The Texas Real Estate Commission (TREC) proposes amendments to 22 TAC §537.20, Standard Contract Form TREC No. 9-11, §537.28, Standard Contract Form TREC No. 20-12, §537.30, Standard Contract Form TREC No. 23-13, §537.31, Standard Contract Form TREC No. 24-13, §537.32, Standard Contract Form TREC No. 25-10, §537.33, Standard Contract Form TREC No. 26-6, §537.37, Standard Contract Form TREC No. 30-11, §537.39, Standard Contract Form No. 32-3, §537.45, Standard Contract Form TREC No. 38-4, §537.46, Standard Contract Form TREC No. 39-7, §537.47, Standard Contract Form TREC No. 40-6, in Chapter 537, Professional Agreements and Standard Contracts.

Texas real estate license holders are generally required to use forms promulgated by TREC when negotiating contacts for the sale of real property. These forms are drafted and recommended for adoption 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 one public member appointed by the governor.

The Broker Lawyer Committee recommended revisions to the contract forms adopted by reference under the proposed amendments to Chapter 537 in order to align the contracts with federal rule changes promulgated by the CFPB in the TILA-RESPA Disclosure Rule, which are effective October 3, 2015; and with state statutory changes enacted by the 84th Legislature in HB 1665, SB 1367, and SB 1168, which are effective September 1, 2015.

Additional revisions to the contracts are recommended by the Broker Lawyer Committee to address issues that have arisen since the last contract revisions or due to recent case law.

The changes listed below apply to all contract forms unless specified otherwise. Paragraph numbers referenced are from the One to Four Family Residential Contract (Resale).

Paragraph 3, Sales Price, now references all of the financing addenda previously contained in paragraph 4 of the old versions.

The Third Party Financing Addendum is completely rewritten and addresses both credit approval and property approval by the lender. Reverse mortgage loans are also addressed in this addendum so form OP-N, Reverse Mortgage Financing Addendum is repealed.

A new paragraph 4 is added regarding license holder disclosure. This paragraph is where a license holder will disclose that he or she is a party to the transaction or related to a party that requires disclosure under the law.

A new paragraph 6E(10), Title Notices, Notice of Water Fluctuations, is added to add new statutory notice requirement regarding the fluctuation of the level of certain impoundments of water that adjoin a property.

Paragraph 7A, Property Condition, Access, Inspections and Utilities, is amended to add a provision that hydrostatic testing must be authorized by the seller in writing.

Paragraph 9, Closing, is amended to add a provision allowing a ten-day extension of closing if the buyer's lender is required to provide additional disclosures mandated by the TILA-RESPA Integrated Disclosure Rule.

Paragraph 9B(5) is amended to conform the language with a statutory change to the property code, noting that the buyer has to acknowledge to a tenant the buyer has acquired the property and is responsible for the return of the security deposit.

Paragraph 14, Casualty Loss, is amended to make it clear that an insurance company must permit insurance proceeds to be assigned to the buyer before the buyer can use this option after a casualty.

Paragraph 18D, Escrow Damages, is amended to take out the treble damages provision based on recent case law.

Paragraph 23, Termination Option is amended to require a 5 p.m. local time deadline for delivery of all notices under the paragraph.

License numbers are added to the Broker Information Section to facilitate compliance with the TILA-RESPA Integrated Disclosure Rule

Paragraph 13, Prorations and Rollback Taxes, in the Farm and Ranch and Unimproved Property Contract forms, is amended to provide that assessments imposed due to the seller's use or change in use of the property are the seller's responsibility.

A new Paragraph 2D to the Condominium Contract Form is added to address situations where the condominium documents reveal the existence of a right of first refusal after the parties enter into a contract.

The Condominium Resale Certificate is amended to conform to new statutory disclosure requirements.

Kerri Lewis, General Counsel, has determined that for the first five-year period the proposed amendments 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. There is no anticipated economic cost to persons who are required to comply with the proposed amendments.

Ms. Lewis 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 greater clarity and consumer protection.

Comments on the proposal may be submitted to Kerri Lewis, General Counsel, Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188 or via email to general.counsel@trec.texas.gov. The deadline for comments is 30 days after publication in the Texas Register.

The amendments are proposed 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 proposal is Texas Occupations Code, Chapter 1101. No other statute, code or article is affected by the proposed amendments.