Changes to TREC rules may affect you

The Texas Real Estate Commission has adopted a number of amendments to TREC rules. The new rules go into effect Jan. 1, 2011, and include clarifications to many aspects of agents' and brokers' businesses.  These changes may affect the way you do business!

Note: These links include most but not all of the changes adopted by TREC. Visit TREC’s Web site to review the complete
TREC rules.

Broker responsibilities
The following new requirements are included in §535.2, which articulate brokers' responsibilities to their sponsored salespeople, the public, and other brokers.

Scope of salesperson's activities: A broker is required to advise a sponsored salesperson of the scope of the salesperson's authorized activities. If a broker permits a sponsored salesperson to conduct activities beyond the scope explicitly authorized by the broker, those activities will be deemed to have been authorized by the broker.

Property management: A broker is responsible for any property-management activity that requires a real estate license that is conducted by the broker's sponsored salespeople.

Advertising: A broker is responsible to ensure that a sponsored salesperson's advertising complies with TREC rules.

Delegation: A broker may designate in writing another licensee to assist in administering the brokerage's compliance with the Real Estate License Act and TREC rules, but the broker may not relinquish overall responsibility for the supervision of his sponsored licensees.

Listings: Listings may only be solicited and accepted in a broker's name.

Record keeping: For four years from the date of closing or the termination of a contract, a broker must maintain the following records:

•Commission agreements, such as listing agreements, buyer representation agreements, or other written agreement relied upon to claim compensation
•Work files
•Contracts and related addenda
•Receipts and disbursements of compensation for services subject to the Act;
•Property-management contracts
•Documents required by Uniform Standards of Professional Appraisal Standards
•Sponsorship agreements between the broker and sponsored salespeople

Written policies: A broker is required to maintain on a current basis written policies and procedures to ensure that:

•Each sponsored salesperson is advised of the scope of his authorized activities and is competent to conduct such activities
•Each sponsored salesperson maintains an active license
•Any and all compensation paid to a sponsored salesperson for acts or services is paid by, through, or with the written consent of the sponsoring broker


Compensation, disclosure, and money issues

Compensation to or paid by a salesperson: An agreement between a broker and sponsored salesperson regarding the compensation a salesperson receives or pays to other licensees must be in writing. (§535.3)

Acquiring or disposing of property: An amendment clarifies that a licensee must disclose in writing when selling, buying, trading, or leasing real property that's owned by the licensee, the licensee's spouse, or a person related to the licensee. (§535.144)

Trust accounts: An amendment clarifies that a broker is ultimately responsible for compliance with the trust account requirements in the Real Estate License Act and TREC rules. Another amendment clarifies that a broker is required to notify all parties in writing when a broker makes a disbursement from a trust account to which all parties have not expressly agreed in writing. A new subsection clarifies that a broker may deposit and maintain additional amounts in a trust account to cover bank service fees. (§535.146)

Splitting fees with unlicensed people: An addition to TREC rules authorizes an unlicensed person to share in the income earned by a licensee as long as the person does not engage in real estate brokerage activity. Another addition clarifies that a broker or salesperson may not share a commission with an unlicensed corporation or limited liability company created by a licensee for the purpose of collecting a commission or fees on behalf of the licensee. (§535.147)

Receiving an undisclosed commission or rebate: A licensee cannot enter into a contract with a service provider that prohibits the licensee from entering into or offering a similar service on behalf of a competing service provider. A licensee cannot accept a fee from a service provider that is contingent upon a party to the real estate transaction purchasing a contract or services from a specific service provider. (§535.148)

New form: As of March 1, 2011, licensees are required to disclose compensation for services provided to or on behalf of a residential service company using new form Disclosure of Relationship with Residential Service Company. (§535.148)


Corporations and limited liability companies

License required: A license is required for a corporation or limited liability company owned by a broker or salesperson that receives compensation on behalf of the licensee. (§535.4)

Corporations and limited liability companies (LLCs): The designated broker of a corporation or LLC must be an officer of the corporation or a manager of a LLC. The entity must provide proof to TREC of the designated individual's current status as an officer or manager upon any change in the corporation or LLC's designated individual. If a corporation or LLC is dissolved with the secretary of state, the license becomes null and void. (§535.53)


Education, experience, and exams required for licenses
General requirements: A bachelor's degree from an accredited college or university counts towards all the related education requirements for a salesperson or broker license. (§535.54)

Broker's licenses: TREC can waive some or all of the education and experience requirements for a broker's license for someone who has been licensed within the four years preceding the date of application. This period used to be six years. (§535.56)

Examinations: Engaging in the listed activities with respect to the TREC exam is considered grounds for disciplinary action regardless of the intent or knowledge of the applicant or licensee. (§535.61)


Real estate schools and instructors

Accreditation of core education schools:
The renewal period for accreditation of schools is changed from five years to four years. For purposes of calculating a school's passage rate, the commission will use a four-year period instead of the current five-year period. (§535.63)

Obtaining approval to offer a course: A course approval expires four years from the date of approval. This expiration date applies to any school that offers the same course. (§535.64)

Operation of core education schools: A school may use objective information, such as pass rates, in advertising. A provider must maintain and make available instructor and course evaluation for each course for review by students and TREC. (§535.65)

Approval of core education instructors: The renewal period for core instructor approval has been changed from five years to two years. (§535.67)

Mandatory continuing education: The renewal term for MCE instructor approval has changed from five to two years. (§535.71)

Mandatory continuing education: Presentation of courses, advertising, and records: A provider must maintain and make available instructor and course evaluation for each course for review by students and TREC. (§535.72)


Inactive, suspended, and probationary licenses

Probationary licenses:
If a person who has a probationary license renews the license within the late renewal period, the new license is subject to the remaining probationary period from the previous probationary license. (§535.94)

Inactivation of salesperson license: A salesperson's license goes inactive if a broker notifies TREC in writing that the broker is terminating sponsorship of the broker. (§535.121)

Inactive broker status: A broker is required to notify TREC if he wishes to go on inactive status and must provide TREC with information including the broker's telephone number and e-mail address. (§535.123)

Initiation of investigation: Advertising has been added to the list of activities that a licensee may not engage in while that person's license is under suspension. A new subsection allows for automatic suspension of a license for violating a term or condition of an agreed probated revocation or suspension. (§535.141)

Penalty for unlicensed activities: TREC may, in addition to its existing powers, impose an administrative penalty and issue an order to cease and desist. (§535.181)