Texas Register Preamble

The Texas Real Estate Commission (TREC) proposes new rule 22 TAC, §537.1, Definitions, and amendments to §537.11, Use of Standard Contract Forms, in Chapter 537, Professional Agreements and Standard Contracts.

The proposed new rule adds a definitions section for ease of reading and for consistency with other Commission rule chapters. This includes a definition for the new term "informational items," which is intended to better describe the type of information that a license holder can add to a contract form.

The proposed amendments to §537.11 reorganize and consolidate the rule for clarity, and simplify the language regarding when a license holder is required to use a Commission-approved contract form and what is considered the unauthorized practice of law. Specifically, the proposed changes in subsection (a) align the rule language more closely with the applicable statutory language and simplify the list of exceptions related to contract form use by license holders. Importantly, the exception found in subsection (a)(4) is amended to eliminate the ability of license holders to use contract forms prepared by an attorney for a brokerage when no Commission-approved contract form for mandatory use exists.

Subsections (b) - (d) provide further guidance to license holders and members of the public on what the Commission considers to be the unauthorized practice of law. Of note, subsection (d)(2) provides that it is not the practice of law to add language to or strike language from a contract form, if specifically instructed in writing by a principal, as long as any change is made conspicuous, including underlining additions, striking through deletions, or employing some other method which clearly indicates the change being made.

Finally, the proposed changes to subsection (h) update the language regarding reproduction of Commission-approved contract forms to better account for changes in technology.

The Commission's Unauthorized Practice of Law Working Group recommends the proposed amendments.

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.

Except as noted below, for each year of the first five years the proposed amendments and new rule 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.

The proposed changes to subsection (a)(4) of §537.11 limit an existing regulation in two ways: (i) by reducing the requirements for a contract form when there is no Commission-approved contract form and a license holder uses a form prepared by a trade association; and (ii) by removing the ability of license holders to use brokerage-prepared forms under this exception.

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.

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