More time to deliver option-period fees and other TREC form changes
04/30/2014 | Author: Editorial Staff
The Texas Real Estate Commission recently approved several changes to its existing forms and created a few new forms that will take effect June 1, 2014. The new and revised forms will be available no later than June 1 in zipForm and on TexasRealEstate.com.
Here is a rundown of all changes TREC approved during its April 28 meeting. Redlines of the forms are available here. Look for more in-depth descriptions of specific revisions in upcoming Advice for Texas REALTORS® blog posts.
A summary of what changed
The following changes apply to One to Four Family Residential Contract (Resale) (TAR 1601, TREC 20-12), Unimproved Property Contract (TAR 1607, TREC 9-11), New Home Contract (Incomplete Construction) (TAR 1603, TREC 23-13), New Home Contract (Complete Construction) (TAR 1604, TREC 24-13), Farm and Ranch Contract (TAR 1701, TREC 25-10), and Residential Condominium Contract (Resale) (TAR 1605, TREC 30-11).
The paragraph numbers below reflect exact changes to One to Four Family Residential Contract (Resale) (TAR 1601, TREC 20-12) only. Check the redline version of each form listed here for the updated paragraph numbers:
Paragraph 4: Financing
TREC added “(Not for use with reverse mortgage financing)” because the commission approved a new Reverse Mortgage Financing Addendum form for voluntary use.
Paragraph 6A(8): Title Policy and Survey
At TAR’s request, the “shortages in area” section was changed to allow for negotiation about whether the title policy will be shortened to “shortages in area,” and if so, the seller and buyer can negotiate who pays.
Paragraph 6B: Commitment
Automatically extends the time for delivery of commitment and exception documents to 15 days or three days before the closing date, whichever is earlier, if these documents aren’t delivered to the buyer within the specified time. The previous version extended the delivery period to the earlier of 15 days or the closing date.
Paragraph 6E(9): Propane Gas System Service Area
Adds notice about the Addendum for Property in a Propane Gas System Service Area.
Paragraph 7D: Acceptance of Property Condition
Changes the wording from “in its present condition” to “As Is” with a definition of “as is.” This is more in line with judicial interpretations of property condition and is designed to cut back on lawsuits defining “as is.”
Paragraph 7F: Completion of Repairs
Unless the buyer and seller agree otherwise in writing, the seller will now be required to use either someone who is licensed to perform the repair or service or someone who is commercially engaged in that repair business, if it’s a job that doesn’t require a license, such as roofing. The time to extend the contract for repairs was shortened from 15 days to 5 days.
Paragraph 10: Possession
New language sets a time limit of seven days for sellers to provide copies of any leases and move-in condition forms signed by the tenant to the buyer after the contract’s effective date. In addition, sellers are now prohibited from signing any new leases (including mineral leases) without the buyer’s consent once the contract is executed.
Paragraph 16: Mediation
Language was changed from optional to mandatory. Buyers and sellers now must attempt to resolve any contract-related dispute through mediation.
Paragraph 22: Agreement of Parties
The Addendum for Property in a Propane Gas System Service Area was added to the list of addenda to attach to the contract.
Paragraph 23: Termination Option
Buyers will now have three days to deliver their termination option-period fee to the seller or listing broker instead of two days. Remember that TREC forms use calendar days, not business days.
Paragraph 24: Consult an Attorney
Cleans up language directing parties to consult an attorney before signing the contract.
Page 9: Broker Information
New language reinforces that names should be printed, not signed, on the appropriate lines.
The One to Four Family Residential Contract (TAR 1601, TREC 20-12) also contains the following changes:
Paragraph 2: Property
The definition of “Property” was moved to the top of the section. All references to satellite dish systems and equipment as part of the property were removed because some satellite companies require the equipment to leave with the contracted party.
Paragraph 9B(5): Closing
Changes clarify that this provision applies to residential leases.
The Farm and Ranch Contract (TAR 1701, TREC 25-10) contains also contains the following changes:
Paragraph 2: Property
Adds “except for the exclusions and reservations” in the definition of Property and removes all references to satellites dish systems and equipment as in the One to Four Family Residential Contract (Resale).
Paragraph 2F: Reservations
Removes reference to the TREC oil and gas addendum and adds “is made in accordance with an attached addendum or Special Provisions.” This allows the seller and buyer to use any addendum of their choice or to write the reservations of minerals into the Special Provisions Paragraph.
The Residential Condominium Contract (Resale) (TAR 1605, TREC 30-11) also contains the following change:
Paragraph 2B(3): Property and Condominium Documents
The subsection regarding buyer’s receipt of seller’s affidavit that the seller requested information was removed.
Proposed addenda for public comment
Two addenda were revised at the April 28 meeting and will be posted for a public-comment period. Please send your comments directly to TREC at email@example.com.
Addendum for Property Subject to Mandatory Membership in a Property Owners Association (TAR 1922, TREC 36-8)
A change to Paragraph C removes payment of fees to the title company from the cap on the total that the buyer must pay in relation to transfer of the property. A buyer and seller negotiate who pays these fees and, if the buyer pays, this amount is no longer included in the cap.
Addendum for Reservation of Oil, Gas and Other Minerals (TAR 1905, TREC 44-2)
The phrase "(Not for use with TREC Farm and Ranch Contract Form)” was added in accordance with removal of requirement to use this form in Farm and Ranch Contract. Changes in the first paragraph allow the seller to reserve all, ½, or ¼ of his interest in the oil, gas, and other minerals that may be produced from the property. The second paragraph was changed to be more specific. New language requires the seller to provide contact information of existing leases to the buyer.
2 new forms coming soon
The Mutual Termination of Contract and Release of Earnest Money form was sent back to TREC’s Broker Lawyer Committee to change its name to the Release of Earnest Money and Termination of Contract. This form will effectively replace TAR’s Release of Earnest Money form, but will not be adopted until at least August of this year.
The Reverse Mortgage Financing Addendum will be available for use by June 1, 2014, and can be used when reverse mortgages are used to purchase a property. This form has been approved for voluntary use by licensees.
The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.
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