The Texas Real Estate Commission (TREC) proposes amendments to 22 TAC §537.20, Standard Contract Form TREC No. 9-15; §537.28, Standard Contract Form TREC No. 20-16; §537.30, Standard Contract Form TREC No. 23-17; §537.31, Standard Contract Form TREC No. 24-17; §537.32, Standard Contract Form TREC No. 25-14; §537.33, Standard Contract Form TREC No. 26-7; §537.37, Standard Contract Form TREC No. 30-15; §537.43, Standard Contract Form TREC No. 36-9; §537.46, Standard Contract Form TREC No. 39-8; §537.47, Standard Contract Form TREC No. 40-9; §537.48, Standard Contract Form TREC No. 41-2; §537.51, Standard Contract Form TREC No. 44-2; §537.58, Standard Contract Form TREC No. 51-0; §537.59, Standard Contract Form TREC No. 52-0; and new rule §537.65, Standard Contract Form TREC No. 57-0, Notice to Prospective Buyer in Chapter 537, Professional Agreements and Standard Contracts.

The proposed amendments and new rules to Chapter 537 are made as a result of the Commission's quadrennial rule review. The proposed changes to the existing rules add the title of the form adopted by reference in each rule to the rule title and add clarifying language to specify which forms are for mandatory versus voluntary use by license holders. The new rules pair previously existing forms that were available for voluntary use by license holders with a rule to provide greater clarity about each form’s purpose and use.

Each of the rules also include corresponding contract forms adopted by reference. 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 proposal 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 Texas Real Estate Broker-Lawyer Committee recommended revisions to the contract forms adopted by reference under the proposed amendments and new rule. 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).

The term "Escrow Agent" is capitalized throughout the contract to reflect its status as a defined term.

Paragraph 3 is amended to add a definition of "cash portion of the sales price."

A new "required notices" section is added to Paragraph 6, which provides one location where MUD, PID, or other similar notices that have been given or are attached to the contract can be listed. The corresponding reference to the Commission's form "Addendum containing Notice of Obligation to Pay Improvement District Assessment" is removed from Paragraph 22.

Paragraph 7.F is revised to require that the seller: (i) provide the buyer with copies of documentation from the repair person that shows both the scope of work and payment for the work completed; and (ii) transfer, at seller's expense, any transferable warranties at closing.

Paragraph 7.H is amended to replace the term "residential service company" with the terminology used by the Texas Department of Licensing and Regulation, which as of September 1, 2021, regulates residential service companies.

Paragraph 9.B(3) is amended to add the transfer of any warranties to correspond with the change in Paragraph 7F. New paragraph 9.B(5) provides that private transfer fees will be the obligation of the seller, unless otherwise provided in this contract.

Paragraph 11 is amended to further clarify the intent of the paragraph by replacing the terms "factual statements" and "business details" with "informational items," which is now defined, and adding that real estate brokers cannot practice law and are prohibited from adding to, deleting, or modifying the contract unless drafted by a party to the contract or a party's attorney. Lines have also been inserted into the blank.

Paragraph 13 is amended to clarify what amounts will be prorated through the closing date.

Paragraph 18.B is amended to add that if no closing occurs, the escrow agent may require a written release of liability before releasing the earnest money.

Paragraph 21 is amended to add a line for a courtesy copy to another individual, like an agent.

In the Unimproved Property Contract, the Farm and Ranch Contract, the New Home Contract (Incomplete Construction), and the New Home Contract (Complete Construction), the Seller's Disclosures paragraph has been amended to: (i) add checkboxes to each disclosure item to indicate whether the seller is or is not aware; and (ii) add two additional disclosures relating to whether the property is located in a floodplain or if any tree located on the property has oak wilt.

The Farm and Ranch Contract contains the following additional proposed changes:

A notice is added that states the form is designed for use in sales of existing farms or ranches of any size, and that it's not for use in complex transactions.

Paragraph 2.A adds the term "Counties" to reflect the fact that farm and ranch properties could be located across two or more counties. Additionally, the phrase "including but not limited to: water rights, claims, permits, strips and gores, easements, and cooperative or association memberships" is deleted from the paragraph.

Paragraph 2.B is amended to make the terms "house" and "garage" plural.

Paragraph 3.D is amended to alter the calculation of the sales price adjustment should the survey reveal a difference in acreage.

New paragraph 4.D is added to address surface leases and includes options regarding whether the seller has delivered copies of written leases or provided notice of oral leases to the buyer, similar to the existing natural resource lease paragraph. The corresponding language in Paragraph 6.F is also amended.

On page 10 of the Contract, the statement "Do not sign if there is a separate written agreement for payment of Brokers' fees" is being modified to make it more conspicuous.

The Residential Condominium Contract contains the following additional proposed changes:

Paragraph 2.A(1) is amended to add a reference to an exhibit.

Paragraph 2.B(2) and 2.C(2) are amended to clarify the timing related to termination and to add a reference to the applicable Property Code provision.

Paragraph 12.A(3) is amended to except prepaid regular periodic maintenance fees, assessments, or dues from the buyer's obligation to pay any and fees associated with the transfer of the property not to exceed a certain amount, and the seller pays the excess.

The Amendment to Contract is amended to add a notice to consult an attorney and to add a reference to Paragraph 7 of the contracts in Paragraph 2 of the Amendment dealing with repairs. The form is also amended to replace the parenthetical following Paragraph 9, Other Modifications, with a statement that real estate brokers and sales agents are prohibited from practicing law. Lines have also been inserted into the blank.

The Seller Financing Addendum contains the following amendments:

A notice encouraging consultation with an attorney and a financial professional and informing parties of the complicated nature of these transactions is added to the top of the form.

Paragraph B is amended to modify the time period within which the seller may terminate.

A new instructional parenthetical is added in Paragraph C. Additionally, the interest in modified to reflect a per annum interest rate.

Paragraph D.2(a) and (b) are amended to clarify the casualty insurance requirements and new paragraph D.2 is added to address casualty insurance.

Paragraph D.2(b) is further amended to add a requirement that the seller provide the buyer with an annual accounting of the escrow account, use escrow deposits to pay taxes and insurance premiums in a timely manner in certain circumstances, and hold the escrow deposit in a separate account. Language is also added to specify whether the escrow account will or will not be serviced by a third-party servicer at either the buyer's or seller's expense.

The Addendum for Property Subject to Mandatory Membership in a Property Owners Association is amended to except prepaid regular periodic maintenance fees, assessments, or dues from the buyer's obligation to pay any and fees associated with the transfer of the property not to exceed a certain amount, and the seller pays the excess. Language is also added to clarify that these fees should be prorated pursuant to Paragraph 13 of the Contract. Finally, the amended language adds that the paragraph does not apply to a fee that is not imposed by the Association, even if it is collected by the Association for the benefit of a third party.

The Third Party Financing Addendum is amended to add an "other financing" box in Paragraph 1. Paragraph 3 is amended to add that a note must be secured by vendor's and deed of trust liens only if required by the buyer's lender. Finally, the phrase "provided in relation to the closing of this sale" is struck from Paragraph 5.B to streamline the paragraph.

Both the Addendum Regarding Residential Leases and the Addendum Regarding Fixture Leases are amended to add a checkbox in Paragraph B.1 related to notice of oral leases. Additionally, the Addendum for Disclosure of Fixture Leases is amended to modify Paragraph A.1 to include checkboxes, in lieu of a blank line, so that the parties can specifically indicate what types of fixture leases will be assumed and assigned.

The Notice to Prospective Buyer form (which currently exists, but has not had a corresponding rule which adopts the form by reference) is amended to add a reference to the notice requirements regarding public improvement districts.

The Loan Assumption Addendum contains the following amendments:

-"Effective Date" and "Title Company" are capitalized throughout.

-Paragraph A is amended to add that the noteholder of the loan being assumed is authorized to receive a copy of the buyer's credit reports.

-Paragraph B is amended to modify the time period within which the seller may terminate.

-Paragraph C is amended to clarify that the buyer will assume in writing the following notes at closing, to remove the reference to $500 and instead insert a blank, and to add the following sentence: "Within 7 days after the Effective Date, Seller will deliver to Buyer copies of the note(s) to be assumed, the deed(s) of trust, and the most recent loan statement(s) from the lender."

-New paragraph H is added related to authorization to release information.

-A new due on sale notice is added.

The Addendum for Reservation of Oil, Gas, and Other Minerals is amended to replace the phrase "reserve and retain implied" with "waive" in Paragraph C. The term "current" is added to "contact information" in Paragraph D.

Abby Lee, Deputy 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 adverse economic effect anticipated for small businesses, micro-businesses, rural communities, or local or state employment as a result of implementing the proposed amendments. There is no significant economic cost anticipated for persons who are required to comply with the proposed amendments. Accordingly, no Economic Impact Statement or Regulatory Flexibility Analysis is required.

Ms. Lee also has determined that for each year of the first five years the sections as proposed are in effect, the public benefits anticipated as a result of adopting the sections as proposed will be improved clarity and greater transparency for members of the public and license holders.

For each year of the first five years the proposed amendments and new rules are in effect, the amendments will not:

-create or eliminate a government program;

-require the creation of new employee positions or the elimination of existing employee positions;

-require an increase or decrease in future legislative appropriations to the agency;

-require an increase or decrease in fees paid to the agency;

-create a new regulation;

-expand, limit, or repeal an existing regulation;

-increase or decrease the number of individuals subject to the rule's applicability; or

-positively or adversely affect the state's economy.

Comments on the proposal may be submitted through the online comment submission form at https://www.trec.texas.gov/rules-and-laws/comment-on-proposed-rules, to Abby Lee, Deputy 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 and new rule 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 license holders to fulfill the purposes of Chapters 1101 and 1102 and ensure compliance with Chapters 1101 and 1102.

The statute affected by these amendments and new rules is Texas Occupations Code, Chapter 1101. No other statute, code, or article is affected by the amendments and new rules.