RECOVERING UNDER THE TEXAS REAL ESTATE RECOVERY TRUST ACCOUNT

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The statute allowing recovery under the Real Estate Recovery Trust Account is found in Chapter 1101 of the Occupations Code. See generally TEX. OCC. CODE ANN. ch. 1101, subch. M & N (West 2012). The statute states that the Trust Account is maintained "to reimburse aggrieved persons who suffer actual damages" at the hands of a license holder. TEX. OCC. CODE ANN. 1101.601(a) (West 2012).  

Texas appellate courts agree "[t]he purpose of the Account is to `guarantee the fidelity and honesty of the real estate salesman in his dealings with the public and to insure and indemnify any member of the public against damages or injury caused by a violation of the Act.'" Wilson v. Bloys, 169 S.W.3d 364, 366 (Tex. App.-Austin 2005, pet. denied) (quoting State v. Pace, 640 S.W.2d 432, 433 (Tex. App.-Beaumont 1982), aff'd, 650 S.W.2d 64 (Tex. 1983)). The statute requires the claimant to show "that the judgment is based on facts allowing recovery under this subchapter." Id. § 1101.607(1) (West 2012).

Simply put, a person who obtains a judgment for actual damages caused by the misconduct of real estate license holders can, when certain specified statutory conditions are met, obtain reimbursement from the Account if the license holder is unable to pay the judgment. Tex. Occ.Code Ann. § 1101.601.  

To recover under the Act, a person who has an uncollectable judgment against a real estate broker may file a verified claim in the court in which the judgment was rendered and, upon notice to the commission and the judgment debtor, apply for an order directing payment out of the fund. Id.  A hearing is then conducted on the application at which the commission is authorized to appear for the limited purpose of protecting "the fund from spurious or unjust claims...." Id.  At this hearing, the claimant must show, among other things, that its prior judgment is against a licensed real estate broker who caused the claimant's damages while acting as a broker. Id. § 8, part 1(a) and part 3(c). 

NOTE:  TEX. OCC. CODE ANN. § 1101.602 provides that when a license holder is selling property in his own name instead of as an agent for someone else, a claimant may not recover from the Trust Account unless the license holder engages in the following enumerated wrongful conduct:

1101.653(3):  acting in bad faith;

1101.652(a)(3): engaging in misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in the name of himself, his spouse, or his relatives; 

1101.652(b): See list here;

1101.653(1): engaging in dishonest dealing, fraud, unlawful discrimination, or a deceptive act;

1101.653(2):  making a misrepresentation; or 

1101.653(4):  demonstrating untrustworthiness.