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© 2014 OnCourse Learning
Texas Real Estate Commission
Legal Update MCE
© 2014 OnCourse Learning
Chapter 1
Legislative Changes
SB 985 – Local Government CodeHB 3038 – Auctioning Real Estate
SB 985 – Authorizing Broker Agreements for Sale by Certain Municipalities. Must be “home rule” city.
House Bill 3038 amends Chapter 1802 of the Texas Occupations Code Auctioneer must holds an auctioneer’s
license.
© 2014 OnCourse Learning
HB 2075 – Texas Uniform Condominium Act and Property Owner Associations
Borrowing Money Insurance Coverage New Foreclosure Sale Rules
Property Owner Associations HB 35 – Use of Adjacent Lot HOA cannot prohibit or restrict an owner’s
use of adjacent lot
© 2014 OnCourse Learning
Property Owner Associations and Timeshare Act Amendments
HB 680 – Flag Poles HOA may regulate size, number and location
SB 198 – Drought-Resistant Landscaping (effective September 1, 2013) HOA cannot prohibit or restrict use
SB 1372 – Timeshare Act Amendments Timeshare owners associations are exempt Provisions for governance of timeshare owners
associations.
© 2014 OnCourse Learning
SB 2911 – Real Estate Inspectors and HB 585 – Appraiser Disclosure Requirements (ARB)
Bill contains provisions about professionalism of R.E. inspectors and adopts practices to match those used by other TREC licensees.
HB 585 – Appraiser Disclosure Requirements Before an ARB Has no impact on appraisers, bill requires an
appraiser and property tax consultant must state capacity under which they are appearing before the ARB.
© 2014 OnCourse Learning
HB2532 – Propane Distribution Retailer Disclosure
Amends Utilities Code to establish standards for propane distribution system retailers.
Bill requires retailers to provide disclosures and record documents in county property records.
Establishes notice requirements for a homeowner who proposes to convey property located in a propane gas system service area.
© 2014 OnCourse Learning
© 2014 OnCourse Learning
Chapter 2
Regulatory Changes
New Broker License Requirements
Measured by transactional experience Applicant must accrue 3,600 points for
transactional experience for 4 of 5 years. Application must have signature of
applicant’s sponsoring broker(s).
© 2014 OnCourse Learning
Transaction Document Verification
Documents not required with application, must be provided upon request.
Affidavit in Lieu of Documentation If unable to obtain documentation or signature,
applicant must submit other evidence
© 2014 OnCourse Learning
Licensee Issues
Licensees Buying, Selling and Leasing Property for Themselves
TREC Disciplinary Action Broker Price Opinions or Comparative
Market Analyses “appraisal of real property” has been removed
from definition of real estate brokerage.
© 2014 OnCourse Learning
Final Mortgage Rules/ Consumer Financial Protection Bureau (CFPB)
Rules setting out new standards address standards on “ability-to-repay” and
“qualified mortgages” (QM Rule) changes in HOEPA escrow accounts for higher-priced loans
QM Rule applies to consumer credit transactions, which are secured by a dwelling and are other than lines of credit, timeshare plan, reverse mortgages, or bridge loans
© 2014 OnCourse Learning
The lender must take into account:
borrower’s income and assets current employment status loan payments payments for mortgage-related obligations
(insurance, tax, etc.) and other debt alimony and child support monthly debt-to-income ratio or residual
income applicant’s credit history
© 2014 OnCourse Learning
New Issues
New Appraisal Requirements Capital Gains Tax Rule Changes 3.8 Percent Investment Income Tax & 0.9
Percent Medicare Tax Appraisal Management Companies
AMCs must ensure appraisers are competent
© 2014 OnCourse Learning
Rules for Business Entities
Owning Less Than 10 Percent of an Entity A licensed business entity required to
obtain E&O insurance of at least $1 million if broker owns less than 10% of the entity
Compensation Partnerships and LLCs
SB 747 eliminated exception
for licensure for partnership or LLP
© 2014 OnCourse Learning
Education Standard Advisory Committee
Statutory committee created by TRELA Function is to regularly review and revise
curriculum standards, course content requirements, and instructor certification requirements for core and MCE courses.
Committee consists of 12 members appointed by TREC. Seven real estate members, four
instructors and one public member
© 2014 OnCourse Learning
Education Standard Advisory Committee
ESAC has recommended a curriculum for Principles I and II, Law of Agency and are
formulating curricula for courses in Promulgated Contracts, Law of Contracts.
Long term goals include reviewing: all core curriculum content course fees and approval processes acceptability of delivery methodologies
(classroom, correspondence, alternative delivery, and combination delivery)
© 2014 OnCourse Learning
Justice Court Rule Changes for Evictions
Legislature asked Supreme Court to create rules for eviction for consolidation of small claims and justice courts. Texas Supreme Court finalized a new set
of rules for justice-court cases, which can affect timelines, mediation and formality.
Timelines Mediation Formality
© 2014 OnCourse Learning
© 2014 OnCourse Learning
Chapter 3
Hot Topics
Choice of Title Company
No seller shall require title insurance be purchased from a particular title company. Choice of title company negotiable
Licensees may suggest particular title companies but should not insist
If seller insists licensees should advise principals to seek legal advice.
© 2014 OnCourse Learning
Form 36-7 – Addendum for Property Subject to Mandatory Membership in Owners Association
Chapter 207 of Property Code deals with resale certificates and other information POAs are required to provide upon request.
Para. A defines items POA is to provide: resale certificate POA’s bylaws any rules the POA maintains subdivision’s restrictions
Now buyer, seller, title company or brokers may obtain subdivision information.
© 2014 OnCourse Learning
Form 36-7 – Addendum for Property Subject to Mandatory Membership in Owners Association
If buyer does not require subdivision info, parties may check Para A(4).
If seller has obtained info, - Para A(3). Para C allows parties to negotiate fees. Para D says “deposit” or “reserve” not a fee; Para E is seller’s authorization to POA to
provide updated information to buyer, title company or broker.
POA may charge a reasonable fee .
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Mutual Termination of Contract Form
“Mutual Termination of Contract,” likely to be adopted in 2014. Form is used only when both buyer and
seller agree that contract is terminated. Does not replace Form No. 38-4, Notice of
Buyer’s Termination of Contract, which is used when the buyer has a right to terminate.
© 2014 OnCourse Learning
E-mail Negotiations and the Creation of Contracts
Cases involving UETA being litigated. Generally, 5 principles courts will consider.
UETA’s Purpose enforceability of contract.
UETA’s Effect on the Law of Contracts electronic version substitute for “paper and ink.”
Using an Electronic Signature.
© 2014 OnCourse Learning
Satisfaction of Contract Elements
Elements for an enforceable contract are Offer, acceptance, consideration, Also, meeting of the minds, communication that each party has
consented to terms, and delivery with intent it be mutually binding.
Must additionally satisfy statute of frauds (a writing and a signature).
© 2014 OnCourse Learning
The Authority of the Broker
Broker typically special agent, not general agent. Special agent does not have authority to
bind principal, but is engaged to conduct a specific act.
Electronic communications from broker to broker have not generally been found to bind principals - broker did not have authority to bind the principal
© 2014 OnCourse Learning
Clarifying E-Mail
A broker who wants to make it clear e-mail may not bind principal, may wish to disavow by written statement. Examples:
“The broker’s statements in this e-mail do not create an agreement for broker’s clients.”
“My typed name is not my electronic signature nor the electronic signature of any clients,” or
“I, the named broker, do not have authority to bind my clients.”
© 2014 OnCourse Learning
Case Study Dittman V. Cerone,
…..ruled, under the facts that a broker’s e-mail did, in fact, bind broker’s principal.
The Dittmans owned a 3.78-acre track and adjoining 17-acre tract. Next to 17-acre tract owned by neighbor.
Dittmans and the neighbor listed properties as single 34 acres.
Broker responded by e-mail that Dittmans might accept a “right of first refusal.”
© 2014 OnCourse Learning
There were three critical e-mails sent during negotiations: E-mail 1 - broker e-mail to buyer E-mail 2 - Broker to Seller E-mail 3 – Dittman’s e-mail Buyer sued Trial court issued a detailed order and
concluded that the three e-mails constituted a valid option contract
Dittmans appealed, arguing e-mails could not, together, constitute one contract.
© 2014 OnCourse Learning
Case Study Dittman V. Cerone,
Sellers argued e-mails did not comply with Statute of Frauds Court noted Dittmans did not communicate
that e-mail was incorrect Dittmans argued broker did not have
authority to bind them Trial court held Dittmans committed fraud
and appellate court upheld
© 2014 OnCourse Learning
Handling Trust and Property Management Funds
About 25% of TREC’s disciplinary orders involve failure to properly handle trust funds.
Most serious because they strike at core fiduciary responsibilities: honesty and trustworthiness, required to obtain license.
TRELA requires a licensee to properly account for or remit money, within a reasonable time and prohibits commingling.
© 2014 OnCourse Learning
Rules regarding “trust accounts”
If broker holds another’s money, must use separate account or agent to hold funds.
Salesperson must timely deliver funds to broker.
Licensee may not commingle money. Must properly account, disburse money to
appropriate party; pay into registry of a court If licensee acquires ownership of money in
account, licensee must remove money.
© 2014 OnCourse Learning
What Should Happen When an Agent Changes Broker?
Sponsorship Change on Paper: Form-1 is required and available on TREC website. Paper sponsorship change takes longer,
more costly than an online change. TREC’s Online Relationship Management
Tool (RMT) is available. RMT has been positive for TREC, licensees and consumers.
RMT allows licensees to manage sponsor relationships online quickly and easily.
© 2014 OnCourse Learning
Termination of Salesperson’s Association with Sponsoring Broker
If sponsorship has ended salesperson shall send written notification to broker.
If TREC receives request from broker to sponsor salesperson sponsored by another broker, TREC shall notify former broker.
When sponsorship of salesperson ends, broker shall immediately return salesperson’s license, or otherwise notify TREC in writing.
If salesperson’s license becomes inactive procedure is different to reactivate license.
© 2014 OnCourse Learning
Craigslist Leasing Scams
Prospective renters respond to online ad for rental property offered at below market rates. “Landlord,” scammer who holds no
ownership, replies that renter needs to wire money for deposit or rent.
Landlord cannot show property. Current tenant and prospective tenant are
bewildered. Property may be for sale but not for rent.
© 2014 OnCourse Learning
© 2014 OnCourse Learning
Forms Changes
TREC No. 20-12, One to Four Family Residential Contract (Resale)
Definition of “Property” moved. Para. 6.A.(8). Third sentence in Para. 6.B Para. 7.D amended to redefine “As Is” Notice after para. 7.D moved Para. 7.F amended
© 2014 OnCourse Learning
TREC No. 20-12, One to Four Family Residential Contract (Resale)
New Para 9B regarding leases – incorporates Para 9.B(5) and renumbers
existing Para. 9B to 9C to contain 9B(1)-(4). Para. 14 amended to add “or cause to be
restored” in first sentence. Para. 16 amended to remove check boxes. Para. 23 - Seller or Listing Broker must
receive option fee within 3 days. Last page - agents do not sign on blank lines.
© 2014 OnCourse Learning
TREC No. 9-11, Unimproved Property Contract
Definition of “Property” not changed. Para. 7.E(1) is amended Para. 7.E(3) amended
TREC No. 23-13, New Home Contract (Incomplete Construction)
The definition of “Property” not changed. Para. 7 insert missing parentheses. Para. 7.I(3) amended New Para. 9.B
© 2014 OnCourse Learning
TREC No. 24-13, New Home Contract (Completed Construction)
Para. 7.H(3) amended Para. 9 amended adding new Para. 9.B
TREC No. 25-10, Farm and Ranch Contract Para. 2 amended Last page not amended
TREC No. 30-11, Residential Condominium Para. 2.B(3) is deleted; No changes to
para. 6.A.(8).© 2014 OnCourse Learning
TREC No. 37-5, Subdivision Information, Including Resale Certificate
TREC No. 37-5 amended: Para. H to more closely track statutory
changes to Chapter 207, Property Code.
TREC No. 40-5, Third Party Financing Addendum New para. E added to reference USDA
Guaranteed Financing.
© 2014 OnCourse Learning
Licensees may only use forms that are authorized by Section 537.11 of the TREC Rules.
Those forms include: forms adopted for type of transaction, forms required by property owner, forms required by government agency, forms prepared by an attorney if no TREC
form has ben promulgated. TREC does not promulgate listing or buyer
rep agreements, property management contracts, forms for commercial property, or residential leases
© 2014 OnCourse Learning
© 2014 OnCourse Learning
Case Studies
Case Studies
“As Is” vs. Seller’s Disclosure - RITCHEY V. PINNELL, 357 S.W.3D 410
Splitting Commission with Buyer - WU V. RHEE, (WL 5198336, BKRTCY. S.D. TEX. 2012)
Buyer Representation/ MisrepresentationDEFTERIOS V. DALLAS BAYOU BEND, LTD., 350 S.W.3D 659 (TEX.APP.-DALLAS 2011)
Reversionary Interests are Compensable in a Takings Case - EL DORADO LAND COMPANY, L.P. V. CITY OF MCKINNEY, 395 S.W.3D 798, TEX., MARCH 29, 2013
© 2014 OnCourse Learning
Case Studies
Attempt to Convert Separate Property to Community Property - ESTATE OF CUNNINGHAM, 390 S.W.3D 685, TEX.APP.–DALLAS, 2012
The Risk Caused by Certain Pets - HARRIS V. EBBY HALLIDAY REAL ESTATE, INC., 345 S.W.3D 756, TEX. APP. – EL PASO, JULY 20, 2011
Mutual Mistake/Scrivener’s Error - SIMPSON V. CURTIS, 351 S.W.3D 374 (TEX. APP.-TYLER 2010, NO PET.)
© 2014 OnCourse Learning
Case Studies
Real Estate License Required for a Business Broker to Sell Real Estate - SMITH SALES V. METAL SYSTEMS, 397 S.W.3D 305, TEX. APP. – DALLAS, MARCH 5, 2013
Stigma Damage May be Awarded for Remediated Property - HOUSTON UNLIMITED, INC. V. MEL ACRES RANCH, 389 S.W.3D 583, TEX. APP.– HOUSTON (14TH DISTRICT), NOVEMBER 15, 2012
© 2014 OnCourse Learning
Case Studies
Listing Agreement/Protection Period - 839 E. 19TH STREET, L.P. V. FRIEDSON, 373 S.W.3D 674 (TEX.APP.-HOUSTON [14TH DIST.] 2012, NO PET. HISTORY TO DATE)
Mold! - ARLINGTON HOME INC. V. PEEK ENVIRONMENTAL CONSULTANTS, INC., 361 S.W.3D 773 (TEX. APP. –HOUSTON [14TH DIST.] 2012)
© 2014 OnCourse Learning
Case Studies
Inspectors are Professional for Purposes of DTPA - RETHERFORD V. CASTRO, TEX. APP. – WACO, JAN. 4, 2012
Failure to Disclose Prior Termite Infestation and Damage - LAWRENCE V. KINSER, TEX.-APP. – DALLAS, DECEMBER 15, 2011
© 2014 OnCourse Learning