form TREC No. 20-11, One to Four Family Residential Contract (Resale). Paragraph 6.B. is amended to add a sentence regarding the buyer's ability to terminate the contract if the commitment and exception documents are not delivered within the time required, which was deleted from paragraph 15; paragraph 6.D. is amended to add the phrase "by Buyer" to the sentence regarding waiver of Buyer's right to object to defects, exceptions or encumbrances to title; paragraph 6.E.(2) is amended to add additional disclosures required by amendments to §207.003, Property Code; new subparagraph 6.E.(8) adds a new statutory disclosure regarding private transfer fee obligations; paragraph 7.A. is amended to require a seller to have utilities turned on and keep them on while the contract is in effect. Paragraph 7.F. is amended to change a phrase regarding the buyer's remedies if the seller fails to complete agreed repairs and treatments prior to the closing date; the new text provides that the buyer may exercise remedies under paragraph 15 or extend the closing date up to 15 days. Paragraph 15 is amended to delete the sentence regarding seller's failure to make non-casualty repairs or deliver the commitment or survey. The sentence was moved to paragraph 6.B.

The amendment to §537.30 adopts by reference Standard Contract Form TREC No. 23-12, New Home Contract (Incomplete Construction). The revisions are the same as those for TREC Form No. 20-11, except that there are no amendments to paragraphs 7.A. or 7.F.

The amendment to §537.31 adopts by reference Standard Contract Form TREC No. 24-12, New Home Contract (Completed Construction). The revisions are the same as those for TREC Form No. 20-11.

The amendment to §537.32 adopts by reference Standard Contract Form TREC No. 25-9, Farm and Ranch Contract. The revisions are the same as those for TREC Form No. 20-11, except that paragraph 6.E.(2) is not amended.

The amendment to §537.37 adopts by reference Standard Contract Form TREC No. 30-10, Residential Condominium Contract (Resale). The revisions are the same as those for TREC Form No. 20-11, except that paragraph 6.E.(2) is not amended and the transfer fee notice is new subparagraph 6.D.(6).

The amendment to §537.44 adopts by reference Standard Contract Form TREC No. 37-4, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners' Association. Paragraphs D, H, and I are amended to more closely track recent statutory changes to Chapter 207, Property Code.

The amendment to §537.46 adopts by reference Standard Contract Form TREC No. 39-7, Amendment to Contract. Paragraph (8) is changed to reference the correct title of the Third Party Financing Condition Addendum for Credit Approval.

The reasoned justification for the amendments is the availability of current standardized contract forms. In addition, the responses to the comments below fully articulate additional reasoned justification for the amendments.

Eleven comments were received on the rules as proposed. The MetroTex Association of Realtors and the Texas Association of Realtors commented on the rules and forms as proposed.

Comment: Three commenters disagree with the proposed changes to require a seller to have utilities turned on and keep them on while the contract is in effect. Reasons given for the opposition include the cost of keeping utilities turned on which may be a hardship on the seller, and the fact that it may be dangerous to keep the utilities turned on in an unoccupied property because of water-related issues that may occur.

Response: While the commission understands the concerns articulated, the commission respectfully disagrees and believes that it is important for utilities to remain on so that inspections can be timely conducted. Home inspectors often show up at a home to conduct an inspection where utilities are not turned on. The inspector will need to set another time to come back out to the property which can be costly and burdensome to the party paying for the inspection or to the inspector who may be expected to not charge for the lost time. The commission believes that requiring the seller to keep the utilities on is a reasonable compromise as home inspections are an important component of the sale of a property.

Comment: One commenter requested that the contracts include a blank line to indicate when an offer was submitted.

Response: The commission will take this comment into consideration when the forms are fully reviewed in the near future.

Comment: One commenter requested that paragraph 7.F. regarding repairs be changed to clarify that the buyer may extend the closing date up to 15 days so that the seller may complete repairs pursuant to the paragraph.

Response: The commission agrees with the commenter and has changed the forms accordingly.

Comment: One commenter opined on delays caused by lenders and suggested ways in which to require lenders to comply with agreed upon dates in the contract forms. The commenter also believes that the contract forms do not adequately deal with what happens when the closing date passes.

Response: The commission will take the comment into consideration when the forms are fully reviewed in the near future.

Comment: One person commented on TREC Form No. 36-7 and the difficulty in anyone other than the current homeowner obtaining the information from the Homeowner's Association (HOA).

Response: The commission did not propose TREC Form No. 36-7 for notice and comment.

Comment: One commenter believes that the proposed changes to paragraph 7.F. regarding repairs and treatments will subject sellers and licensees to more lawsuits.

Response: The commission respectfully disagrees and believes that the changes to paragraph 7.F. which permits the buyer to extend the closing date by 15 days so that the seller may complete repairs is consistent with the first part of the paragraph wherein the seller agrees to complete the repairs prior to the closing date.

Comment: One commenter pointed out a typographical error in paragraph 6.B of TREC Form No. 23-12. The commenter also suggested that paragraph 11 be expanded in TREC Form No. 24-12, and that the phrase "smoke detectors" be changed to "smoke alarms" in paragraph 21 of TREC Form Nos. 15-5 and 16-5.

Response: The commission will review the forms to make sure the proposed changes are consistently applied to all the contract forms if relevant and that the blank space in paragraph 11 is consistently the same size across all forms. The commission also agrees with the commenters suggestions regarding TREC Form Nos. 15-5 and 16-5.

Comment: One commenter suggested that paragraph C of TREC Form No. 11-7 should read that an amendment or termination of the First Contract will not terminate the Back-Up Contract. The commenter also suggested that the second sentence of Paragraph 6.B. should be amended let seller authorizes the Title Company to deliver the Commitment and Exception Documents to Buyer at an address to be filled in by Buyer.

Response: The commission respectfully disagrees with the commenter and has not changed the referenced forms as suggested. Regarding TREC Form NO. 11-7, paragraph C in its present form is correct. Regarding the suggested changes to paragraph 6.B., the commission believes that the sentence in its present form is appropriate.

Comment: The commenter suggested that on TREC Forms Nos. 15-5 and 16-5, paragraph 16 should emphasize the need to secure appropriate insurance coverage by both parties. Regarding TREC Form Nos. 20-11 and 30-10, the commenter suggested that paragraph 7.H. should give the specific TREC website for licensed residential service contract providers in the State of Texas. Regarding TREC Form No. 38-4 the commenter suggested that the form should be revised to serve as a "withdrawal of offer" form. Regarding TREC Form No. 40-5, the commenter suggested revising the form to include additional loans.

Response: The commission will take the comment regarding TREC Form Nos. 15-5 and 15-6 into consideration when the forms are fully reviewed in the near future. The commission respectfully disagrees with the suggestions regarding the remaining forms.

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 are adopted under Texas Occupations Code, §1101.151, which authorizes the Texas Real Estate Commission to make and enforce all rules and regulations necessary for the performance of its duties and to establish standards of conduct and ethics for its licensees in keeping with the purpose and intent of the Act to ensure compliance with the provisions of the Act.

The statutes affected by this adoption are Texas Occupations Code, Chapters 1101, 1102, 1303; and Texas Property Code, Chapter 221. No other statute, code or article is affected by the amendments.