TREC proposes limits for when lawyers can draft contracts for principals who aren’t their clients

The Texas Real Estate Commission met on August 7 and adopted amendments to existing rules and proposed several more. View the meeting materials packet, which provides more details about all the changes, on TREC’s website. Here’s a breakdown of a few proposals related to forms. Find a list of other rule changes proposed by TREC here.

TREC is proposing amendments to Section 537.11, Use of Standard Contract Forms. This rule currently says license holders may only use contract forms promulgated by TREC, with a few exceptions.

TREC proposed amendments to some of those exceptions, including Section 537.11(a)(3), to state that while generally license holders must use TREC forms in their transactions, TREC forms are not required for transactions in which a principal or a lawyer representing the principal prepares a contract form or addendum. If TREC adopts this amendment that says a lawyer-principal relationship is necessary for a lawyer to draft a contract, this means a lawyer for a title company or a brokerage could not draft a contract or addendum for a transaction unless he or she is representing the buyer or seller.

If the amendment proposed to Section 537.11(a)(3) is adopted, certain forms could still be drafted by a lawyer who is not representing a principal to a transaction because the rule would not change the current exception of using lawyer-drafted forms in transactions for which no mandatory form has been approved by TREC. This is what allows TAR to create commercial contracts or residential lease forms, for example. The only change here is that the form must contain the following information:

  • Name of the lawyer or trade association who prepared the form
  • Name of the broker or trade association for whom the form was prepared
  • The type of transaction for which the lawyer has approved the use of the form
  • Any restrictions on the use of the form
  • A statement that the form has not been approved by TREC; and
  • A statement that TREC rules prohibit real estate license holders from giving legal advice.

In addition, TREC has made another proposal that would affect TAR’s ability to provide forms to members that amend existing mandatory forms from TREC, such as the Release of Earnest Money or the Relocation Addendum, which are not TREC forms. You can read more about this proposal here.

Share your feedback on proposed rule changes with TREC

The earliest these proposed rule amendments could be adopted is during the next TREC meeting, scheduled for November 13.

You can provide comments about these proposed rule changes for at least 30 days after they are published in the Texas Register by emailing general.counsel@trec.texas.gov. The proposals from the August 7 meeting will likely go live August 25; you can enter “Texas Real Estate Commission” in the Agency Name field on this page to read the rules when they’re published in the Texas Register.

Comments made on this blog post will not be read by TREC and do not count as official feedback on proposed rule changes.

Other adopted or proposed rule changes from TREC:

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About Texas Association of REALTORS®

The voice for Texas real estate
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