© 2015 OnCourse Learning Texas Real Estate Brokerage and Law of Agency, 6 th Edition

Practicing Law and Real Estate Brokerage © 2015 OnCourse Learning Chapter 8

Real Estate Involves Contract Law A licensee uses and/or must be familiar with escrow and listing agreements, sales contracts and contracts for deed, leases, options, and wills. One of the oldest controversies is the disagreement between attorneys and real estate licensees – particularly in the area of writing contracts. © 2015 OnCourse Learning

The History of and Need for Promulgated Forms In 1972 TREC requested the Attorney General’s opinion – Commission could sanction use of a form if “duly promulgated by the Commission,” could be used by licensees – drawing up or supplying any contract form might “reasonably be deemed suspect and possibly [be] in violation of” the TRELA © 2015 OnCourse Learning

The Texas Real Estate Broker-Lawyer Committee 13 members – six appointed by State Bar of Texas – six appointed by TREC – one consumer member appointed by the Governor. Has the job of drafting and revising uniform contracts and other forms, such as mediation agreements and addendums © 2015 OnCourse Learning

Broker-Lawyer Committee A contract promulgated must be used – unless an attorney draws up a contract or the parties insist on using another form A licensee may not make any changes to the contract except for business details and statements of fact – These changes must be at the direction of the buyer and/or the seller and initialed by them © 2015 OnCourse Learning

Required Forms Contract forms that bind the sale, exchange, option, lease, or rental of any interest in real property does not constitute unauthorized or illegal practice of law provided: – the forms have been promulgated for that particular kind of transaction involved – the forms have been prepared by an attorney – the forms have been prepared by the owner © 2015 OnCourse Learning

Required Forms TREC adopts rules and regulations requiring licensees to use contract forms that have been prepared by the Broker–Lawyer Committee The Commission may suspend or revoke a license when it has determined that the licensee failed to use a contract form required by the Commission © 2015 OnCourse Learning

Required Forms Exceptions when requiring TREC promulgated forms: – transactions in which the licensee is functioning solely as a principal, not as an agent – transactions in which an agency of the U.S. government requires a different form to be used – when using forms made available by TREC for trial use. TREC Rules and Regulations, Sec (b) © 2015 OnCourse Learning

Licensees as Legal Advisers Licensee is limited to filling in the blanks of the form – may not add to or strike matter from such forms, except to add factual statements and business details desired by the principals – and shall strike only such matter as is desired by the principals and as is necessary to conform the instrument to the intent of the principals © 2015 OnCourse Learning

Lawyers as Real Estate Brokers An attorney at law is not required to have a real estate license to negotiate a transaction – However, unless a lawyer is a real estate licensee they cannot employ salespeople Possible Conflicts of Interest: - Can a lawyer look after the best interest of the client when he stands to lose a substantial commission if the deal does not close? © 2015 OnCourse Learning

Lawyers and Commissions Licensees may not split fees with anyone not having a real estate license in Texas This includes attorneys who are not licensed. © 2015 OnCourse Learning