Texas Register Preamble
The Texas Real Estate Commission (TREC) adopts amendments to 22 TAC §537.20, Standard Contract Form TREC No. 9-13; §537.28, Standard Contract Form TREC No. 20-14; §537.30, Standard Contract Form TREC No. 23-15; §537.31, Standard Contract Form TREC No. 24-15; §537.32, Standard Contract Form TREC No. 25-12; §537.37, Standard Contract Form TREC No. 30-13; §537.43, Standard Contract Form TREC No. 36-9; and new rules §537.58, Standard Contract form TREC No. 51-0; §537.59, and Standard Contract Form TREC No. 52-0, in Chapter 537, Professional Agreements and Standard Contracts, without changes to the rule text. The rules will not be republished. TREC adopts the Standard Contract Form TREC No. 36-9, adopted by reference in §537.43, with changes to the forms as published in the August 28, 2020, issue of the Texas Register (45 TexReg 6018). The rule will be republished.
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 (BLC), 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 amendments and new rules to Chapter 537 to address issues that have arisen since the last contract revisions. Prior versions of these rules changes and new forms were posted in the June 12, 2020, issue of the Texas Register. At its July 17, 2020, meeting, the Broker-Lawyer Committee considered comments submitted by members of the public and made significant revisions to these items. Because such changes were substantive in nature, the Broker-Lawyer Committee withdrew the prior version of these items posted in the June 12, 2020, issue of the Texas Register and now adopts these items as amended. 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 2 is amended to remove quotes and add a parenthetical around the word "Property."
Paragraph 2.C is amended security systems and "Controls" as Accessories and defines "Controls."
The language of Paragraph 4 was moved to the end of Paragraph 8, which is retitled "License Holders."
Language was added to Paragraph 4 to address leases to which the Seller is a party. The Buyer may terminate the contract after receipt of the Leases within a period of days set in the contract.
Paragraph 4 is also amended to include language regarding disclosure of existing leases and prohibits, without Buyer's consent, any new leases, amendments to exiting leases, or conveyance of interest in the property. Language also requires disclosure of Residential Leases, Fixture leases, or Natural Resources Leases within 3 days after the effective date.
Paragraph 5 is amended is authorize payment of option fee to escrow agent separately or combined with earnest money in single payment. Clarifies order application of funds to be credited first to Option Fee and then to earnest money. Authorizes release of option money without further consent from Buyer. Paragraph 5 also now incorporates language previously found in Paragraph 23 relating to remedy for failure to timely deliver Option Fee and earnest money.
Paragraph 10.B is amended to remove redundancies found in Paragraph 4 by striking all language except "After the Effective Date, Seller may not convey any interest in the Property without Buyer's written consent."
Paragraph 10.C is amended to include definition of Smart Device and require delivery of access codes to Buyer and removal of seller access points.
Paragraph 18.A is amended to allow escrow agent to require any disbursement made under the contract to be made in good funds.
Paragraph 18.B is amended to further define expenses that an escrow agent may deduct.
Paragraph 23 is deleted in its entirety.
Paragraph 24 is renumbered to Paragraph 23.
The Option Fee Receipt is amended to strike reference to Seller/Broker and replace with Escrow Agent.
Language was deleted from the Broker Information page of all forms except the Farm and Ranch Contract form: "Listing Broker has agreed to pay Other Broker ___ of the total sales price when the Listing Broker's fee is received. Escrow agent is authorized and directed to pay Other Broker from Listing Broker's fee at closing." Language was added for informational purposes to disclose there is a separate commission agreement between the Listing Broker and Other Broker.
Language was added to the Incomplete Construction Contract to mirror the language in the Complete Construction Contract Paragraph 7.I. regarding Residential Service Contracts. The language was added to the Incomplete Construction Contract as Paragraph 7.J.
In the Residential Condominium Contract, all references to a survey were removed from Paragraph 6.
The Addendum for Property Subject to Mandatory Membership in a Property Owners Association adopted by reference in §537.43 is amended to add deposits and reserves to the list of payments the Buyer will make in association with the transfer of the property.
The Addendum Regarding Residential Leases is adopted by reference in §537.58 is a new form that supplements changes made to Paragraph 4 regarding required consent to enter into any new leases, amendments to exiting leases, or conveyance of interest in the property.
The Addendum Regarding Fixture Leases adopted by reference in §537.59 is a new form protects the parties regarding fixture leases in place on the property at the time of contract execution.
One hundred twenty-four Comments were received. The Broker Lawyer Committee (committee) met on October 16, 2020, and addressed each comment received.
Texas Realtors submitted comments in agreement with the majority of changes made to the contract forms; however, the Association expressed concern the seller's disclosure language contained in the Addendum for Residential Leases in Paragraph B(3) might expose the seller to greater liability and risk. As a result, the committee modified the disclosure language to reflect the leases the seller was aware of at the time of transaction.
The San Antonio Board of Realtors (SABOR) also submitted comments in response to the form changes, which consisted of overall concerns regarding the impact of these changes. The committee addressed the majority of these concerns verbally in its meeting. The committee did make a suggested change related to Paragraph 4(C), which was addressed in response to SABOR's comments and other submitted by members of the public and is detailed below.
The committee changed two typographical errors cited in two comments received from members of the public.
In response to multiple comments, the committee decided to change Paragraph 5D to now reference Paragraph 5 in the sentence referencing the unrestricted right to terminate. Additionally and in response to public comment, the committee decided to move the last sentence in Paragraph 5B and make it the last sentence in Paragraph 5A(4).
In response to multiple comments regarding formatting and sufficient space to fill out information, the committee changed the formatting in Paragraph 21 so that both the fax and the email line will both read "Email/Fax:".
In response to multiple comments received, the committee decided to revise the Addendum Regarding Fixture Leases so that it notes the rights to any leased fixtures are governed by the fixture leases in place and provide notice regarding rights associated with leased fixtures left on the property. The Addendum Regarding Fixture Leases now contains assumption of fixture lease language, addresses liens on fixture leases at the time of transaction, and recommends consulting with an attorney regarding assignment, assumption, or termination of any fixture leases.
In response to multiple comments, the committee decided to make changes to the paragraph concerning Natural Resource Leases in the contract forms (Paragraph 4C) to reference seller delivery of natural resources leases.
In response to multiple comments from members of the public and SABOR, the committee decided to change the disclosure in the Broker Information Box, at the end of the contract forms, to include the example of an MLS offer of compensation or other agreement between brokers.
In response to multiple requests to include additional disclosure space in Paragraph 8(A), the committee added additional lines to the paragraph and added back current language to Paragraph 8(B) regarding broker's fees.
In response to multiple comments, the committee also replaced a previously struck the phrase related to garage doors and entry gates in Paragraph 2C.
In response to multiple comments, the committee requested a new line in the Broker Information box on the last page and to add lines for "Team Name" after the Associate's Name for the Other Broker, after the Listing Associate, and after the Selling Associate (adding three new lines).
In response to public comment, the committee decided to change the bolded notice in Paragraph A of the Addendum Regarding Residential Leases to include language stating the paragraph does not amend or terminate any existing lease and to consult with an attorney regarding termination of residential leases prior to signing the agreement.
The committee received fourteen comments requesting a 5:00 p.m. deadline be inserted into Paragraph 5. The committee declined to make that change, noting that there is not a 5:00 p.m. deadline associated with the current process for delivery of option fee and earnest money. The committee also received three comments suggesting insertion of a business day clarification in Paragraph 5 and declined to make that suggested change for the same reason.
The committee received 34 comments solely related to being generally in favor of the proposed changes to Paragraph 5 (combination of option fee and earnest money to be delivered to title company). The committee received 12 comments solely related to being generally against the same proposed changes to Paragraph 5. The committee declined to make changes in response to the opposing comments and noted the new changes have been overall favorably received by license holders, real estate associations, and the title industry.
The Committee voted to recommend adoption to the Commission. The Commission voted to move forward with adoption of these changes at its November 10, 2020, meeting.
The amendments and new rules 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.
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