The Texas Real Estate Commission (TREC) proposes new 22 TAC §535.35, Registration of Certain Business Entities, in Chapter 535, General Provisions.

New §535.35 is proposed to implement statutory changes enacted by the 88th Legislature in SB 1577, which becomes effective January 1, 2024. Currently, §1101.355(c), Occupations Code, requires business entities who receive compensation on behalf of a license holder to be licensed as a broker. Licensure requires certain conditions be satisfied, including, for instance, that the entity have a designated broker and payment of an initial license application fee of $150 and a subsequent $72 application fee to renew. SB 1577 amends §1101.355 by allowing 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 and requires the Commission to adopt rules providing for this registration. The proposed new rule outlines the requirements these exempt business entities must follow to register the business entity with the Commission. The proposed changes also provide a term for the registration once issued, as well as an obligation to certify continuing compliance. Additionally, SB 1577 also amends §1101.152, Occupations Code, which specifically directs the Commission to adopt a rule to charge and collect fees in amounts reasonable and necessary to cover the costs of registering a business entity. Therefore, the changes set forth the fee obligations for such registration and certification of continued compliance. Finally, under the proposal, a license holder must also notify the Commission in writing not later than the 10th day after the date the business entity no longer qualifies for the exemption.

Vanessa E. Burgess, General Counsel, has determined that for the first five-year period the proposed new rule is 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 new rule. There is no significant economic cost anticipated for persons who are required to comply with the proposed new rule. 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 is in effect, the public benefit anticipated as a result of enforcing the new rule 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 new rule is in effect the new rule 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 limit 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 and decreased associated fees paid to the agency. Section 1101.152, as amended by SB 1577, also requires the Commission to charge and collect reasonable and necessary fees to cover the costs of the registration of certain business entities. However, entities that will ultimately be eligible for registration as of January 1, 2024, must currently be licensed and pay the fees for such licensure, including a $150 initial application fee. Licensure also requires renewal and with that, a new set of fees, including a $72 renewal fee. Therefore, while this creates new fees associated with registration and certification of compliance, these fees are lower than what individuals would be required to pay to obtain an original license and renew that license.

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 E. 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 new rule is 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 statutes affected by this proposal is Texas Occupations Code, Chapters 1101. No other statute, code or article is affected by the proposed new rule.