TREC Adopts New Form for "Information About Broker Services" - to Take Effect on 2/1/16

Trey Wilson San Antonio Texas Real Estate Attorney, Trey Wilson Real Estate Lawyer in San Antonio wrote:

The Texas Real Estate Commission met on November 2, 2015, and approved all of the proposed changes to the promulgated TREC contract forms. Use of these new contract forms will become mandatory for all TREC licensees on January 1, 2016.

In addition, the Commissioners adopted a new form for the "Information About Broker Services" disclosure.  The new form will go into effect on February 1, 2016, and can be found HERE.  The "old" IABS form was adopted in October 2011. 

The new form contains clear consumer notices related to the duties of brokers-- and to the respective parties -- as follows:

A BROKER’S MINIMUM DUTIES REQUIRED BY LAW (A client is the person or party that the broker represents): 

• Put the interests of the client above all others, including the broker’s own interests;  

• Inform the client of any material information about the property or transaction received by the broker;  

• Answer the client’s questions and present any offer to or counter-offer from the client; and 

• Treat all parties to a real estate transaction honestly and fairly. 

 The new form also contains a written recommendation that agreements with brokers should be in writing:

0. TO AVOID DISPUTES, ALL AGREEMENTS BETWEEN YOU AND A BROKER SHOULD BE IN WRITING AND CLEARLY ESTABLISH:

   
   

   • The broker’s duties and responsibilities to you, and your obligations under the representation agreement. 

   
   

   •  Who will pay the broker for services provided to you, when payment will be made and how the payment will be calculated.

Another significant feature is a space for real estate licensees to provide all parties with contact information (as opposed to just a signature)

LICENSE HOLDER CONTACT INFORMATION: This notice is being provided for information purposes. It does not create an obligation for you to use the broker’s services. Please acknowledge receipt of this notice below and retain a copy for your records. 

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

Why the Texas Deceptive Trade Practices Act Usually Doesn't Apply to Claims Against Brokers

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

One of the favored and most-powerful weapons in the arsenal of Plaintiff's lawyers is the Texas Deceptive Trade Practices Act ("DTPA"). This statute is modeled on similar ones adopted by other states, and provides valuable protections to consumers against all manner of false, misleading and/or deceptive practices and acts.

In addition to serving as an independent cause of action, the DTPA also implicates categories of damages that can result in significant damages awards against defendants who are found to have acted "knowingly" or "intentionally." Specifically, Section 17.50(b) of the DTPA provides:

(b) In a suit filed under this section, each consumer who prevails may obtain:

(1) the amount of economic damages found by the trier of fact. If the trier of fact finds that the conduct of the defendant was committed knowingly, the consumer may also recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of economic damages; or if the trier of fact finds the conduct was committed intentionally, the consumer may recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of damages for mental anguish and economic damages;

Obviously, given the types of damages provided in Section 17.50(b), plenty of demand letters and Petitions contain allegations that the DTPA has been violated. In fact, it seems like many lawyers use the same "boilerplate" language to implicate the statute's Draconian damages provisions or otherwise make a standard tort or contract case "fit" within the scope of the DTPA.

In our San Antonio real estate law practice, we frequently defend and prosecute real estate professionals who have allegedly violated ethical or legal standards. In those instances where our client is a real estate broker or salesperson in a suit or claim advanced against them, we limit the scope of a Plaintiff's claim by forcing that Plaintiff to demonstrate that he or she is entitled (based on the law and/or facts) to pursue each of the causes of action brought against our client. Where the DTPA is concerned, a Plaintiff is usually limited by Section 17.49(i), of the DTPA, which provides:

(i) Nothing in this subchapter shall apply to a claim against a person licensed as a broker or salesperson under Chapter 1101, Occupations Code, arising from an act or omission by the person while acting as a broker or salesperson. This exemption does not apply to:

(1) an express misrepresentation of a material fact that cannot be characterized as advice, judgment, or opinion;

(2) a failure to disclose information in violation of Section 17.46(b)(24); or

(3) an unconscionable action or course of action that cannot be characterized as advice, judgment, or opinion.

This section serves to exempt from the DTPA virtually all activities of a real estate professional who renders advice, exercises judgment, or offers and opinion the course and scope of his or her activities as a broker or salesperson. Notably, this exemption does not apply where the real estate professional engages in intentional or other unconscionable behaviors or actual fraud. Likewise, a real estate professional who acts as a principal may not be exempted.

Real Estate Commission Disputes Frequently Turn on Sufficiency of Written Agreements

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

As a real estate lawyer in San Antonio, Texas who frequently represents Buyers, Sellers, Brokers and Agents involved in real estate transactions, disputes over commissions are commonly encountered in my practice.  Almost always, the outcome of these commission disputes turn on the existence and sufficiency of a written agreement for the payment (or split) of commissions.

Perhaps the most unfortunate of commission dispute cases arise when a broker or agent has, on behalf of a Seller, located and secured a Buyer who closes (i.e. the Broker is the "procuring cause" of the sale) but that broker has never entered into a formal, written commission agreement with the Seller. In those cases, the Seller has willingly accepted, and benefitted from the broker's services; yet, despite this performance, the Seller refuses to pay a commission based upon the absence (or deficiency) of a written agreement. These cases are unfortunate because the unappreciative Seller very likely might get away without paying the broker for his services.

Chapter 1101 of the Texas Occupations Code (the "RELA") speaks directly to the enforceability of commission agreements, and mandates that a "person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document." Tex. Occ. Code Ann. § 1101.806(c). To comply with this provision, the memorandum or agreement must: 

"(1) be in writing and must be signed by the person to be charged with the commission; 

(2) promise that a definite commission will be paid, or must refer to a written commission schedule; (3) state the name of the broker to whom the commission is to be paid; and 

(4) either itself or by reference to some other existing writing, identify with reasonable certainty the land to be conveyed."

Lathem v. Kruse, 290 S.W.3d 922, 925 (Tex. App.-Dallas 2009, no pet.). Moreover, the Texas Supreme Court has cautioned that the statutory requirements are "clear and unequivocal" and that courts should construe them strictly. Trammel Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 636-37 (Tex. 1997) (construing predecessor statute that was nearly identically worded and warning that if broker proceeds without written agreements, he "does so at his or her own peril"). 

San Antonio's Fourth Court of Appeals has been even more succinct in its interpretation:  "Strict compliance with RELA is required; the agreement to pay a real estate commission must be in writing or it is not enforceable." Brice v. Eastin, 691 S.W.2d 54, 57 (Tex.App.-San Antonio 1985, no writ). But a writing, alone, is generally not sufficient if such writing fails to meet ALL of the RELA's criteria. 

When RELA applies and its requirements are not met, courts have also denied recovery under other, related causes of action, including fraud, conspiracy, deceit, quantum meruit, and breach of contract. McKellar v. Marsac, 778 S.W.2d 573, 575 (Tex.App.-Houston [1st Dist.] 1989, no writ). 

When RELA applies and its requirements are not met, courts have denied recovery for companion claims for fraud, conspiracy, deceit, quantum meruit, and breach of contract. McKellar v. Marsac, 778 S.W.2d 573, 575 (Tex.App.-Houston [1st Dist.] 1989, no writ). Similarly, in Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 634 (Tex.1997) a broker's claim against lessors for tortious interference with an exclusive representation agreement with lessees, was rejected as "wholly derivative of [broker's] unenforceable oral commission agreement" and "translates only into the loss of the expectancy of receiving a commission at the end of the lease negotiations"). A broker "cannot do indirectly what the law says he cannot do directly." 

However, some exceptions have been recognized, but only where a signed, written commission agreement exists and contains only minimal defects.  For example, the Dallas Court of Appeals applied the "partial performance doctrine" in a RELA statute of frauds case where the broker's written commission agreement lacked only a precise identification of the property. After reviewing the "well-recognized" partial performance exception to the general statute of frauds, that Court observed, "When one party fully performs a contract, the Statute of Frauds may be unavailable to the other party if he knowingly accepts the benefits and partly performs." Id. at 40. However, the Court was careful to limit its decision to the holding that under the doctrine of partial performance a written real estate commission agreement that failed to describe the property with precision may be enforced by the broker notwithstanding RELA's statute of frauds when: (1) the broker has fully performed; (2) the other party has knowingly accepted the broker's services by completing the transaction arranged by the broker and receiving benefits from that transaction; (3) the other party has acknowledged in writing his obligation for a commission; and (4) documentary evidence establishes the amount of the commission due. Id. at 41-42; see Collins v. Beste, 840 S.W.2d 788, 792 (Tex.App.-Fort Worth 1992, writ denied). 

These exceptions are not universally recognized. See Harkinson, 944 S.W.2d at 636 ("We consistently have refused to erode [RELA's statute of fraud provision] with the same exceptions as may render oral contracts within the general statute of frauds enforceable."); Boyert v. Tauber, 834 S.W.2d 60, 63-64 (Tex.1992) ("Allowing a broker to recover on the ground of his performance alone would permit enforcement of any commission agreement fully performed by the broker whether or not it complies with [RELA].")

Commission disputes can be (and usually are) highly emotional and  volatile. The outcome of these disputes can be decided on subtle nuances in written documents. 

When confronted with a dispute over who should be paid a commission, and in what amount, a Seller, Buyer, Broker and/or Agent would be well advised to contact a real estate lawyer who is experienced with the RELA, the statutes of fraud, and general real estate litigation.

Texas Real Estate Commission to Make Changes to Promulgated Forms

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

The TREC has been busy. They have proposed (and published for public comment) numerous changes to their forms, including those related to Professional Agreements and Contracts.  In total, TREC has proposed to adopt six revised contract forms, two revised addenda, and one new addendum for use by Texas real estate licensees. Once adopted, these changes will appear in Chapter 537 of Title 22 of the Texas Administrative Code.

The Comment Deadline is OCTOBER 1, 2013.

Here are some of the more important proposed changes:

Standard Contract Form TREC No. 20-11, One to Four Family Residential Contract (Resale). The proposed amendments are as follows. 

The definition of “Property” is moved from the end of Paragraph 2 to the beginning of the paragraph. 

Paragraph 6.A.(8) is amended to provide that, at buyers’ expense, the exception shall be amended to read “shortages in area” unless the buyer instructs the title company otherwise. The third sentence in 

Paragraph 6.B regarding delivery of Commitment and Exception Documents is amended to read “...the time for delivery will be automatically extended up to 15 days or 3 days before the Closing Date, whichever is earlier” to foreclose the delivery of such documents at closing. 

Paragraph 7.D is amended to define “As Is” as “the present condition of the Property with any and all defects and without warranty except for the warranties of title and the warranties in this contract.” The notice after paragraph 7.D is moved to the body of the paragraph after the definition of “As Is” and the defined term “As Is” is added to that sentence and subparagraphs (1) and (2) to replace “in its present condition.” The parenthetical at the end of paragraph 7.D is changed to add “and treatments” at the end of the sentence. 

The second sentence in Paragraph 7.F is amended to clarify that, if no license is required by law to perform a repair or treatment, all repairs and treatments must be performed by persons “who

are commercially engaged in the trade of providing such repairs or treatments” rather than “authorized by law to provide such repairs or treatments.” Paragraph 7.F is amended to change the number of days in the last sentence from 15 to 5 days regarding the Buyer’s option to extent the Closing Date if Seller fails to complete agreed repairs and treatments prior to closing. Paragraph 9 is amended by adding a new 

Paragraph 9.B regarding leases wherein the Seller (1) agrees not to execute any lease or convey any interest in the Property after the effective date without the Buyer’s written consent, and (2) incorporates existing Paragraph 9.B(5) and renumbers existing Paragraph 9B to 9C to contain 9B(1)-(4). 

Paragraph 14 is amended to add the clause “or cause to be restored” in the first sentence. Paragraph 16 is amended to remove the mediation check boxes to require mediation to resolve disputes between Buyer and Seller related to the contract. Paragraph 23 is amended to provide that the Seller or Listing Broker must receive the option fee within 3 days after the effective date of the contract rather than Buyer paying Seller the option fee within two days after the effective date of the contract to make it clear that it is not enough that the Buyer puts the option fee in the mail within 2 days after the effective date; the Seller or Listing Broker must receive the option fee within 3 days after the effective date. The last page is amended to clarify that the agents should not sign on the blank lines, they should insert their names only.

Standard Contract Form TREC No. 9- 10, Unimproved Property Contract. The proposed revisions are the same as those proposed for TREC Form No. 20-9 except as follows. 

The definition of “Property” in Paragraph 2 is not changed. 

Paragraph 7.E(1) is amended to be the same as Paragraph 7.H(1) in Form 25-10, Farm and Ranch Contract. 

Paragraph 7.E(3) regarding environmental hazards is amended to change “any environmental hazards or conditions affecting” to “any environmental hazards that materially and adversely affect” the property.

A complete list of the proposed changes is available from TREC on their "Forms" page.