The Texas Real Estate Commission (TREC) adopts amendments to 22 TAC §§535.1 - 535.5, 535.16, 535.17, 535.20, 535.31, 535.33, 535.34, 535.41, 535.42, 535.51, 535.52, 535.55, 535.56, 535.82, 535.91 - 535.93, 535.101, 535.112, 535.121 - 535.123, 535.131 - 535.133, 535.141, 535.143 - 535.145, 535.147 - 535.149, 535.153, 535.154, 535.156, 535.161, 535.171, 535.181, 535.191, 535.201, 535.206, 535.208 - 535.211, 535.215 - 535.217, 535.219 - 535.221, 535.223, 535.224, 535.226, 535.240, 535.300, and 535.400 - 535.405; new §§535.21, 535.43, 535.44, 535.54, 535.57, 535.60 - 535.67, 535.70 - 535.75, 535.77, 535.213, and 535.218; and the repeal of existing §§535.54, 535.57, 535.61 - 535.68, 535.71 - 535.75, 535.213, 535.214, and 535.218 in Chapter 535, General Provisions. Sections 535.2, 535.5, 535.21, 535.43, 535.56, 535.57, 535.61 - 535.63, 535.65, 535.66, 535.72, 535.91 - 535.93, 535.101, 535.148, 535.154, 535.210, and 535.215 are adopted with changes to the proposed text as published in the September 5, 2014, issue of the Texas Register (39 TexReg 6978) and will be republished. The other amendments, new sections and repeals are adopted without changes.

Elsewhere in this issue, the proposed amendments to §535.53 and §535.81 that were published in the September 5, 2014, issue are withdrawn.

The repeal of §§535.94 - 535.98 is adopted without changes to the proposal as published in the October 24, 2014, issue of the Texas Register (39 TexReg 8359).

The Commission adopted these amendments, new sections and repeals to be effective January 1, 2105.

The difference between the rules as published and as adopted and comments received on each rule will be described under each subchapter heading below.

The revisions to Chapter 535 are made following a comprehensive quadrennial rule review of this chapter to better reflect current TREC procedures, to simplify and clarify where needed and to improve overall readability. To accomplish this, redundant or unused provisions were removed and certain rules were restructured in whole or in part. Rules that are no longer needed or that have been totally rewritten are being proposed for repeal.

The amendments capitalize the term "Commission" and replace the term "licensee" with "license holder" throughout the chapter. The terms "promptly" and "reasonable time" were replaced throughout the chapter with the specific timeframe previously set out in the chapter definitions (3 days and 10 days respectively) so that the required timeframe would be immediately clear in each rule. Other specific amendments by subchapter are:

Subchapter A: adds new definitions for terms used throughout the chapter and deletes other definitions that are no longer used throughout the chapter.

No comments were received on this proposal and no changes were made to the amendments as published.

Subchapter B: amends §535.2 to require that the broker give notice of the scope of authorized activities to a sponsored salesperson in writing, ties the handling of trust funds to the requirements of revised §535.146; revises §535.4 to hold a person conducting brokerage business from another state through the mail, internet or other medium under the jurisdiction of the Real Estate Licensing Act (Act) if the property is located in Texas; and adds §535.21, Mailing Address and other Contact Information, that was moved from §535.96.

No comments were received on this proposal but non-substantive changes to the text as proposed were made in §535.2(b) to correct grammatical errors and in §535.5(b) to rewrite the last sentence and add it as part of the preceding sentence to provide greater clarity. The word "day" was added to adopted §535.21(a).

Subchapter D: adds §535.43, Education Standards Advisory Committee, that was moved from Subchapter G, §535.75, and adds §535.44, Commission Seal, to clarify that the Commission seal may be used only by the Commission for official agency business.

The Education Standards Advisory Committee (ESAC) commented that committee member terms should be staggered for better continuity of committee work as members rotate off of the committee. The Commission agreed and changes were made to the text of §535.43 as proposed to incorporate that appointment scheme and make a few other clarifying changes to the text regarding minutes and reports of the Committee.

Subchapter E: adds language related to specific requirements of each real estate license type, including language that was moved from Subchapter I which now houses rules related to renewal only; repeals §535.54 since the provisions of that section were moved to other more appropriate sections within the chapter; adds a new §535.54 dealing with hearings on license denial and probationary licenses that was moved from Subchapter I; amends §535.56 to revise the experience point credits allowed for application for a broker license based on recommendations from the Broker Responsibility Working Group (BRWG); and amends §535.57 regarding licensure examinations to put all relevant provisions from the chapter in one location and adds more specific requirements regarding the administration of licensing examinations. The proposed amendments to §535.53 were withdrawn and will be re-proposed since some additional language regarding what is considered being "in good standing" with the Commission was added to the rule.

Two comments were received on §535.56. One commenter requested that the Commission not change the existing point values for experience transactions. The other commenter suggested that the entire experience point system be overhauled, including elimination of the timeframe requirement and development of a new point system based on difficulty levels of various transaction categories. The BRWG and the Commission respectfully declined to undertake an overhaul of the system at the time since the current system has only been in place for a few years and was developed by the BRWG after extensive research and stakeholder input. The only changes made to the text as published were to correct the name of another state agency and correct the subsection lettering. A minor change was made to §535.57(c) to correct wording.

Subchapter F: reorganizes and updates pre-licensure education program rules to better reflect TREC policies and procedures, to more clearly reflect the approval process for real estate and real estate inspector educational programs and to simplify for greater understanding. Specific amendments include:

Correspondence Courses will be allowed to continue as a delivery method for the time being and not be eliminated as proposed, based on comments received on the proposal and a revised recommendation from ESAC.

Terminology was changed for consistency, including "proprietary school" being changed to the more generic "provider", "core" being changed to "qualifying" and classroom delivery including live webinars where the instructor and student can see each other via computer or other technology.

Clarifying that approved providers can provide approved real estate and real estate inspection qualifying courses and not have to get a separate approval by license program.

A separate section was developed to deal with accredited colleges and universities, since these are the only entities exempt from approval of core educational programs and courses by statute, although TREC still has the statutory authority to determine whether core courses offered by an accredited college or university qualifies for credit for a license.

Class rosters for pre-licensure courses still have to be retained by providers but do not have to be delivered to TREC monthly. Certificates of completion issued by the provider for qualifying courses will remain the evidence students submit to receive credit toward a license. Course completion certificates will now have to also include the instructor's name and TREC identification number and the date of issuance.

Beginning January 1, 2016, instructors of qualifying and non-elective continuing education courses will be required to complete 8 hours of adult education training every 5 years.

Seventeen written comments were received on Subchapter F, one of which was from a trade association. The majority of the comments concerned the proposed amendments regarding elimination of correspondence courses effective as of December 31, 2015. Seven commenters were opposed to this change while four were in favor. One commenter urged the continued study to try and fix the problems with correspondence courses in their current form. Following review of these comments and discussion, ESAC recommended to the Commission to leave correspondence courses as a delivery method for the time being while they engage more stakeholders to more closely examine the issues and possible solutions to the problems presented by correspondence and other distance learning courses. The trade association's comment supported this recommendation. Three additional comments were given at the Commission meeting. Two were reiterating the position made in their written comments. The Commission agreed with ESAC and the language regarding elimination of correspondence courses was removed from the adopted amendments.

ESAC and staff also recommended changes to §535.66 to clarify that references to "academic credit" is too narrow and the language should be tied more closely to the statutory language and read "comply with the curriculum accreditation standards required of the college or university by the applicable accreditation association." A conforming change to references to the curriculum standard was also recommended for §535.62 and §535.72. The Commission agreed and those changes were made to the amendments adopted.

One written comment was received in support of requiring adult education training for instructors. One oral comment from Inspector trade associations expressed concern that the approval of inspector instructors was not distinct enough from that of real estate instructors and he did not like the new requirement of adult education training for all instructors. Additionally, one commenter suggested revision to several of the proposed sections in Subchapter F. He suggested adding "colleges and universities" to the list of exempt providers in §535.61(b), even though they were listed as exempt in §535.66, so that there would be no misunderstanding. The Commission agrees and added that category to the list. He also suggested language be added to exempt only trade associations that have regularly elected Board and officers. The Commission declined to make this change at this time since this is only one of several factors that could be considered in defining what constitutes a "legitimate" trade association. More study is needed before any action can be taken. In §535.62(g), he thought it would save staff time if they did not have to review a course upon renewal if curriculum standards had not change. The Commission appreciates the thought but declined to make a change to the rule, since individual courses are not renewed. A new application is required and full course review is completed each time. In §535.63(b)(2)(C), he requested a prohibition on consideration of location of teaching or training experience when considering "equivalent" experience of an applicant. The Commission respectfully declined to make this change since there may be instances where the type of training experience in a different region would not be equivalent to training experience in Texas and the Commission should be able to consider all relevant factors. Finally, he suggested that the language found in §535.62 regarding using the name of the provider "in association with an accredited college or university" on the course certificate as certification that curriculum standards have been met be repeated in §535.66(d)(2) and (f)(1) for consistency. The Commission declined to make this change. That provision refers to the situation where an approved provider is offering a course in conjunction with the university, which is governed by §535.62. This commenter also made a comment at the meeting implying that the Commission was trying to regulate colleges and universities. The Commission respectfully disagrees. Section 535.66 recognizes that accredited colleges and universities are exempt from approval as a provider by statute but also recognizes the Commission's statutory right to determine whether any course satisfies the requirements of Texas Occupations Code Chapters 1101 and 1102 and gives appropriate meaning to the use of the word "accredited" in the exemption.

Finally, staff suggested some changes be made to §535.65(g) after adding correspondence courses back in to clarify that student questions must be answered "in a timely manner" and that a student must complete all instructional modules to receive credit for a course. The Commission agreed and those changes were made to the amendments adopted.

Subchapter G: reorganizes and updates continuing education program rules to better reflect TREC policies and procedures, to more clearly reflect the approval process for real estate and real estate inspector educational programs and to simplify for greater understanding. Specific amendments include:

Correspondence Courses will be allowed to continue as a delivery method for the time being and not be eliminated as proposed, based on comments received on the proposal and a revised recommendation from ESAC.

Clarifying that approved CE providers can provide approved CE real estate and real estate inspection courses and not have to get a separate approval by license program.

Class rosters or Alternative Delivery Methods Reporting form will continue to be required to be submitted in a format required by TREC for all CE courses.

The requirement for open enrollment to the general public for all courses was removed to recognize that trade associations market courses to members who pay dues and allow brokerage firms to become providers and get their in-house training courses approved for CE credit.

The method of using proctored supervised videos for CE classroom instruction was removed as it did not comport to the methods of delivery ESAC recommended. This does not prohibit the use of videos in a classroom course taught by an approved instructor.

The subjects permitted for related credit hours for a broker's license were tightened up.

Requirements on the type of courses that qualify for credit for the various license types were not changed but were moved to the appropriate rule for that license type.

Providers are no longer allowed to give partial credit for a real estate CE course that was not fully attended. This was removed for consistency since partial credit is not currently allowed for real estate core, inspector core, and inspector CE courses and it is difficult to determine and program for partial credit.

Fourteen written comments were received on Subchapter G, one of which was from a trade association. The majority of the comments concerned the proposed amendments regarding elimination of correspondence courses effective as of December 31, 2015. Seven commenters were opposed to this change while four were in favor. One commenter urged the continued study to try and fix the problems with correspondence courses in their current form. Following review of these comments and discussion, ESAC recommended to the Commission to leave correspondence courses as a delivery method for the time being while they engage more stakeholders to more closely examine the issues and possible solutions to the problems presented by correspondence and other distance learning courses. The trade association's comment supported this recommendation. The Commission agreed and language regarding elimination of correspondence courses was removed from the adopted amendments.

Subchapter H: §535.81 was not adopted as proposed and will be proposed for repeal since it is inconsistent with another amendment that was adopted.

Subchapter I: restructures and clarifies the rules regarding license renewal; moves other provisions not dealing with renewals (§535.94, §535.96 and portions of §535.95) to other more appropriate subchapters; and amends language to stipulate that the fee to defer completion of continuing education for up to an additional 60 days will now be due at the time of the filing of the renewal application.

No comments were received on this proposal but non-substantive changes to the text as proposed in §535.93(g) were added to explain that the rules for reactivation of an inactive license are found in Subchapter L. Additionally, §535.92(h)(2) granting partial credit for elective CE courses was deleted since under the amendments adopted in Subchapter G, providers are no longer allowed to give partial credit for elective CE courses. The provision is now meaningless and leaving it in will cause confusion. A non-substantive correction to a reference in §535.91(g)(3) was also adopted.

Subchapter J: revises §535.101 effective January 1, 2015, as part of the FY2015 budget adopted by the Commission, including restructuring license fees by reducing renewal fees and increasing fees for initial applications and reinstatements; setting out the statutory fee required for the Real Estate Recovery Trust Account.

No comments were received on this proposal and no changes to the text as published were made except for one grammatical correction.

Subchapter L: restructures the subchapter and adds language to more clearly set out when each real estate license type becomes inactive and how to reactive a license on inactive status.

No comments were received on this proposal and no changes were made to the amendments as published.

Subchapter N: contains the standard conforming terminology changes.

No comments were received on this proposal and no changes were made to the amendments as published except that the word "active" was inserted in the last sentence of §535.148(a) to clarify the existing law that a license holder must be active to share in a commission, including by referral, and in §535.154(d), "reasonable time" was changed to "10 days" to be consistent with the standard changes made throughout the chapter.

Subchapter R: restructures §535.208 and add provisions related to license renewal for members of the military and military spouses; clarifies in §535.209 that an applicant is not eligible to take the inspector examination until the applicant provides evidence to the Commission that all education and experience requirements have been met; revises §535.210 effective January 1, 2015, as part of the FY2015 budget adopted by the Commission, including restructuring inspector license application fees, slightly reducing the examination fee and significantly reducing the contribution to the Real Estate Inspection Recovery Fund; restructures §535.213 and §535.218 for improved readability after removal of certain provisions related to approval of education providers, courses or instructors that were moved to Subchapters F or G.

No comments were received on this proposal but non-substantive changes to the text as proposed were made in §535.215 to reference another subsection for clarity, to correct subsection numbering, and rewrite the paragraphs on returning to active status to make the process easier to understand. Further, based on oral comments received from a trade association, the Commission reduced the fee for continuing education courses for inspectors in §535.210 from $50 plus $10 per classroom hour to $50 plus $5 per classroom hour, to encourage development of continuing education courses for a relatively small pool of inspectors.

Subchapter T: adds clarifying language to the requirements for obtaining and renewing an easement or right of way agent license.

No comments were received on this proposal and no changes were made to the amendments as published.

The revisions to the rules 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 than the proposed rules.

The reasoned justification for the rules is to better reflect and clarify current TREC procedures and to simplify and clarify text for greater comprehension.

The amendments 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 statutes affected by these amendments are Texas Occupations Code, Chapters 1101 and 1102. No other statute, code or article is affected by the amendments.