The Texas Real Estate Commission (TREC) proposes amendments to 22 TAC §535.4, License Required, and §535.5, License Not Required, in Chapter 535, General Provisions.

The amendments are proposed to implement statutory changes enacted by the 88th Legislature in SB 1577, which become effective January 1, 2024. Currently, Chapter 1101, Occupations Code, requires business entities who receive compensation on behalf of a license holder to be licensed as a broker. SB 1577 allows certain entities-limited liability companies and s-corporations (as that term is defined by federal law)-to register with the Commission in lieu of obtaining a license. In order to be eligible for registration, these exempted entities must: (i) perform no acts of a broker, other than receiving said compensation on behalf of a license holder; and (ii) be at least 51 percent owned by the license holder on whose behalf the business entity receives compensation. The proposed rule changes reflect this statutory change.

Vanessa E. Burgess, 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. Burgess also has determined that for each year of the first five years the section as proposed are in effect, the public benefit anticipated as a result of enforcing the section will be greater clarity in the rules and consistency with the applicable statutory requirements.

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

SB 1577 limits an existing regulation by exempting certain business entities from licensure requirements as detailed above. By doing so, it decreases the number of individual license holders who must obtain licenses on behalf of these entities. However, the licensure requirement is replaced with a registration requirement.

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 Vanessa Burgess, 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 and §1101.355, as that section is amended by SB 1577. Section 1101.151 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. Section 1101.355, as amended by SB 1577, requires the Commission to adopt rules providing for the registration of an exempted business entity.

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