TREC License Law Changes
Jan 28, 2011
Summary
of Amendments to Chapter 535
TheTexas Real Estate Commission adopted a series of rule amendments and new rules
under Chapter 535 of Title 22 of the Texas Administrative Code (the Rules).
Along with substantive revisions, the amendments and new rules reorganize and
streamline the chapter into a more logical order. The effective date of the
amendments is January 1, 2011, unless the text of the rule provides a different
effective date.
The following is a list of most of the substantive changes to the rules. The TREC
Web site, www.trec.state.tx.us, has comprehensive summaries and the text of the
adopted amendments and new rules.Broker Responsibility
· Amendments to §535.2
clarify a broker’s responsibilities to his or her sponsored salespersons, the
public, and other brokers.
· A broker is required
to advise a sponsored salesperson of the scope of the salespersons authorized
activities under the act; clarifies that a broker is liable for the activities
of the salesperson if the broker permits a salesperson to engage in activities
beyond the scope originally authorized.
· A broker is responsible for any property management activity conducted by sponsored
salespersons and for all advertising done by sponsored salespersons.
· The amendments permit a broker to designate in writing another licensee to be responsible for
day-to-day supervision of sponsored salespersons; however, the broker would
continue to have overall responsibility of the salespersons.
· The amendments require a broker to maintain business records such as disclosures, commission
agreements, work files, contracts and related addenda, property management
contracts, appraisal related records, and sponsorship agreements for a period
of 4 years.
1. Brokers will be required to maintain written policies and procedures to ensure that:
2. Each sponsored salesperson is advised of the scope of the salesperson’s authorized activities
subject to the Act and is competent to conduct such activities;
3. Each sponsored salesperson maintains their license in active status at all times while they are engaging in activities subject to the Act;
4. Any and all compensation paid to a sponsored salesperson for acts or services subject to
the Act is paid by, through, or with the written consent of the sponsoring
broker;
5. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the
change, notice of any change to the Act, Rules, or commission promulgated
contract forms;
6. In addition to completing statutory minimum continuing education requirements, each sponsored salesperson receives such additional educational instruction the broker may
deem necessary to obtain and maintain on a current basis competency in the
scope of the sponsored salesperson’s practice subject to the Act;
7. Each sponsored salesperson complies with the commission’s advertising rules.
8. All trust accounts, including but not limited to property management trust accounts, and other
funds received from consumers are handled by the broker with appropriate
controls; and
9. Records are properly maintained pursuant to records retention requirements in the rules.
·
The amendments clarify that the broker responsibility rules are not meant to create an
employer/employee relationship where there is none.
· Amendments to §535.3 regarding Compensation to or Paid by a Salesperson require that an agreement between a broker and sponsored salesperson regarding the compensation a
salesperson receives or pays to other licensees must be in writing.License Required / Not Required
· New §535.4 regarding License Required is a compilation of existing rules that are put together into
one comprehensive rule that addresses the instances in which a license is
required under the Act.
· New §535.5 regarding License Not Required is a compilation of existing rules that are put together
into one comprehensive rule that addresses the instances in which a license is
not required under the Act.
Corporations and Limited Liability Companies
· Section 535.4 adds a new provision which clarifies that a corporation or limited liability company
owned by a broker or salesperson that receives compensation on behalf of the
licensee must be licensed as a broker under the Act.
· Amendments to 535.53 clarify the requirements for obtaining and maintaining a broker license
for a corporation or limited liability company, and new subsection (c) provides
that if a corporation or limited liability company is dissolved with the
Secretary of State the license becomes null and void.
Education and Experience
· Section 535.54 provides that a bachelor’s degree from an accredited college or university
satisfies all of the “related” education requirements for a salesperson or
broker license. A bachelor’s degree does not satisfy the required “core”
courses.
· The commission has the authority under §1101.362 of the Act to waive some or all of the education and experience requirements for someone who has been licensed within the six
years preceding the date the application is filed. Currently, §535.56, the
commission has waived the education and experience required for a broker
license for a broker who was licensed in the preceding six years (the maximum
authorized under the Act) and otherwise meets the requirements of the section.
The new rule changes the period from six years to four years, so that a person
who was licensed in the preceding four years and otherwise meets the experience
requirements of the section could apply to reinstate an expired broker license.
If applying more than 2 years after a license expired, one would need to retake
the examination.
·
The commission will not grant credit to a student who has taken a “core” course with substantially
the same content as one taken within the previous two-year period.
Schools, Courses & Instructors – Pre-License Education
· The renewal period for accreditation of schools is changed from five years to four years in
§535.63(b). For purposes of calculating a school’s passage rate in
§535.63(b)(3), the commission will use a four year period instead of a five
year period.
· A course approval expires four years from the date of approval, and if any school that offers the
same course obtains TREC approval to offer the same course, the expiration date
remains unchanged.
· The requirement in existing §535.64 that examination preparation courses be submitted to TREC for approval is deleted. No credit is earned for such courses.
· Schools are required to provide to students and maintain for commission review instructor and course evaluations for each course; schools must use, at a minimum evaluation criteria
established by the commission.
· A school will be required to maintain records of each student enrolled for a minimum of four
years; and the full class file and student enrollment agreements must be
retained for at least 24 months following completion; records may be retained
in an electronically as long as the records are maintained in a common format
that may be legibly and easily printed.
· Section 535.65(d) clarifies that a school may use published objective information such as pass
rates in advertising.
· In section 535.67(b), the renewal term for “core” instructor approval is changed from five
to two years.
Providers, Courses & Instructors – MCE Providers
·
In Section 535.71, the renewal term for MCE instructor approval is changed from five to two years.
· Under Section 535.71(z), alternative delivery method courses for required legal credit must
be certified by a distance learning certification center that is acceptable to
the commission.
· Subsection (i) of §535.71 requires a provider to make available to students and maintain for
commission review instructor and course evaluation for each course; schools
must use, at a minimum evaluation criteria established by the commission.
· Subsection (k) of 535.71 requires a provider to maintain the same types of records and for the
same period of time as required of schools accredited under Subchapter F,
regarding core education providers.
Violations
· 535.141 is amended to include advertising in the laundry list of activities that a licensee may
not engage in while the person’s license is under suspension; the commission
may automatically suspend a license if the licensee violates certain types of
terms or conditions of an agreed probated revocation or suspension.
· Amendments to §535.146 clarify existing requirements that apply to maintenance of trust
accounts, including that a broker is ultimately responsible for compliance with
the trust account requirements in the Act and Rules; subsection (h) requires a
broker to notify all parties in writing when a broker makes a disbursement to
which all parties have not expressly agreed to in writing; new subsection (k)
clarifies that a broker may deposit and maintain additional amounts in a trust
account to cover bank service fees.
· §535.147(a) clarifies that a licensee may not share a commission with an unlicensed person
except as provided by the Act or Rules; new subsection (b) authorizes an
unlicensed person to share in the income earned by a licensed business entity
as long as the person does not engage in real estate brokerage activity; new
subsection (c) clarifies that a broker or salesperson may not share a
commission with an unlicensed corporation or limited liability company created
by a licensee for the purpose of collecting a commission or fees on behalf of the
licensee.
· New subsection (c) is added to §535.148 to prohibit a licensee from entering into contracts with
service providers which prohibits a licensee from entering into or offering
similar service on behalf of a competing service provider; new subsection (d)
would prohibit contingent fee arrangements where the licensee accepts a fee
that is contingent upon a party to the real estate transaction purchasing a
contract or services from a specific service provider; new subsection (e)
adopts by a reference RSC-1, Disclosure of Relationship with Residential
Service Company which licensees will be required to use as of March 1, 2011 to
disclose compensation for services provided to or on behalf of a residential
service company.
· The Commission postponed taking any action on the proposed revisions to §535.154 concerning
advertising. The commission will continue to seek recommendations from
interested parties regarding §535.154. Similarly, the commission decided not to
take final action to repeal existing §535.154 until such time that a decision
is made on a provision to replace it.
Miscellaneous License Provisions
· Under §535.96, licensees would be required to notify the commission of the licensee’s current
email address, if any, and other contact information.
· New 535.94(d) clarifies that if a person who has a probationary license renews the license
within the one year late renewal period, the new license is subject to the
remaining probationary period from the previous probationary license.
· Section 535.121 is amended to clarify that a salesperson’s license becomes inactive if a broker
notifies the commission in writing that the broker is terminating sponsorship
of the salesperson.
Residential Locators Advertising
· Section 535.300 clarifies that the definition of “advertisement” in §535.154 applies to rental
locators.
For more information, visit www.texasrealtors.com. Once you’re logged-in, visit “Changes to TREC
Rules” under “Reference Materials” under the “Legal” category on the Member
Resources portion of the site.
