In November, the Texas Real Estate Commission adopted changes to Section 537.11 of its rules, Use of Standard Contract Forms, which takes effect May 15. Here’s what the changes mean for you.
When a license holder is negotiating contracts for the sale, exchange, option, lease, or rental of any interest in real property, he or she must use a mandatory Texas Real Estate Commission form if one is available for the transaction. But there are exceptions, and TREC adopted changes to two of those exceptions:
Forms created by a property owner or an attorney. Previously, a license holder could use other forms in transactions for which a contract form has been prepared by a principal to the transaction or prepared by an attorney and required by a principal to the transaction. The updated rule changes “principal” to “property owner,” which reflects the language in the Real Estate License Act.
Transactions without mandatory TREC forms or addenda. Prior to the rule change, a license holder could use other forms in transactions for which no standard contract form had been promulgated by TREC if the form was prepared by a licensed Texas attorney and approved by the attorney for that kind of transaction. Approximately 50 TAR forms, like the Commercial Contract – Improved Property (TAR 1801) or the Residential Lease (TAR 2001), exist because of this exception. The updated rule requires forms like these to include certain information, such as who prepared the form and any restrictions on its use. All TAR forms that exist under this exception already contain the required information.
An addendum that changes the rights, obligations, or remedies of a party under a mandatory TREC contract or addendum form must include additional information. TAR offers one such form, the Relocation Addendum (TAR 1941). This form will be updated to include the newly required information.
Reading the title to this posting left me confused…after I read the remarks included under it. ~Is anyone else having the same issue with the title…? —After reading the explanation of the action that TREC took, it is hard to see where this “limits when a lawyer can draft a contract.” So they changed the wording to say “property owner”, but what has that got to do with allowing an attorney to draft the contract for the property owner? I did not hear any new restrictions placed on lawyers. Would someone please tell me what I am missing here…?
Agree. I am confused.
I too am confused. After reading several times, does this mean only a property owner (but not a buyer) can prepare their own contract or use a contract prepared by an attorney?
What about TAR forms?
Agreed! I saw no limitations for attorneys in this article. TAR can you please explain?
I also have a question about all these forms that are included with the contract from the other Broker. Coldwell Banker is one such Broker that has their own forms that they require all parties to sign. Do these forms fall under the new rule since the “Property Owner” did not have the attorney draft?
I posed a similar question to the TREC Standards and Enforcement Division. Attorney Bill Zukauckas responded, “The amendment to Rule §537.11 makes many changes including the extensive additions to 537.11(a)(4). However, the single change to 537.11(a)(3) so specifically substitutes “property owner” for “principal” that it leaves little doubt that the seller is the only principal who may prepare, or require his or her attorney to prepare, a contract form or an addendum to a contract form. It is also my understanding that this substitution of property owner for principal is peculiar to this section (537.11(a)(3)) of the rule only.
I’m an old real estate lawyer. Don’t work much on single family residential deals, and don’t want to. But I stumbled on this website, and I was suprised by the following statement: “However, the single change to 537.11(a)(3) so specifically substitutes “property owner” for “principal” that it leaves little doubt that the seller is the only principal who may prepare, or require his or her attorney to prepare, a contract form or an addendum to a contract form” Really? Imagine a buyer hires a lawyer, and the lawyer suggests a change to the TREC contract form. Imagine the lawyer suggests… Read more »
Thanks for pointing out these two small changes, but changes nevertheless. I am pleased too that a change to Paragraph 5 has occurred, making that paragraph a “Time is of the essence “ paragraph.
I use a single-page Exclusive Listing Agreement that was prepared with the help of an attorney friend of mine twenty years ago. It is still acceptable to all my clients, even preferred over the multi-page TREC Listing form. Does this fall into the same category as “contracts” in the new rule…for it actually is a contract between my firm and our clients? I hope not!
Not a personal attack, David, but I am surprised that licensed agents don’t know the difference between TREC forms (that are mandatory) and TAR forms that are optional for our use.
Don’t we teach this stuff in basic classes? Don’t we review it in CE courses about contracts?
It is sad, but most instructors holding brokers licenses have never actually acted as a broker. My instructor for my broker course has been teaching for Champion School of Real Estate for 15 years, and has never been the broker of record on a single transaction.
TREC doesn’t have a Listing form or Buyer/Tenant Rep Agreement. They never have, those are TAR Forms.
It would seem to me that a Listing Agreement (contract) is way too complicated to shrink down to just ONE page. ~I’d sure like to see a copy of that form, so I could understand the logic that was used by the attorney.
Feel free to email a copy to me.
Yes this is taught in the blended (formerly Core)courses, then in CE. It’s fundamental.
Rick and Randy- I am still always amazed what I see on this blog! I guess that is why I am still an instructor. Randy, you are right. This year in TREC Legal classes we point out the differences between TREC and TAR. Maybe it will help.
Yes Sir. Being an instructor helps immensely. As they say, “The best way to learn something, is to teach it.”
SO, QUESTION… DOES THIS PERTAIN TO HOUSES THAT ARE SOLD BY OWNER?? i am in a situation where everything is falling apart, LITERALLY, on my house and i havent even been in it a year. im trying to figure out a way out of this deal. HELP PLEASE???????