TREC clarifies exceptions to mandatory use of contract forms

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.

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16 Responses to TREC clarifies exceptions to mandatory use of contract forms

  1. Rick DeVoss says:

    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…?

    Like

  2. Marcia Livingston says:

    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?

    Like

  3. Ray Faragher says:

    What about TAR forms?

    Like

  4. Sharon says:

    Agreed! I saw no limitations for attorneys in this article. TAR can you please explain?

    Thanks!

    Like

  5. Cheryl McClintock says:

    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?

    Like

  6. Chip Staniswalis says:

    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.

    Like

  7. Randy Smith says:

    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.

    Like

  8. David F Etzold says:

    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!

    Liked by 1 person

    • Rick DeVoss says:

      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?

      Liked by 1 person

  9. Randy Smith says:

    TREC doesn’t have a Listing form or Buyer/Tenant Rep Agreement. They never have, those are TAR Forms.

    Liked by 1 person

  10. Rick DeVoss says:

    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.
    RickDeVoss@Realtor.com

    Liked by 1 person

  11. Randy Smith says:

    Yes this is taught in the blended (formerly Core)courses, then in CE. It’s fundamental.

    Liked by 1 person

  12. Brian Cooper says:

    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.

    Liked by 1 person

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