Proposed Changes to the TREC Forms

The Commission has proposed changes to the following forms recommended by the Broker Lawyer Committee:

TREC Form No. 9-12 Unimproved Property Contract

TREC Form No. 20-13 One to Four Family Residential Contract (Resale)

TREC Form No. 23-14 New Home Contract (Incomplete Construction)

TREC Form No. 24-14 New Home Contract (Complete Construction)

TREC Form No. 25-11 Farm and Ranch Contract

TREC Form No. 26-7 Seller Financing Addendum

TREC Form No. 30-12 Residential Condominium Contract (Resale)

TREC Form No. 32-4 Condominium Resale Certificate

TREC Form No. 38-5 Notice of Buyer’s Termination of Contract

TREC Form No. 39-8 Amendment to Contract

TREC Form No. 40-7 Third Party Financing Addendum

OP-H, Seller’s Disclosure of Property Condition

Redline versions of the proposed forms can be found under recently proposed rules. Comments on the proposals should be sent to general.counsel@trec.texas.gov before October 4th so that they can be considered by the Broker Lawyer Committee at their October 7th meeting.

Contract Changes Highlights

The noted changes apply to all contract forms unless specified otherwise. Paragraph numbers referenced are from the One to Four Family Residential Contract (Resale). Paragraph 3, Sales Price, now references all of the financing addenda previously contained in paragraph 4 of the old versions. The Third Party Financing Addendum is completely rewritten and addresses both credit approval and property approval by the lender. Reverse mortgage loans are also addressed in this addendum so form OP-N, Reverse Mortgage Financing Addendum is repealed. A new paragraph 4 is added regarding license holder disclosure. This paragraph is where a license holder will disclose that he or she is a party to the transaction or related to a party that requires disclosure under the law. A new paragraph 6E(10), Title Notices, Notice of Water Fluctuations, is added to add new statutory notice requirement regarding the fluctuation of the level of certain impoundments of water that adjoin a property. Paragraph 7A, Property Condition, Access, Inspections and Utilities, is amended to add a provision that hydrostatic testing must be authorized by the seller in writing. Paragraph 9, Closing, is amended to add a provision allowing a ten-day extension of closing if the buyer’s lender is required to provide additional disclosures mandated by the TILA-RESPA Integrated Disclosure Rule. Paragraph 9B(5) is amended to conform the language with a statutory change to the property code, noting that the buyer has to acknowledge to a tenant the buyer has acquired the property and is responsible for the return of the security deposit. Paragraph 14, Casualty Loss, is amended to make it clear that an insurance company must permit insurance proceeds to be assigned to the buyer before the buyer can use this option after a casualty. Paragraph 18D, Escrow Damages, is amended to take out the treble damages provision based on recent case law. Paragraph 23, Termination Option is amended to require a 5 p.m. local time deadline for delivery of all notices under the paragraph. License numbers are added to the Broker Information Section to facilitate compliance with the TILA-RESPA Integrated Disclosure Rule Paragraph 13, Prorations and Rollback Taxes, in the Farm and Ranch and Unimproved Property Contract forms, is amended to provide that assessments imposed due to the seller’s use or change in use of the property are the seller’s responsibility. A new Paragraph 2D to the Condominium Contract Form is added to address situations where condominium documents reveal the existence of a right of first refusal after the parties entered into a contract. The Condominium Resale Certificate is amended to conform to new statutory disclosure requirements. (This was also adopted by emergency since the new statutory requirements are effective September 1, 2015.)