Current through Reg. 49, No. 38; September 20, 2024
(a) When
negotiating contracts binding the sale, exchange, option, or lease of any
interest in real property, a license holder shall use only those contract forms
approved for mandatory use by the Commission for that type of transaction with
the following exceptions:
(1) transactions in
which the license holder is functioning solely as a principal, not as an
agent;
(2) transactions in which an
agency of the United States government requires a different form to be
used;
(3) transactions for which a
contract form has been prepared by the property owner or prepared by an
attorney and required by a property owner; or
(4) transactions for which no contract form
has been approved for mandatory use by the Commission, and the license holder
uses a form:
(A) prepared by an attorney
licensed by this state, or a trade association in consultation with an attorney
licensed by this state that contains:
(i) the
name of the attorney or trade association who prepared the form;
(ii) the name of the broker or trade
association for whom the form was prepared;
(iii) a statement indicating the type of
transaction for which the attorney or trade association has approved the use of
the form;
(iv) any restrictions on
the use of the form; and
(v) if
applicable, an explanation of how the form changes the rights, obligations, or
remedies of a party under a contract form approved for mandatory use by the
Commission and a statement that license holders may not practice law or give
legal advice; or
(B)
prepared by the Texas Real Estate Broker-Lawyer Committee and approved by the
Commission for voluntary use by license holders.
(b) A license holder may not:
(1) practice law;
(2) directly or indirectly offer, give or
attempt to give legal advice;
(3)
give advice or opinions as to the legal effect of any contract forms or other
such instruments which may affect the title to real estate;
(4) give opinions concerning the status or
validity of title to real estate;
(5) draft or recommend language to be
included in a contract form defining or affecting the rights, obligations, or
remedies of the principals of a real estate transaction, including escalation,
appraisal, or contingency clauses;
(6) add informational items to a form
approved by the Commission if the Commission has approved another form for
mandatory use for that purpose;
(7)
attempt to prevent or in any manner whatsoever discourage any principal to a
real estate transaction from employing an attorney; or
(8) obtain legal advice from an attorney,
directly or indirectly, for a principal in a real estate transaction in which
the license holder is acting as an agent.
(c) This section does not:
(1) limit a license holder's fiduciary
obligation to disclose to the license holder's principals all pertinent facts
that are within the knowledge of the license holder, including such facts which
might affect the status of or title to real estate;
(2) prevent the license holder from
explaining to the license holder's principals the meaning of informational
items or choices in a contract form, as long as the license holder does not
practice law or give legal advice;
(3) limit a license holder from employing and
paying for the services of an attorney to represent only the license holder in
a real estate transaction; or
(4)
limit a license holder from reimbursing a principal for attorney's fees
incurred.
(d) It is not
the practice of law for a license holder to:
(1) add informational items to a contract
form authorized for use by this section; or
(2) if specifically instructed in writing by
a principal, add language to or strike language from a contract form, as long
as any change is made conspicuous, including underlining additions, striking
through deletions, or employing some other method which clearly indicates the
change being made.
(e)
When a transaction involves unusual matters that should be reviewed by an
attorney before an instrument is executed, or if the instrument must be
acknowledged and filed of record, the license holder shall advise the license
holder's principals to consult an attorney before executing the
instrument.
(f) A license holder
shall advise the license holder's principals that the instrument they are about
to execute is binding on them.
(g)
Contract forms approved by the Commission are published by and available from
the Commission at www.trec.texas.gov.
(h) Contract forms approved by the Commission
may be reproduced, including through use of a software application, provided
that the text and format of the form, including the sizing, spacing, and
pagination, is identical to the Commission's published version, except that:
(1) the business name or logo of a broker,
trade association, or other organization may appear outside the form's border;
and
(2) a form may be scaled to
accommodate viewing on smaller screens, including mobile devices, as long as
the final executed copy of the form otherwise complies with this
subsection.
