Legal FAQs for REALTORS®
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A company has two offices in two different board jurisdictions. Principal broker A belongs to board A (where firm A is located) and principal broker B in the same company belongs to board B (where the firm's branch office is located). A salesman who works in broker A's office decides to hold primary membership in board B pursuant to the board of choice policies. Can broker B be automatically joined in any Code of Ethics complaint against the salesperson? (updated Jan. 1, 2002)

Several years ago the NAR Professional Standards Committee abolished the policy that allowed local boards as a matter of local option to automatically join a REALTOR® (principal) in any complaint against a REALTOR® (non-principal). Consequently, the salesperson would be the only respondent in the ethics complaint unless the complainant names principal broker B as a co-respondent in the complaint, or if the Grievance Committee believes there is potential culpability on broker B's part.


What sanctions can be imposed for violations of the Code of Ethics by REALTORS® who participate in the MLS but do not hold membership in the board? (updated Jan. 1, 2002)

Discipline that may be imposed may be the same as but shall not exceed the discipline that may be imposed on members except that direct suspension or termination of MLS rights and privileges may also be utilized. If such individuals are found in violation of the Code of Ethics, they may be assessed an administrative processing fee not to exceed $500, which may be in addition to any other discipline, including fines, that may be imposed.


What are the privileges and obligations of secondary members? (updated Jan. 1, 2002)

Membership is available in a secondary board on terms and conditions no more stringent than the requirements established in the board's Bylaws for REALTOR® and REALTOR®-Associate® (where applicable) membership. Similarly, the rights and privileges of secondary members are the same. For example, a licensee who qualifies for REALTOR® membership in a secondary board would have the same rights and privileges of any other REALTOR® member (including the right to vote and hold office). Similarly, a licensee who only qualifies for REALTOR®-Associate® membership in a secondary board (even though he/she may hold REALTOR® membership in their primary board) would only be entitled to the privileges and obligations that are granted to REALTOR®-Associate®s in the secondary board (which may or may not include the right to vote and hold office).


When does a seller have to provide a water-district notice to a buyer? How can my seller get the right form and fill it out correctly? (Updated Nov. 19, 2014)

Generally speaking, a seller of property located in a water district must provide a water-district notice to a buyer, if depending on how the water district is financed, the seller owes a tax or standby fee. Sellers who are unsure if they are required to provide such a notice should check with their particular water district.

There are three types of notices, and the one required depends on if the property is:

-Located in whole or in part within the corporate boundaries of a municipality
-Located in whole or in part in the extraterritorial jurisdiction of one or more home-rule municipalities and not within the corporate boundaries of a municipality
-Not located in whole or in part within the corporate boundaries of a municipality or the extraterritorial jurisdiction of one or more home-rule municipalities.

Water districts are required to file certain information with the appropriate county clerk and with the Texas Commission on Environmental Quality (TCEQ), which has a list on its website of water districts in Texas and provides other useful resources.

Once the water district is identified, a seller can submit a written request for the right notice from the water district, which will provide the notice filled in with all the required information. The district may charge a fee for mailing the notice or allowing the requester to pick it up in person, but it cannot be more than $10. However, an alternative or faster method of delivery may require an additional fee.


Where would property managers go online to see how this new law will impact their landlords? (updated Aug. 9, 2007)

The bill can be found on the Texas Legislature's Web site, and a discussion of its impact is available in the August 2007 Legal column in Texas REALTOR® magazine. The most prudent position for a property manager will be that any property he manages contains smoke detectors in compliance with local building code requirements. The property manager may need to check with the local building code officer to determine what the applicable building code requires with respect to the installation and location of smoke detectors. Most cities use the International Residential Code. Depending on which version is being used, the requirements may vary slightly. However, the newer versions of the IRC impose more requirements than the older versions with respect to the location and installation of smoke detectors.


How does board of choice affect professional standards enforcement? (updated Jan. 1, 2002)

Complaints alleging violations of the Code of Ethics and requests for arbitration may be filed in any board where the REALTOR® holds membership or participates in the board's MLS.


What requirements may a board establish for participation in its MLS? (updated Jan. 1, 2002)

The board may require that a REALTOR® (principal) be licensed in the state as a condition of MLS participation. Further, one of the conditions of access to a board's MLS is the participant's agreement to submit to ethics hearings and arbitration requests filed with the board in which the REALTORS® obtains MLS access but is not a member. (See Model MLS Participation Agreement)


Please discuss the modification to the board of choice proposal concerning primary membership. (updated Jan. 1, 2002)

The original model plan developed by the Presidential Advisory Group on board of choice provided that all licensees in a particular office location must join the board selected by the designated REALTOR®. Based on comments received from various state associations after the model plan was distributed the Membership Policy and Board Jurisdiction Committee was asked to consider a modification to this provision to authorize licensees affiliated with a REALTOR® firm to join (as their primary board) any board within the state where the firm maintains a designated REALTOR®. This was a departure from what had been proposed in the PAG's model plan, and the concept ultimately recommended by the Committee is slightly more comprehensive in favor of choice. For example, a firm with 50 licensees in a particular office location may divide its membership between two boards provided the firm has a designated REALTOR® member in both boards. This provides additional flexibility for designated REALTORS® and their sales licensees while maintaining the essential requirement that one of the principals, partners, corporate officers or branch office managers of the firm must be a designated REALTOR® member of the board. The modification was approved by the committee and Board of Directors at the 1994 Midwinter Meetings in San Diego, and was reaffirmed at the 1994 Midyear Meetings in Washington, D.C.


Will a service contract cover pre-existing conditions? (updated Jan. 1, 2002)

No. A residential service contract must not be used to market properties with components or systems which do not work or are clearly near the end of their mechanical life. Every approved contract offered in Texas excludes preexisting problems, and purchasers who try to get preexisting problems corrected will always end up dissatisfied. Any repairs needed prior to closing should be negotiated with the seller and corrected or repaired prior to the effective date of the home warranty contract.


Who are the "local building officials" the agents should have their clients to contact for local building code requirements? (updated Aug. 9, 2007)

Contact the city offices of any municipality in which the property is located, and ask for the office that issues residential building permits or a residential building-code compliance officer. Your local association may have already contacted the building code officers to see if they would issue a brief statement as to what the local code required with respect to smoke detectors. If your local association has such a document, ensure it has been periodically updated.


How will the board assess MLS fees for REALTORS® who obtain MLS access but are not members of the board? (updated Jan. 1, 2002)

MLS fees for these participants can be assessed in the same manner that the board assesses MLS fees for board members who participate in the MLS. For example, if MLS fees are assessed based on all licensees in a participating broker's office, this same policy can be applied to REALTORS® who are participants in the MLS but do not hold membership in the board. A board may, at its discretion, waive fees for those licensees that the participant certifies will not be using the MLS information.


Must boards make sold data and lockbox services available to REALTORS® who do not hold membership in the board? (updated Jan. 1, 2002)

As previously indicated, under the "universal access to services" component of board of choice, REALTORS® (irrespective of where they hold their primary membership) are entitled to purchase services of other boards without holding membership in those boards. This includes comparable sold data that is distributed as a service of the board and access to lockbox systems that are operated as activities of boards of REALTORS®. Service fees are determined by the individual boards.


Please discuss portability of member records as it relates to membership under board of choice. (updated Jan. 1, 2002)

At the 1996 Midwinter Meetings, the NAR Board of Directors approved a Statement of Membership Policy and amendments to NAR's Membership Qualification Criteria to authorize associations (at their discretion) to consider information received from other associations when determining whether an applicant satisfies the association's membership requirements. This would be a file of information that would follow REALTORS® from board to board throughout their professional career and would include information such as prior violations of the Code of Ethics or other membership duties, and information related to unpaid arbitration awards or unpaid financial obligations to other associations or MLSs. Associations are required to share this information with other associations (when so requested), and associations receiving such information may, but are not required to, consider information in such files in determining whether an applicant satisfies the association's membership requirements. This responds to a primary concern of associations under board of choice that some members may shift membership from association to association to avoid accountability under the Code of Ethics and other membership duties.


What appliances or systems does a service contract cover? (updated Jan. 1, 2002)

Most residential service contracts include repair or replacement coverage for built-in appliances, air conditioning and heating systems, electrical systems, water heaters and plumbing, leaky roofs and termite treatments. Optional coverage is usually available for swimming pools, spas, and clothes washers and dryers.


The 80th Texas Legislature in 2007 made changes to seller's disclosure requirements, specifically regarding smoke detectors. What are the smoke detector requirements for homes in Texas? (updated Aug. 6, 2007)

The legislation, which is effective Sept. 1, 2007, requires one- and two-family dwellings constructed in Texas to have working smoke detectors installed in accordance with the requirements of the building code in effect in the area in which the dwelling is located. This requirement extends to a landlord of a one- or two-family dwelling unit and satisfies the requirements of the current smoke-detector laws applicable to landlords. The law further requires that a permit issued for a home improvement include the installation of smoke detectors in accordance with the local building code if the dwelling for which the permit will be issued does not comply.


Is "at large" membership in the state association affected by board of choice? (updated Jan. 1, 2002)

No. States may continue to offer "at large" membership to individuals whose offices are located in an area not within the jurisdiction of a local board.


My market area is mostly in one local REALTOR® association, but part of it falls under another association. Do I have to have a secondary membership in that association to use its services? (Updated Nov. 19, 2014)

No. While secondary membership in a neighboring association is encouraged so you can receive their communications, network with other Texas REALTORS® in your market, and participate in their consumer-outreach activities, membership is not required to participate in another association’s MLS or to purchase any other services through that association.


Can a board require that applicants for REALTOR® membership be licensed in the state? (updated Jan. 1, 2002)

Boards may, at their discretion, require that all applicants for REALTOR® membership, irrespective of the location of their principal place of business, be licensed in the state as condition of membership in the board.


What is a residential service contract? (updated Jan. 1, 2002)

A residential service contract or home warranty is usually purchased when a house sells in the resale market. A home under warranty may be more attractive to prospective buyers. It covers major appliances and systems which are in proper operating condition at the time of closing and usually carries a one-year service agreement. It is an agreement on the part of the issuer (the residential service company) to repair or replace certain named components or systems within a home that fail due to normal wear and tear during the contract term. A service fee (a deductible ranging from $35 to $125) may be charged for each service call, and the homeowner is protected against the costly expense of a major breakdown or multiple breakdowns which can occur when a change of ownership and lifestyle subject the equipment to different usage.


An executed contract is in place, and the buyer had crossed out the waiver wording on the seller's disclosure before signing. Within the 10 days, the buyer requests in writing that the seller install hearing-impaired smoke detectors. At this point, does the seller have a right to refuse? If the buyer is willing to waive his rights to require the seller to install, how should you document their agreement? (updated Aug. 9, 2007)

The seller does not have the right to refuse to install under the facts of this question. However, the seller does have the right to negotiate who will pay for the installation. If the parties cannot agree, the contract will terminate. As to the second question, there might not need to be any documentation of a waiver. The buyer's acceptance of the property and willingness to close without the installation being complete would seem to be sufficient in most cases. However, if documentation of the waiver is necessary, the buyer could simply state in writing that he is waiving his rights under Chapter 766 of the Health and Safety Code.


If a REALTOR® participates in a regional MLS owned by two or more shareholder boards, which board is responsible for professional standards enforcement with respect to those REALTOR® members who participate in the MLS but do not hold membership in one of the shareholder boards? (updated Jan. 1, 2002)

Professional standards enforcement would be the responsibility of the board through which the REALTOR® obtained participation rights. Participation in a regional MLS is only available through one of the shareholder (or signatory) boards. In other words, a REALTOR® cannot obtain direct access to the MLS through the regional entity. Rather, REALTORS® must sign an MLS participation agreement with one of the shareholder (or signatory) boards which establishes their agreement to submit to ethics and arbitration requests filed with the board from which the REALTOR® obtained MLS access but is not a member.


What effect does board of choice have on use of the REALTOR® marks? (updated Jan. 1, 2002)

REALTORS® are authorized to use the marks anywhere in the state in which they hold REALTOR® membership. Boards will continue to protect use of the registered marks within their territorial jurisdiction (i.e., use of the marks by individuals who do not hold REALTOR® membership in any board in the state).


Can a board offer volume discounts in dues and service fees to large firms? (updated Jan. 1, 2002)

Yes, so long as the discounts are made known and available to all brokers with firms of similar size. There cannot be a different scale for brokers with the same size firm. Offering these types of discounts is completely a matter for judgment and determination by each local board, and is not governed by NAR policy.


Can the Board of Directors change the bylaws without membership's approval? (updated Jan. 1, 2002)

If your board's bylaws permit director approval of bylaw changes then it is not necessary to call a membership meeting for a vote. However, if director approval is not specifically permitted in the bylaws, a general membership meeting must be called and appropriate notice given, per the amendments section of the bylaws. NAR previously revised its model board bylaws to authorize approval of bylaw amendments by the Board of Directors (as opposed to a vote of the general membership) if the bylaw amendments are the result of a mandated NAR policy. If this provision has been adopted by your board and is incorporated in your bylaws, only Board of Directors approval is required.


What is the difference between homeowners insurance and a residential service contract? (Updated May 28, 2014)

A typical homeowners-insurance policy covers loss to the dwelling and its contents as a result of external forces, such as fire, hurricane, hail, or vandalism. The policy excludes loss due to mechanical failure or normal wear and tear.

Conversely, a residential service contract—also known as a home warranty—covers many losses due to mechanical failure and wear and tear. It covers major appliances and systems that are in proper operating condition at the time of closing and usually carries a one-year service agreement. It is an agreement on the part of the issuer (the residential service company) to repair or replace certain named components or systems within a home that fail due to normal wear and tear during the contract term.


If a hearing-impaired buyer is not willing to waive his rights on the seller's disclosure to have hearing-impaired smoke detectors installed by the seller but is willing to acknowledge receipt of the seller's disclosure, how is this accomplished? Can the buyer strike through the waiver wording and sign? (updated Aug. 9, 2007)

Nothing in the statute prohibits the buyer from striking the waiver language. The statute is silent about whether he can strike the language or not. Therefore, he could strike the language and acknowledge receipt. As a side comment, please note that Section 5.008 of the Property Code requires the seller to deliver the Seller's Disclosure Notice. Once it is delivered and signed by the seller, the seller has accomplished his statutory requirements. The seller may need to document delivery by other means if a buyer refuses to sign the notice. The more likely course of events is that the buyer will ask what his rights are under Chapter 766 before deciding to sign or before deciding to strike any language. In that case, the buyer will need to read Chapter 766 of the Health and Safety Code. The buyer's rights are to request hearing-impaired smoke detectors to be installed. Although the statue provides that the seller is required to install the hearing-impaired smoke detectors (under the conditions that trigger that requirement), the statute also provides that the parties can agree as to who will pay for the installation. Even if he signs the notice and does not strike the waiver language, the buyer's offer or any amendment of the offer can request the installation of smoke detectors or any other repairs. The buyer has not waived any contractual rights by signing the notice. As a side comment, one has to ask whether the statute is creating any new rights because the buyer and seller always had the contractual rights to negotiate the installation of such items. Of course, the statute brings the issue up close for consideration. It also requires the seller to agree to install hearing-impaired smoke detectors under certain conditions provided that the parties agree who will pay for the installation.


Can a board solicit membership from another board's territory? (updated Jan. 1, 2002)

A board is free to make potential members aware of the products and services it offers. Members can then determine the board provider of products and services that is best for their business operation.


What is the difference between primary and secondary membership? (updated Jan. 1, 2002)

An individual is a primary member of a board if that board remits state and national dues based on that member. An individual is a secondary member if state and national dues are remitted through another board. Since national dues are only paid once, there is only one primary board.


Have jurisdiction lines been eliminated under board of choice? (updated Jan. 1, 2002)

No. The jurisdictional lines are still in effect. Neither the PAG or the policy committees felt there was a compelling need to eliminate jurisdictional territories.


When did these policies become effective? (updated Jan. 1, 2002)

Board of choice was mandatory Jan. 1, 1996. Board of choice across state lines was mandatory as of July 1, 1996.


What is the Residential Service Company Act? (updated Jan. 1, 2002)

The Residential Service Company Act (Article 6573b, Vernon's Texas Civil Statutes) has been administered by the Texas Real Estate Commission since 1979. It provides for the licensing and regulation of residential service companies who provide residential service contracts, also known as home warranties, to the public.


What rights do buyers have under this law? (updated Aug. 6, 2007)

Certain purchasers may require the seller to install smoke detectors equipped for hearing-impaired persons prior to the closing date of the sale of the home. In order to impose this requirement on the seller, the purchaser must satisfy a number of requirements: 1. There must be a written contract in place. 2. It must be a sale of single-family dwelling or duplex. 3. The buyer or a member of the buyer's family who will live in the dwelling must be hearing impaired. 4. The buyer must provide written evidence of the hearing impairment signed by a licensed physician. 5. The buyer must submit a written request to the seller to install the smoke detectors. 6. The buyer must specify in the written request where the detectors are to be installed. 7. The buyer must send the written request not later than the 10th day after the effective date of the contract. The bill allows the buyer and seller to agree on the brand and which party will bear the cost of the detectors. The seller must install the detectors no later than the closing date. If the seller fails to install, as may be required, the buyer has the right to terminate the contract.


Does the designated REALTOR® have to hold secondary membership in order for affiliated licensees to obtain secondary membership? (updated Jan. 1, 2002)

No. Secondary membership may be granted to non-principal licensees who hold REALTOR® or REALTOR®-Associate® membership in their primary board without any requirement that the designated REALTOR® they are licensed or affiliated with hold membership in the secondary board. However, MLS services are only available to secondary members if their office participates in the MLS.


Explain the "universal access to services" element of the board of choice policies? (updated Jan. 1, 2002)

Based on the board of choice policies approved by the Board of Directors, REALTORS® are entitled to purchase services from boards other than their primary board without the necessity of holding membership in those boards. Service fees are determined by the individual boards except that fees for MLS services may not exceed those for members of the board. Note: The issue of whether boards can charge higher MLS fees for REALTORS® who are not members of the board is currently being reviewed by the National Association's Multiple Listing Policy Committee.


Who will be responsible for policing the designated REALTOR® dues formula under board of choice? (updated Jan. 1, 2002)

The associations to which the REALTOR® belongs. If a real estate firm maintains designated REALTORS® in more than one board, each designated REALTOR® shall be responsible (per the certification provision in the board's bylaws) for providing the board(s) where they hold designated REALTOR® membership with a list of names of any non-member licensees affiliated with their office(s) and indicate in which board the licensee will be included for purposes of computing the designated REALTOR® dues. The following are examples of how the dues formula should be administered: 1. A broker (sole proprietor) has a single office located in board A's jurisdiction but chooses board B as his primary board. Designated REALTOR® assessments for nonmember licensees in the office would be paid to board B since this is the only board where the broker (designated REALTOR®) holds membership. Note: This same principle would apply if the broker had multiple office locations in one or more board jurisdictions but chose only one board in which to hold membership. 2. Two brokers are partners in a real estate firm and have a single office located in board A's jurisdiction. Broker one selects board A as his primary board and Broker two selects board B as her primary board. Each broker could be required (per the certification provision in the boards' bylaws) to report the total number of nonmember licensees in the office (i.e., those licensees who haven't joined either board A or board B) and indicate in which board the licensees will be included for purposes of computing the designated REALTOR® dues. All nonmember assessments could be paid to one board or they could be split between the two boards (e.g., four nonmember licensees reported in board A; six nonmember licensees reported in board B). 3. A real estate firm has its principal place of business in board A with branch offices in boards B and C. Each office has a different designated REALTOR® and each designated REALTOR® has selected the board where their office is located as their primary board. Each designated REALTOR® could be required to report the total number of nonmember licensees in his/her office to his/her primary board and indicate in which board (A, B or C) the nonmember licensee(s) will be included for purposes of computing the designated REALTOR® dues. Nonmember assessments could be remitted to any one of the Boards where the firm maintains a designated REALTOR® (A, B or C). In the final analysis, every nonmember licensee affiliated with a real estate firm will be accounted for in one of the boards where the firm maintains a designated REALTOR® presence. Many state associations have indicated plans to assume a leadership role in developing licensee tracking systems and many states already provide this service through lists obtained from state real estate regulatory agencies.


What is board of choice across state lines? (updated Jan. 1, 2002)

The original board of choice policies authorized REALTORS® to join any board within the state where their office is located. Based on amendments approved by the Board of Directors and Delegate Body at the 1995 Annual Convention, this policy was expanded to authorize REALTORS® to join a primary board across contiguous state lines. State association membership would be in the state where primary board membership is held.


Can I charge a fee to provide a broker price opinion or comparative market analysis to an owner, buyer, or lender? (Updated May 6, 2015)

Yes. The Real Estate License Act and TREC rules permit a broker to charge a fee for providing a broker price opinion (BPO) or a comparative market analysis (CMA). A salesperson may provide a BPO or CMA as well, but they must be submitted in a broker's name. The broker is responsible for a BPO or CMA submitted by a salesperson.

BPOs and CMAs are not appraisals. Appraisals may only be completed by someone who is licensed or certified as an appraiser. Therefore, TREC rules require that BPOs and CMAs contain the following statement verbatim:

"THIS IS A BROKER PRICE OPINION OR COMPARATIVE MARKET ANALYSIS AND SHOULD NOT BE CONSIDERED AN APPRAISAL OR OPINION OF VALUE. In making any decision that relies upon my work, you should know that I have not followed the guidelines for development of an appraisal or analysis contained in the Uniform Standards of Professional Appraisal Practice of the Appraisal Foundation."


What are the consequences of a local board not adopting board of choice and/or board of choice across state lines? (updated Jan. 1, 2002)

The immediate consequence of a board's failure to comply with a policy mandated by NAR Board of Directors is that coverage under the Blanket Errors and Omissions insurance is jeopardized. Subsequent to that, it would be likely that the board would be requested to come before the Executive Committee to explain its refusal to comply with the policy in question. Based on the outcome of that proceeding, the Executive Committee would make a recommendation to the board of directors for action. The ultimate sanction for non-compliance with mandatory policies enacted by the Board of Directors is revocation of charter status.


Does implementation of board of choice across state lines require amendments to the local board's bylaws? State bylaws? (updated Jan. 1, 2002)

All necessary provisions to implement board of choice across state lines were included in the March 1996 Model Board Bylaws. A complimentary copy of the Model Bylaws was distributed to all boards and associations on or around April 1, 1996. There are no amendments required to the state association's bylaws since membership originates at the local level.


Must all offices of a real estate firm belong to the same board? (updated Jan. 1, 2002)

Based on the board of choice policies approved by the Board of Directors, a firm comprised of REALTOR® principals which has multiple office locations in the same state must operate each office as a "REALTOR®-office." Each office must have a designated REALTOR® and each designated REALTOR® must have a primary board affiliation (though the same designated REALTOR® may be responsible for more than one office). The primary board affiliation for branch offices may or may not be the same as the board chosen by the firm's principal office.


What is board of choice? (updated Jan. 1, 2002)

Under previous jurisdictional policies of NAR, REALTORS® were required to join the board where their principal place of business is located, prior to joining any other board. The board-of-choice concept allows REALTORS® to choose the board to which they want to belong on the basis of the factors they decide are most important rather than being limited by office location or jurisdictional boundaries. At the same time, services of other boards are available without the necessity of holding membership in those boards.


In the case of a seller concerned about future liability issues that could arise from improper or unsatisfactory installation of hearing-impaired smoke detectors, does he have the right to refuse to negotiate an offer from a hearing-impaired buyer who will not waive his rights on the seller's disclosure, or would this fall under fair-housing policy? (updated Aug. 9, 2007)

No. A seller may not refuse to negotiate an offer simply because a buyer is hearing-impaired, as that conduct discriminates against the buyer based on his disability. There are alternatives that can provide direct privity between the buyer and the installer, which should be able to address any liability concerns raised in this question. The statute also provides that the parties can agree who will install the detectors and can agree on the brand of the detectors. The seller may want to use the buyer's preferences as to the brand and installer.


Legal Disclaimer: 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.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on TexasRealEstate.com. Any legal or other information found here, on TexasRealEstate.com, or at other sites to which we link, should be verified before it is relied upon.

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