Chapter 531 Canons of Professional Ethics and Conduct

§531.1 Definitions

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.
1. Commission–The Texas Real Estate Commission.
2. License Holder–A real estate broker or sales agent licensed under Chapter 1101, Texas Occupations Code.

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§531.2 Fidelity

A license holder, while acting as an agent for another, is a fiduciary. Special obligations are imposed when such fiduciary relationships are created. They demand:
1. that the primary duty of the license holder is to represent the interests of the client, and the license holder's position, in this respect, should be clear to all parties concerned in a real estate transaction; that, however, the license holder, in performing duties to the client, shall treat other parties to a transaction fairly;
2. that the license holder be faithful and observant to trust placed in the license holder, and be scrupulous and meticulous in performing the license holder's functions; and
3. that the license holder place no personal interest above that of the client.

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§531.3 Integrity

A license holder has a special obligation to exercise integrity in the discharge of the license holder's responsibilities, including employment of prudence and caution so as to avoid misrepresentation, in any way, by acts of commission or omission.

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§531.4 Competency

It is the obligation of a license holder to be knowledgeable and competent as a real estate brokerage practitioner. The license holder must:
1. be informed on local market issues and conditions affecting real estate in the geographic area where a license holder provides services to a client;
2. be informed on national, state, and local issues and developments in the real estate industry;
3. exercise judgment and skill in the performance of brokerage activities; and
4. be educated in the characteristics involved in the specific type of real estate being brokered for others.

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§531.18 Consumer Information

1. The Commission adopts by reference the Consumer Protection Notice, TREC No. CN 1-5. This document is published by and available from the Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188, www.trec.texas.gov.
2. Each license holder shall provide the notice adopted under subsection (a) by:
   1. displaying it in a readily noticeable location in each place of business the broker maintains; and
   2. providing a link to it in a readily noticeable place on the homepage of each business website, labeled:
      1. "Texas Real Estate Commission Consumer Protection Notice", in at least 10 point font; or
      2. "TREC Consumer Protection Notice", in at least 12 point font.
3. For purposes of this section, business website means a website on the internet that:
   1. is accessible to the public;
   2. contains information about a license holder's real estate brokerage services; and
   3. the content of the website is controlled by the license holder.
4. For purposes of providing the link required under subsection (b)(2) on a social media platform, the link may be located on:
   1. the account holder profile; or
   2. a separate page or website through a direct link from the social media platform or account holder profile.

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§531.19 Discriminatory Practices

1. No license holder shall inquire about, respond to or facilitate inquiries about, or make a disclosure of an owner, previous or current occupant, potential purchaser, lessor, or potential lessee of real property which indicates or is intended to indicate any preference, limitation, or discrimination based on the following:
   1. race;
   2. color;
   3. religion;
   4. sex;
   5. national origin;
   6. ancestry;
   7. familial status; or
   8. disability.
2. For the purpose of this section, disability includes AIDS, HIV-related illnesses, or HIV infection as defined by the Centers for Disease Control of the United States Public Health Service.

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§531.20 Information About Brokerage Services

1. The Commission adopts by reference the Information About Brokerage Services Notice, TREC No. IABS 1-0 (IABS Notice). The IABS Notice is published by and available from the Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188, www.trec.texas.gov.
2. Each license holder shall provide:
   1. a link to a completed IABS Notice in a readily noticeable place on the homepage of each business website, labeled:
      1. "Texas Real Estate Commission Information About Brokerage Services", in at least 10 point font; or
      2. "TREC Information About Brokerage Services", in at least 12 point font; and
   2. the completed IABS Notice at the first substantive communication as required under §1101.558, Texas Occupations Code.
3. For purposes of §1101.558, Texas Occupations Code, the completed IABS Notice can be provided:
   1. by personal delivery by the license holder;
   2. by first class mail or overnight common carrier delivery service;
   3. in the body of an email; or
   4. as an attachment to an email, or a link within the body of an email, with a specific reference to the IABS Notice in the body of the email.
4. The link to a completed IABS Notice may not be in a footnote or signature block in an email.
5. For purposes of this section, business website means a website on the internet that:
   1. is accessible to the public;
   2. contains information about a license holder's real estate brokerage services; and
   3. the content of the website is controlled by the license holder.
6. For purposes of providing the link required under subsection (b)(1) on a social media platform, the link may be located on:
   1. the account holder profile; or
   2. a separate page or website through a direct link from the social media platform or account holder profile.
7. License holders may reproduce the IABS Notice published by the Commission, provided that the text of the IABS Notice is copied verbatim and the spacing, borders and placement of text on the page must appear to be identical to that in the published version of the IABS Notice, except that the Broker Contact Information section may be prefilled.

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Chapter 533 Practice and Procedure

Subchapter A Definitions

§533.1 Definitions

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.
1. ADR–Alternative dispute resolution.
2. ADR Procedures–Alternatives to judicial forums or administrative agency contested case proceedings for the voluntary settlement of contested matters through the facilitation of an impartial third-party.
3. APA–The Administrative Procedure Act (Texas Government Code, Chapter 2001).
4. Applicant–Any person seeking a license, certificate, registration, approval, or permit from the Commission.
5. Commission–The Texas Real Estate Commission.
6. Complainant–Any person who has filed a complaint with the Commission against any person whose activities are subject to the jurisdiction of the Commission.
7. Contested case or proceeding–A proceeding in which the legal rights, duties, or privileges of a party are to be determined by the Commission and/or the Executive Director after an opportunity for adjudicative hearing.
8. Executive Director–The Executive Director of the Texas Real Estate Commission.
9. License–The whole or part of any registration, license, certificate, approval, permit, or similar form of permission required or permitted by law issued by the Commission.
10. Mailing Address–The mailing address as provided to the Commission by a license holder and maintained as required by the Commission's rules or as provided to the Commission by an applicant or as shown in the Commission's records for a respondent who is not a license holder. The mailing address for a respondent that holds an active sales agent license shall be the mailing address of the sales agent's sponsoring broker as shown in the Commission's records.
11. Party–A person admitted to participate in a case before the Commission or the Executive Director.
12. Person–Any individual, partnership, corporation, or other legal entity, including a state agency or governmental subdivision.
13. Pleading–A written document submitted by a party, or a person seeking to participate in a case as a party, which requests procedural or substantive relief, makes claims, alleges facts, makes legal arguments, or otherwise addresses matters involved in the case.
14. Respondent–Any person, licensed or unlicensed, who has been charged with violating a law that establishes a regulatory program administered by the Commission or a rule or order issued by the Commission.
15. Sanctions–Any administrative penalty, disciplinary or remedial action imposed by the Commission for violations of Texas Occupations Code, Chapter 1101, 1102, or 1105 or the Rules adopted by the Commission pursuant to those chapters.
16. SOAH–State Office of Administrative Hearings.
17. TAC–Texas Administrative Code.

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Subchapter B General Provisions Relating to Practice and Procedure

§533.2 Purpose and Scope

This subchapter provides for an efficient and uniform system of practice and procedure before the Commission. This subchapter governs the institution, conduct, and determination of adjudicative proceedings required or permitted by law, whether instituted by the Commission or by the filing of an application, claim, complaint, or any other pleading. This subchapter does not enlarge, diminish, modify, or otherwise alter the jurisdiction, powers, or authority of the Commission, the Executive Director, or the substantive rights of any person or agency.

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§533.3 Filing and Notice

1. If the Commission denies an application for a license, the Commission shall send the applicant written notice of the denial. An applicant may accept the denial or make a written request for a hearing on that denial. If an applicant fails to request a hearing in writing not later than the 30th day after the date the notice denying an application is sent, the Commission's denial is final.
2. When an application is denied by the Commission, no subsequent application will be accepted from the applicant until two years after the date of the Commission's written notice of denial under subsection (a) of this section.
3. If after investigation of a possible violation and the facts surrounding that possible violation the Commission determines that a violation has occurred, the Commission may issue a written Notice of Alleged Violation to the respondent. The Commission shall provide notice in accordance with the APA.
4. Not later than the 30th day after the date on which the Notice of Alleged Violation is sent, the respondent may:
   1. accept the determination of the Commission, including sanctions recommended by the Commission; or
   2. make a written request for a hearing on that determination.
5. Upon receipt of a written request for hearing, the Commission shall submit a request to docket case to SOAH accompanied by copies of relevant documents giving rise to a contested case.
6. When the Commission submits a request to docket case with SOAH, SOAH acquires jurisdiction over a contested case until SOAH issues final amendments or corrections to the Proposal for Decision. In case of a conflict with the Commission's rules, SOAH's rules control while SOAH has jurisdiction.
7. Pleadings, other documents, and service to SOAH shall be filed in accordance with SOAH's rules.
8. If a sales agent is a respondent, the Commission will notify the sales agent's sponsoring broker of the hearing. If an apprentice inspector or real estate inspector is a respondent, the Commission will notify the sponsoring professional inspector of the hearing. Notice under this subsection need not be provided by certified or registered mail.
9. Any document served upon a party is prima facie evidence of receipt, if it is directed to the party's mailing address or email address. This presumption is rebuttable. Failure to claim properly addressed certified or registered mail will not support a finding of nondelivery.

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§533.4 Failure to Answer, Failure to Attend Hearing and Default

1. If, not later than the 30th day after the date a Notice of Alleged Violation is sent, the respondent fails to accept the Commission's determination and recommended sanctions, or fails to make a written request for a hearing on the determination, the Commission shall enter a default order against the respondent, incorporating the findings of fact and conclusions of law in the Notice of Alleged Violation, which shall be deemed admitted.
2. The Commission may delegate to the Executive Director the Commission's authority to act under Texas Occupations Code, §1101.704(b) and subsection (a) of this section.
3. SOAH rules relating to Default Proceedings and Dismissal Proceedings apply when a respondent or applicant fails to appear on the day and time set for administrative hearing. In that case, the Commission's staff may move either for dismissal of the case from SOAH's docket or for the issuance of a default Proposal for Decision by the administrative law judge. If the administrative law judge issues an order dismissing the case from the SOAH docket or issues a default Proposal for Decision, the factual allegations against the respondent or applicant filed at SOAH are admitted and the Commission shall enter a default order against the respondent or applicant as set out in the Notice of Hearing sent to the respondent or applicant. No additional proof is required to be submitted to the Commission before the Commission enters the final order.

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§533.5 Transcript Cost; Interpreters and Translators

1. Cost of a transcript of a SOAH proceeding ordered by a party is paid by that party. Cost of a transcript of a SOAH proceeding ordered by the administrative law judge is split equally between the parties.
2. A party or witness who needs an interpreter or translator is responsible for making the request under SOAH rules.

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§533.6 Filing of Exceptions and Replies

1. Any party of record who is adversely affected by the Proposal for Decision of the administrative law judge may file exceptions to the Proposal for Decision in accordance with SOAH's rules.
2. Exceptions and replies are filed with SOAH with a copy served on the opposing party. The Proposal for Decision may be amended by the administrative law judge pursuant to the exceptions and replies submitted by the parties.

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§533.7 Final Decisions and Orders

1. After a Proposal for Decision has been issued by an administrative law judge, the Commission will render the final decision in a contested case or remand the proceeding for further consideration by the administrative law judge. The Commission is responsible for imposing disciplinary action and/or assessing administrative penalties against respondents who are found to have violated any of the Commission's statutes or rules. The Commission welcomes recommendations of administrative law judges as to the sanctions to be imposed, but the Commission is not required to give presumptively binding effect to the administrative law judges' recommendations and is not bound by such recommendations.
2. If the Commission remands the case to the administrative law judge, the Commission may direct that further consideration be accomplished with or without reopening the hearing and may limit the issues to be considered. If, on remand, additional evidence is admitted that results in a substantial revision of the Proposal for Decision, or the underlying facts, the administrative law judge shall prepare an amended or supplemental Proposal for Decision and this subchapter applies. Exceptions and replies are limited to items contained in the supplemental Proposal for Decision.
3. The Proposal for Decision may be acted on by the Commission after the administrative law judge has ruled on any exceptions or replies to exceptions or on the day following the day exceptions or replies to exceptions were due if no such exceptions or replies were filed.
4. Any party may request oral argument before the Commission before the final disposition of the contested case. An oral argument is conducted in accordance with paragraphs (1) - (5) of this subsection.
   1. The chairperson or the Commission member designated by the chairperson to preside (the presiding member) shall announce the case. Upon the request of any party, the presiding member may conduct a prehearing conference with the parties and their attorneys of record. The presiding member may announce reasonable time limits for any oral arguments presented by the parties.
   2. The hearing on the Proposal for Decision is limited to the record. New evidence may not be presented on the substance of the case unless the party submitting the evidence establishes that the new evidence was not reasonably available at the time of the original hearing or the party offering the evidence was misled by a party regarding the necessity for offering the evidence at the original hearing.
   3. In presenting an oral argument, the party bearing the burden of proof opens and closes. The party responding may offer a rebuttal argument. A party may request an opportunity for additional rebuttal subject to the discretion of the presiding member.
   4. After being recognized by the presiding member, the members of the Commission may ask questions of the parties. If a party is represented by counsel, the Commission must direct the questions to the party's attorney. Questions must be limited to the record and to the arguments made by the parties.
   5. Upon the conclusion of oral arguments, questions by the members of the Commission, and any discussion by the members of the Commission, the presiding member shall call for a motion regarding disposition of the contested case. The presiding member may vote on the motion. A motion is granted only if a majority of the members present and voting vote in favor of the motion. In the event of a tie vote, the presiding member shall announce that the motion is overruled.
5. It is the policy of the Commission to change a finding of fact or conclusion of law in a Proposal for Decision of an administrative law judge when the Commission determines:
   1. that the administrative law judge did not properly apply or interpret applicable law, agency rules, written policies provided by staff, or prior administrative decisions;
   2. that a prior administrative decision on which the administrative law judge relied is incorrect or should be changed; or
   3. that a technical error in a finding of fact should be changed.
6. If the Commission modifies, amends, or changes a finding of fact or conclusion of law in a Proposal for Decision, the order shall reflect the Commission's changes and state the specific reason and legal basis for the changes. If the Commission does not follow the recommended sanctions in a Proposal for Decision, the order shall explain why the Commission chose not to follow the recommendation.
7. Final orders on contested cases shall be in writing and signed by the presiding officer of the Commission. Final orders shall include findings of fact and conclusions of law separately stated from disciplinary actions imposed and administrative penalties assessed. Parties will be notified and given a copy of the decision as provided by the APA. A decision is final as provided by the APA.
8. If the Commission or the Executive Director finds that an imminent peril to the public health, safety, or welfare requires immediate effect of a final decision or order, that finding shall be recited in the decision or order as well as the fact that the decision or order is final and effective on the date signed. The decision or order is then final and appealable on the date signed and a motion for rehearing is not required as a prerequisite for appeal.
9. Conflict of Interest. A Commission member shall recuse themselves from all deliberations and votes regarding any matter:
   1. the member reviewed during an informal proceeding pursuant to §533.25 of this chapter;
   2. involving persons or transactions about which the member has a conflict of interest; or
   3. involving persons or transactions related to the member such that it creates the appearance of a conflict of interest.

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§533.8 Motions for Rehearing

1. The timely filing of a motion for rehearing is a prerequisite to appeal. The motion must be filed with the Commission by:
   1. delivering the motion in-person to the Commission's headquarters;
   2. sending the motion via email to administration@trec.texas.gov; or
   3. sending the motion via fax to (512) 936-3788, ATTN: TREC General Counsel.
2. Motions for rehearing are controlled by the APA, §§2001.145 - 2001.147 and this section.
3. A motion for rehearing shall set forth the particular finding of fact, conclusion of law, ruling, or other action which the complaining party asserts caused substantial injustice to the party and was in error, such as violation of a constitutional or statutory provision, lack of authority, unlawful procedure, lack of substantial evidence, abuse of discretion, other error of law, or other good cause specifically described in the motion. In the absence of specific grounds in the motion, the Commission will take no action and the motion will be overruled by operation of law.
4. The Commission delegates authority to hear and rule on motions for rehearing to the Commission's Enforcement Committee, consisting of three Commission members appointed by the Commission chair. A motion for rehearing may be ruled upon pursuant to §2001.146(d), Texas Government Code.
5. Any party may request oral arguments before the Enforcement Committee prior to the final disposition of the motion for rehearing. If the Enforcement Committee grants a request for oral argument, oral arguments will be conducted in accordance with paragraphs (1) - (5) of this subsection.
   1. The chair of the Enforcement Committee or the member designated by the chair to preside (the presiding member) shall announce the case. Upon the request of any party, the presiding member may conduct a prehearing conference with the parties and their attorneys of record. The presiding member may announce reasonable time limits for any oral arguments to be presented by the parties.
   2. The hearing on the motion shall be limited to a consideration of the grounds set forth in the motion. Testimony by affidavit or documentary evidence, such as excerpts of the record before the presiding officer, may be offered in support of, or in opposition to, the motion; provided, however, a party offering affidavit testimony or documentary evidence must provide the other party with copies of the affidavits or documents at the time the motion is filed. New evidence may not be presented on the substance of the case unless the party submitting the evidence can establish that the new evidence was not reasonably available at the time of the original hearing, or the party offering the evidence was misled by a party regarding the necessity for offering the evidence at the original hearing.
   3. In presenting oral arguments, the party filing the motion will have the burden of proof and persuasion and shall open and close. The party responding to the motion may offer rebuttal arguments. Parties may request an opportunity for additional rebuttal, subject to the discretion of the presiding member.
   4. After being recognized by the presiding member, the members of the Enforcement Committee may ask questions of the parties. If a party is represented by counsel, the questions must be directed to the party's attorney. Questions must be limited to the grounds asserted for the motion to be granted and to the arguments made by the parties.
   5. Upon the conclusion of oral arguments, questions by the members of the Enforcement Committee, and any discussion by the members of the Enforcement Committee, the presiding member shall call for a vote on the motion. A member of the Enforcement Committee need not make a separate motion or second a motion filed by a party. The presiding member may vote on the motion. A motion may be granted only if a majority of the Enforcement Committee members are present and vote in favor of the motion. In the event of a tie vote, the presiding member shall announce that the motion is overruled.
6. A petition for judicial review must be filed in a District Court of Travis County Texas as provided by the APA. A party filing a petition for judicial review must also comply with the requirements of Texas Occupations Code, §1101.707.
7. A party who appeals a final decision in a contested case must pay all costs for the preparation of the original or a certified copy of the record of the agency proceeding that is required to be transmitted to the reviewing court.
8. If, after judicial review, the administrative penalty is reduced or not assessed, the Executive Director shall remit to the person charged the appropriate amount, plus accrued interest if the administrative penalty has been paid, or shall execute a release of the bond if a supersedeas bond has been posted. The accrued interest on amounts remitted by the Executive Director under this subsection shall be paid at a rate equal to the rate charged on loans to depository institutions by the New York Federal Reserve Bank, and shall be paid for the period beginning on the date that the assessed administrative penalty is paid to the Commission and ending on the date the administrative penalty is remitted.

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§533.9 Computation of Time

In computing any period of time prescribed or allowed by this Chapter, the day of the act, event, or default after which the designated period of time begins to run is not included. The last day of the period so computed is to be included, unless it is a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day that is not a Saturday, Sunday, or legal holiday.

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§533.10 Hearing: Subpoenas and Fees

1. In addition to APA §2001.089, process may be served by an employee of the Commission if that person is designated by the Commission.
2. A witness or deponent who is not a party and who is subpoenaed or otherwise compelled to attend any hearing or proceeding to give a deposition or to produce books, records, papers, or other objects that may be necessary and proper for the purposes of the proceeding is entitled to receive mileage of $.20 a mile for going to and returning from the place of the hearing or where the deposition is taken, if the place is more than 25 miles from the person's place of residence and a fee of $20 a day for each day or part of a day the person is necessarily present as a witness or deponent.
3. Pursuant to APA §2001.089, a party who requests the issuance of a subpoena for a witness or deponent under subsection (b) of this section, must deposit an amount with the Commission that will reasonably ensure payment of the amounts estimated to accrue under subsection (b) of this section and APA §2001.103.
4. Pursuant to APA §2001.177, a party seeking judicial review of a final decision of the Commission in a contested case shall pay all costs of preparing the original or certified copy of a record of the contested case proceedings.

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Subchapter C Alternative Dispute Resolution

§533.20 ADR Policy

It is the Commission's policy to encourage the fair and expeditious resolution of all contested matters through voluntary settlement procedures. The Commission is committed to working with all parties to achieve early settlement of contested matters and encourages resolution of disputes at any time.

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§533.21 Negotiated Settlement

1. Commission staff and the respondent or applicant may enter into a settlement agreement following negotiations at any time.
2. Negotiations may be conducted in person or by electronic, telephonic, or written communication.

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§533.25 Informal Proceedings

1. Informal disposition of any contested case involving a respondent may be made through an informal conference pursuant to Texas Occupations Code, §1101.660.
2. A respondent may request an informal conference; however, the decision to hold a conference shall be made by the Director of Enforcement.
3. An informal conference shall be voluntary and shall not be a prerequisite to a formal hearing.
4. An informal conference may be conducted in person or by electronic, telephonic, or written communication.
5. The Director of Enforcement or the director's designee shall decide upon the time, date, and place of the informal conference and provide written notice to the respondent. Notice shall be provided by certified mail no less than ten days prior to the date of the conference to the last known mailing address of the respondent. The ten days shall begin on the date of mailing. The respondent may waive the ten-day notice requirement.
6. A copy of the Commission's rules concerning informal conferences shall be enclosed with the notice of the informal conference. The notice shall inform the respondent of the following:
   1. that the respondent may be represented by legal counsel;
   2. that the respondent may offer documentary evidence as may be appropriate;
   3. that at least one public member of the Commission shall be present;
   4. that two staff members, including the staff attorney assigned to the case, with experience in the regulatory area that is the subject of the proceedings, shall be present;
   5. that the respondent's attendance and participation is voluntary; and
   6. that the complainant involved in the alleged violations may be present.
7. The notice of the informal conference shall be sent to the complainant at their last known mailing address. The complainant shall be informed that they may appear in person or may submit a written statement for consideration at the informal conference.
8. The conference shall be informal and need not follow the procedures established in this chapter for contested cases and formal hearings.
9. The respondent, the respondent's attorney, the Commission member, and the staff members may question the respondent or complainant, make relevant statements, present statements of persons not in attendance, and present such other evidence as may be appropriate.
10. The staff attorney assigned to the case shall attend each informal conference. The Commission member or other staff member may call upon the attorney at any time for assistance in the informal conference.
11. No formal record of the proceedings of the informal conference shall be made or maintained.
12. The complainant may be excluded from the informal conference except during the complainant's oral presentation. The respondent, the respondent's attorney, and Commission staff may remain for all portions of the informal conference, except for consultation between the Commission member and Commission staff.
13. The complainant shall not be considered a party in the informal conference but shall be given the opportunity to be heard if the complainant attends. Any written statement submitted by the complainant shall be reviewed at the conference.
14. At the conclusion of the informal conference, the Commission member or staff members may propose an informal settlement of the contested case. The proposed settlement may include administrative penalties or any disciplinary action authorized by the Act. The Commission member or staff members may also recommend that no further action be taken.
15. The respondent may either accept or reject the proposed settlement recommendations at the conference. If the proposed settlement recommendations are accepted, a proposed agreed order shall be prepared by the staff attorney and forwarded to the respondent. The order shall contain agreed findings of fact and conclusions of law. The respondent shall execute the proposed agreed order and return the executed order to the Commission not later than the 10th day after their receipt of the proposed agreed order. If the respondent fails to sign and return the executed proposed agreed order within the stated time period, the inaction shall constitute rejection of the proposed settlement recommendation.
16. If the respondent rejects the proposed settlement recommendation, the matter shall be referred to the Director of Enforcement for appropriate action.
17. If the respondent signs and accepts the proposed agreed order, it shall be signed by the staff attorney and submitted to the Executive Director for approval.
18. If the Executive Director does not approve a proposed agreed order, the respondent shall be so informed and the matter shall be referred to the Director of Enforcement for other appropriate action.
19. A license holder's opportunity for an informal conference under this subchapter shall satisfy the requirements of the APA, §2001.054(c).
20. The Commission may order a license holder to pay a refund to a consumer as provided in an agreement resulting from an informal conference instead of or in addition to imposing an administrative penalty pursuant to Texas Occupations Code, §1101.659. The amount of a refund ordered as provided in an agreement resulting from an informal settlement conference may not exceed the amount the consumer paid to the license holder for a service regulated by the Act and this title. The Commission may not require payment of other damages or estimate harm in a refund order.

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§533.30 Staff Mediation

1. Commission staff, who have received a minimum of 40 hours of formal mediation training, may mediate a resolution of a complaint between the Commission, a respondent, and a complainant upon agreement of all parties.
2. After receipt of a complaint that meets the requirements to be investigated under Texas Occupations Code, §1101.204(b), Commission staff may refer a complaint for mediation to a Commission staff mediator.
3. Mediation under this section is voluntary.
4. If an agreed resolution between the Commission, a respondent, and a complainant cannot be reached, the Commission staff mediator will not have any further involvement with the continued investigation or resolution of the complaint.

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§533.32 Appointment of Mediator

1. For each matter referred for ADR procedures, the ADR administrator shall mediate or assign another Commission mediator, unless the parties agree upon the use of another agency's mediator or private mediator. The ADR administrator may assign a substitute or additional mediator to a proceeding as the ADR administrator deems necessary.
2. A private mediator may be hired for Commission ADR procedures provided that:
   1. the parties unanimously agree to use a private mediator;
   2. the parties unanimously agree to the selection of the person to serve as the mediator; and
   3. the mediator agrees to be subject to the direction of the Commission's ADR administrator and to all time limits imposed by the administrator, statute, or regulation.
3. If a private mediator is used, the costs for the services of the mediator shall be apportioned equally among the parties, unless otherwise agreed upon by the parties, and shall be paid directly to the mediator.
4. All mediators in Commission mediation proceedings shall subscribe to the ethical guidelines for mediators adopted by the ADR Section of the State Bar of Texas.

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§533.33 Outside Mediation

1. At the discretion of the Director of Enforcement and with the consent of all parties, mediation with an outside mediator may be scheduled between the Commission and a respondent or applicant when the Commission anticipates initiation of an adverse action against a respondent or applicant or any time after initiation.
2. SOAH mediators, employees of other agencies who are mediators, and private pro bono mediators may be assigned to contested matters as needed. Each such mediator shall:
   1. have received at least 40 hours of Texas mediation training; and
   2. have some expertise in the area of the contested matter.
3. If the mediator is a SOAH judge, that person will not sit as the administrative law judge for the case if the contested matter goes to a SOAH hearing.
4. Upon unanimous motion of the parties and at the discretion of the administrative law judge, this section applies to a case referred to SOAH.
5. Respondents or applicants participating in a mediation will pay one-half of any fees incurred for the mediation directly to the Commission before mediation begins.

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§533.35 Stipulations

When the ADR procedures do not result in the full settlement of a matter, the parties in conjunction with the mediator, if applicable, may limit the contested issues through the entry of written stipulations. Such stipulations shall be forwarded or formally presented to the administrative law judge assigned to conduct the contested case hearing on the merits and shall be made part of the hearing record.

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§533.36 Agreements

All agreements between or among parties that are reached as a result of ADR must be committed to writing, signed by respondents or applicants and a Commission staff attorney, and submitted to the Commission or Executive Director for approval. Once signed by the Commission or Executive Director, the agreement will have the same force and effect as a written contract.

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§533.37 Confidentiality

1. Except as provided in subsections (c) and (d) of this section, a communication relating to the subject matter made by a participant in an ADR procedure, whether before or after the institution of formal ADR proceedings, is confidential, is not subject to disclosure, and may not be used as evidence in any further proceeding.
2. Any notes or record made of an ADR procedure are confidential, and participants, including the mediator, may not be required to testify in any proceedings relating to or arising out of the matter in dispute or be subject to process requiring disclosure of confidential information or data relating to or arising out of the matter in dispute.
3. An oral communication or written material used in or made a part of an ADR procedure is admissible or discoverable only if it is admissible or discoverable independent of the procedure.
4. If this section conflicts with other legal requirements for disclosure of communications or materials, the issue of confidentiality may be presented to the judge to determine, in camera, whether the facts, circumstances, and context of the communications or materials sought to be disclosed warrant a protective order or whether the communications or materials are subject to disclosure.
5. All communications in the mediation between parties and between each party and the mediator are confidential. No shared information will be given to the other party unless the party sharing the information explicitly gives the mediator permission to do so. Material provided to the mediator will not be provided to other parties and will not be filed or become part of the contested case record. All notes taken during the mediation conference will be destroyed at the end of the process.

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Subchapter D Negotiated Rulemaking

§533.40 Negotiated Rulemaking

1. It is the Commission's policy to employ negotiated rulemaking procedures when appropriate. When the Commission is of the opinion that proposed rules are likely to be complex, or controversial, or to affect disparate groups, negotiated rulemaking will be considered.
2. When negotiated rulemaking is to be considered, the Commission will appoint a convener to assist it in determining whether it is advisable to proceed. The convener shall have the duties described by Texas Government Code, §2008.052, and shall make a recommendation to the Executive Director to proceed or to defer negotiated rulemaking. The recommendation shall be made after the convener, at a minimum, has considered all of the items enumerated in Texas Government Code, §2008.052(c).
3. Upon the convener's recommendation to proceed, the Commission shall initiate negotiated rulemaking according to the provisions of Texas Government Code, Chapter 2008.

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Subchapter E Petition for Adoption of Rules

§533.50 Petition for Adoption of Rules

1. Any interested person, as defined by §2001.021, Government Code, may request a rule be adopted, amended, or repealed by submitting a written petition to the Commission.
2. The written petition must include:
   1. the person's full name, mailing address, telephone number, and email address;
   2. a brief summary of the proposed action and its desired effect;
   3. a justification for the proposed action set out in narrative form with sufficient particularity to inform the Commission the reasons and arguments on which the person is relying;
   4. if proposing a new rule, the text of the new rule in the exact form that is desired to be adopted; and
   5. if proposing an amendment or repeal, the specific section and text of the rule the person wants to change, with deletions crossed through and additions underlined.
3. The written petition must be submitted to the Commission by:
   1. delivering the petition in person to the Commission's headquarters;
   2. sending the petition via email to general.counsel@trec.texas.gov;
   3. sending the petition via fax to (512) 936-3788, ATTN: General Counsel; or
   4. sending the petition via mail to P.O. Box 12188, Austin, Texas, 78711, ATTN: General Counsel.
4. Not later than 60 days after the date of submission of a petition that complies with the requirements of this section, the Chair of the Commission, in consultation with Commission staff, shall review the petition and either:
   1. deny the petition in writing, stating the reasons for the denial; or
   2. initiate a rulemaking proceeding under Chapter 2001, Government Code, by directing that the petition be placed on the next agenda for discussion by:
      1. the Commission; or
      2. the appropriate advisory committee with subject matter jurisdiction.

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Chapter 534 General Administration

§534.1 Definitions

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.
1. Agency–The Texas Real Estate Commission and the Texas Appraiser Licensing and Certification Board.
2. Board–The Texas Appraiser Licensing and Certification Board.
3. Chief Financial Officer–The Chief Financial Officer of the Texas Real Estate Commission.
4. Commission–The Texas Real Estate Commission.
5. Comptroller–The Comptroller of Public Accounts.
6. DIR–The Department of Information Resources.
7. Executive Director–The Executive Director of the Texas Real Estate Commission.
8. TAC–The Texas Administrative Code.
9. TFC–The Texas Facilities Commission.

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§534.2 Charges for Copies of Public Information

1. Any charges associated with copies of public information provided by the Commission shall be based upon the current charges established by the Office of the Attorney General.
2. If the actual costs of providing copies exceed the charges established by the Office of the Attorney General, the Commission shall charge its actual costs, if approved by the Office of the Attorney General.
3. The Commission may furnish copies of public information without charge, or at a reduced charge, if the Commission determines that waiver or reduction of the charge is in the public interest. The Commission also may waive the charge if the cost of processing the collection of a charge exceeds the amount of the charge.

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§534.3 Employee Training and Education

1. The Commission may provide training and education for its employees in accordance with Subchapter C, Chapter 656, Texas Government Code.
2. The Commission may spend public funds as appropriate to pay the costs associated with employee training, including, but not limited to, salary, tuition and other fees, travel, and living expenses, training stipend, expense of training materials, and other necessary expenses of an instructor, student, or other participant in a training or education program.
3. The Executive Director shall adopt policies related to training for Commission employees, including eligibility and obligations assumed upon completion.
4. Before an employee may receive reimbursement of tuition expenses for successful completion of a training or education program offered by an accredited institution of higher education, the Executive Director must pre-approve the program and authorize the tuition reimbursement payment.
5. Approval to participate in any portion of the Commission's training and education program does not affect an employee's at-will status.
6. Participation in the training and education program does not constitute a guarantee or indication of continued employment, nor does it constitute a guarantee or indication of future employment in a current or prospective position.

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§534.4 Historically Underutilized Businesses Program

To comply with Texas Government Code §2161.003, the Commission adopts by reference the rules of the Comptroller of Public Accounts in 34 TAC Part 1, Chapter 20, Subchapter D, Division 1 (relating to the Historically Underutilized Business Program).

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§534.5 Bid Opening and Tabulation

To comply with Texas Government Code, §2156.005(d), the Commission adopts by reference the rules of the Texas Comptroller of Public Accounts in 34 TAC §20.207 (relating to Competitive Sealed Bidding).

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§534.6 Negotiation and Mediation of Certain Contract Disputes

To comply with Texas Government Code, §2260.052(c), the Commission adopts by reference the rules of the Office of the Attorney General in 1 TAC Part 3, Chapter 68 (relating to Negotiation and Mediation of Certain Contract Disputes). The rules set forth a process to permit parties to structure a negotiation or mediation in a manner that is most appropriate for a particular dispute regardless of the contract's complexity, subject matter, dollar amount, or method and time of performance.

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§534.7 Vendor Protest Procedures

1. The purpose of this section is to provide a procedure for vendors to protest purchases made by the Commission and the Board. Protests of purchases made by the TFC on behalf of the Agency are addressed in 1 TAC Chapter 111, Subchapter C (relating to Complaints and Dispute Resolution). Protests of purchases made by DIR on behalf of the Agency are addressed in 1 TAC §201.1 (relating to Procedures for Vendor Protests and the Negotiation and Mediation of Certain Contract Disputes and Bid Submission, Opening and Tabulation Procedures). Protests of purchases made by the Statewide Procurement Division of the Comptroller on behalf of the Agency are addressed in 34 TAC Chapter 20, Subchapter F, Division 3 (relating to Protests and Appeals). The rules of TFC, DIR, and the Comptroller are in the Texas Administrative Code, which is on the Internet website of the Office of the Secretary of State, Texas Register Division at: www.sos.state.tx.us/tac/index.shtml.
2. Any actual or prospective bidder, offeror, or contractor who believes they are aggrieved in connection with the solicitation, evaluation, or award of a contract may formally protest to the Agency. Such protests must be in writing and received in the office of the Chief Financial Officer within ten working days after such aggrieved person knows, or should have known, of the occurrence of the action which is protested. Formal protests must conform to the requirements set forth in subsection (c) of this section. Copies of the protest must be mailed or delivered by the protesting party to all vendors who have submitted bids or proposals for the contract involved.
3. A formal protest must be sworn and contain:
   1. a specific identification of the statutory provision(s) that the action complained of is alleged to have violated;
   2. a specific description of each act alleged to have violated the statutory provision(s) identified in paragraph (1) of this subsection;
   3. a precise statement of the relevant facts;
   4. an identification of the issue or issues to be resolved;
   5. argument and authorities in support of the protest; and
   6. a statement that copies of the protest have been mailed or delivered to other identifiable interested parties.
4. The Chief Financial Officer shall have the authority, prior to appeal to the Executive Director or the Executive Director's designee, to settle and resolve the dispute concerning the solicitation or award of a contract. The Chief Financial Officer may solicit written responses to the protest from other interested parties.
5. If the protest is not resolved by mutual agreement, the Chief Financial Officer will issue a written determination on the protest.
   1. If the Chief Financial Officer determines that no violation of rules or statutes has occurred, the Chief Financial Officer shall so inform the protesting party and interested parties by letter which sets forth the reasons for the determination.
   2. If the Chief Financial Officer determines that a violation of the rules or statutes has occurred in a case where a contract has not been awarded, the Chief Financial Officer shall so inform the protesting party and other interested parties by letter which sets forth the reasons for the determination and any appropriate remedial action.
   3. If the Chief Financial Officer determines that a violation of the rules or statutes has occurred in a case where a contract has been awarded, the Chief Financial Officer shall so inform the protesting party and other interested parties by letter which sets forth the reasons for the determination and any appropriate remedial action. Such remedial action may include, but is not limited to, declaring the purchase void, reversing the award, and re-advertising the purchase using revised specifications.
6. The Chief Financial Officer's determination on a protest may be appealed by an interested party to the Executive Director or the Executive Director's designee. An appeal of the Chief Financial Officer's determination must be in writing and must be received in the office of the Executive Director or the Executive Director's designee no later than ten working days after the date of the Chief Financial Officer's determination. The appeal shall be limited to review of the Chief Financial Officer's determination. Copies of the appeal must be mailed or delivered by the appealing party to other interested parties and must contain an affidavit that such copies have been provided.
7. The general counsel shall review the protest, the Chief Financial Officer's determination, and the appeal and prepare a written opinion with recommendation to the Executive Director or the Executive Director's designee. The Executive Director or the Executive Director's designee may, in their discretion, refer the matter to the Commission at a regularly scheduled open meeting or issue a final written determination.
8. When a protest has been appealed to the Executive Director or the Executive Director's designee under subsection (f) of this section and has been referred to the relevant Commission or Board by the Executive Director or the Executive Director's designee under subsection (g) of this section, the following requirements shall apply:
   1. Copies of the appeal, responses of interested parties, if any, and the general counsel's recommendation shall be mailed to the Commission members and interested parties. Copies of the general counsel's recommendation and responses of interested parties shall be mailed to the appealing party.
   2. All interested parties who wish to make an oral presentation at the Commission's open meeting are requested to notify the office of general counsel at least two working days in advance of the open meeting.
   3. The Commission may consider oral presentations and written documents presented by staff, the appealing party, and interested parties. The chair of the Commission shall set the order and amount of time allowed for presentations.
   4. The Commission's determination of the appeal shall be by duly adopted resolution reflected in the minutes of the open meeting and shall be final.
9. Unless good cause for delay is shown or the Executive Director or the Executive Director's designee determines that a protest or appeal raises issues significant to procurement practices or procedures, a protest or appeal that is not filed timely will not be considered.
10. In the event of a timely protest or appeal under this section, a protestor or appellant may request in writing that the Agency not proceed further with the solicitation or with the award of the contract. In support of the request, the protestor or appellant is required to show why a stay is necessary and that harm to the Agency will not result from the stay. If the Executive Director determines that it is in the interest of the Agency not to proceed with the contract, the Executive Director may make such a determination in writing and partially or fully suspend contract activity.
11. A decision issued either by the Commission in open meeting, or in writing by the Executive Director or the Executive Director's designee, shall constitute the final administrative action of the Agency.

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Chapter 535 General Provisions

Subchapter A Definitions

§535.1 Definitions

The following terms and phrases, when used in this chapter, have the following meanings unless the context clearly indicates otherwise.
1. Act–Chapter 1101, Texas Occupations Code.
2. Business entity–A domestic or foreign corporation, limited liability company, partnership or other entity authorized under the Texas Business Organizations Code to engage in real estate brokerage business in Texas and required to be licensed under the Act.
3. Chapter 1102–Chapter 1102, Texas Occupations Code.
4. Commission–The Texas Real Estate Commission.
5. Compensation–A commission, fee, or other valuable consideration for real estate brokerage services provided by a license holder under the Act.
6. Executive Director–The Executive Director of the Texas Real Estate Commission.
7. Foreign broker–A real estate broker licensed in another country, territory, or state other than Texas.
8. License–Any Commission license, registration, certificate, approval, or similar form of permission required by law.
9. License holder–A person licensed or registered by the Commission under Chapter 1101 or 1102, Texas Occupations Code.
10. Place of business–A place where the license holder meets with clients and customers to transact business.
11. Trade Association–A nonprofit voluntary member association or organization:
    1. whose membership consists primarily of persons who are licensed as real estate license holders and pay membership dues to the association or organization;
    2. that is governed by a board of directors elected by the members; and
    3. that subscribes to a written code of professional conduct or ethics.

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Subchapter B General Provisions Relating to the Requirements of Licensure

§535.2 Broker Responsibility

1. A broker is required to notify a sponsored sales agent in writing of the scope of the sales agent's authorized activities under the Act. Unless such scope is limited or revoked in writing, a broker is responsible for the authorized acts of the broker's sales agents, but the broker is not required to supervise the sales agents directly. If a broker permits a sponsored sales agent to conduct activities beyond the scope explicitly authorized by the broker, those are acts for which the broker is responsible.
2. A broker owes the highest fiduciary obligation to the principal and is obliged to convey to the principal all information known to the agent which may affect the principal's decision unless prohibited by other law.
3. A broker is responsible for the proper handling of trust funds placed with the broker and must comply with §535.146 of this chapter (relating to Maintaining Trust Money).
4. A broker is responsible for any property management activity by the broker's sponsored sales agent that requires a real estate license.
5. A broker may delegate to another license holder the responsibility to assist in administering compliance with the Act and Rules, but the broker may not relinquish overall responsibility for the supervision of license holders sponsored by the broker. Any license holder who leads, supervises, directs, or manages a team must be delegated as a supervisor. Any such delegation must be in writing. A broker shall provide the name of each delegated supervisor to the Commission on a form or through the online process approved by the Commission within 30 days of any such delegation that has lasted or is anticipated to last more than three consecutive months. The broker shall notify the Commission in the same manner within 30 days after the delegation of a supervisor has ended. In the event the delegated supervisor is a broker at the time of delegation or later becomes a broker, that broker may, in lieu of the sponsoring broker, notify the Commission in writing when the delegation ends.
6. Listings and other agreements for real estate brokerage services must be solicited and accepted in a broker's name.
7. A broker is responsible to ensure that a sponsored sales agent's advertising complies with §535.154 of this chapter (relating to Registration and Use of Alternate, Team and Assumed Business Names Used in Advertisements) and §535.155 of this chapter (relating to Advertisements).
8. Except for records destroyed by an "Act of God" such as a natural disaster or fire not intentionally caused by the broker, the broker must, at a minimum, maintain the following records in a format that is readily available to the Commission for at least four years from the date of closing, termination of the contract, or end of a real estate transaction:
   1. disclosures;
   2. commission agreements such as listing agreements, buyer representation agreements, or other written agreements relied upon to claim compensation;
   3. substantive communications with parties to the transaction;
   4. offers, contracts, and related addenda;
   5. receipts and disbursements of compensation for services subject to the Act;
   6. property management contracts;
   7. appraisals, broker price opinions, and comparative market analyses; and
   8. sponsorship agreements between the broker and sponsored sales agents.
9. A broker who sponsors sales agents or is a designated broker for a business entity shall maintain, on a current basis, written policies and procedures to ensure that:
   1. Each sponsored sales agent is advised of the scope of the sales agent's authorized activities subject to the Act and is competent to conduct such activities, including having competence in the geographic market area where the sales agent represents clients.
   2. Each sponsored sales agent maintains their license in active status at all times while they are engaging in activities subject to the Act.
   3. Any and all compensation paid to a sponsored sales agent for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker.
   4. Each sponsored sales agent is provided on a timely basis, before the effective date of the change, notice of any change to the Act, Commission rules, or Commission promulgated contract forms.
   5. In addition to completing statutory minimum continuing education requirements, each sponsored sales agent receives such additional educational instruction the broker may deem necessary to obtain and maintain, on a current basis, competency in the scope of the sponsored sales agent's practice subject to the Act. At a minimum, when a sales agent performs a type of real estate brokerage activity for the first three times, the broker must require that the sales agent receive coaching and assistance from an experienced license holder competent for that activity.
   6. Each sponsored sales agent complies with the Commission's advertising rules.
   7. All trust accounts, including but not limited to property management trust accounts, and other funds received from consumers are maintained by the broker with appropriate controls in compliance with §535.146 of this chapter.
   8. Records are properly maintained pursuant to subsection (h) of this section.
10. In addition to the requirements of §535.157 of this chapter (relating to Obligation to Respond Timely), a broker or supervisor delegated under subsection (e) of this section must respond to sponsored sales agents within two calendar days.
11. A sponsoring broker or supervisor delegated under subsection (e) of this section shall deliver mail and other correspondence from the Commission to their sponsored sales agents within three calendar days after receipt.
12. When the broker is a business entity, the designated broker is the person responsible for the broker responsibilities under this section.
13. This section is not meant to create or require an employer/employee relationship between a broker and a sponsored sales agent.

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§535.3 Compensation to or Paid by a Salesperson

A sales agent may not receive a commission or other valuable consideration except with the written consent of the sales agent's sponsoring broker or the broker who sponsored the sales agent when the sales agent became entitled to the commission or other valuable consideration. A sales agent may not pay a commission or other valuable consideration to another person except with the written consent of the sales agent's sponsoring broker.

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§535.4 License Required

1. The Act applies to any person acting as a real estate broker or sales agent while physically within Texas, regardless of the location of the real estate involved or the residence of the person's customers or clients. For the purposes of the Act, a person conducting brokerage business from another state by mail, telephone, the Internet, email, or other medium is acting within Texas if the real property concerned is located wholly or partly in Texas.
2. This section does not prohibit cooperative arrangements between foreign brokers and Texas brokers pursuant to §1101.651(a)(2) of the Act and §535.131 of this chapter (relating to Unlawful Conduct; Splitting Fees).
3. Unless otherwise exempted by the Act, a person must be licensed as a broker or sales agent to show a property. For purposes of this section, to "show" a property includes causing or permitting the property to be viewed by a prospective buyer or tenant, unlocking or providing access onto or into a property for a prospective buyer or tenant, and hosting an open house at the property.
4. A license holder may permit a prospective tenant unescorted access to view a property available for rent or lease only if:
   1. the property is vacant, meaning no person lives at, and no personal property except property intended to remain or convey is stored at, the property;
   2. the license holder employs a method to control access and verify the identity of the prospective tenant; and
   3. the property owner has signed a written consent that sets out in bold print in at least 12-point font that:
      1. the property owner is aware that unescorted access may occur; and
      2. specifies whether the broker enabling unescorted access or the property owner will be responsible for any damage that results from such unescorted access.
5. The employees, agents, or associates of a licensed broker must be licensed as brokers or sales agents if they direct or supervise other persons who perform acts for which a license is required.
6. A real estate license is required for a person to solicit listings or to negotiate in Texas for listings.
7. Unless otherwise exempted by §535.5 of this chapter (relating to License Not Required) and §1101.355(d) of the Act, a business entity owned by a broker or sales agent which receives compensation on behalf of the license holder must be licensed as a broker under the Act.
8. A person controls the acceptance or deposit of rent from a resident of a single-family residential real property unit and must be licensed under the Act if the person has the authority to:
   1. use the rent to pay for services related to management of the property;
   2. determine where to deposit the rent; or
   3. sign checks or withdraw money from a trust account.
9. For purposes of subsection (h) of this section, a single-family residential real property unit includes a single-family home or a unit in a condominium, co-operative, row-home, or townhome. The term does not include a duplex, triplex, or four-plex unless the units are owned as a condominium, cooperative, row-home, or townhome.
10. A person must be licensed as a broker to operate a rental agency.
11. A real estate license is required of a subsidiary corporation, which, for compensation, negotiates in Texas for the sale, purchase, rent, or lease of its parent corporation's real property.
12. A person who arranges for a tenant to occupy a residential property must have a real estate license if the person:
    1. does not own the property or lease the property from its owner;
    2. receives valuable consideration; and
    3. is not exempt under the Act.
13. A real estate license is required for a person to receive a fee or other consideration for assisting another person to locate real property for sale, purchase, rent, or lease, including the operation of a service which finds apartments or homes.
14. The compilation and distribution of information relating to rental vacancies or property for sale, purchase, rent, or lease is activity for which a real estate license is required if payment of any fee or other consideration received by the person who compiles and distributes the information is contingent upon the sale, purchase, rental, or lease of the property. An advance fee is a contingent fee if the fee must be returned if the property is not sold, purchased, rented, or leased.
15. A person must be licensed as a broker or sales agent if, for compensation, the person:
    1. advertises for others regarding the sale, purchase, rent, or lease of real property;
    2. accepts inquiries received in response to such advertisements; and
    3. refers the inquiry to the owner of the property.

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§535.5 License Not Required

1. Acting as a principal, a person may purchase, sell, lease, or sublease real estate for profit without being licensed as a broker or sales agent.
2. A person who owns property jointly may sell and convey title to his or her interest in the property, but to act for compensation or with the expectation of compensation as an agent for the other owner, the person must be licensed unless otherwise exempted by the Act.
3. A real estate license is not required for an individual employed by a business entity for the purpose of buying, selling, or leasing real property for the entity. An entity is considered to be an owner if it holds record title to the property or has an equitable title or right acquired by contract with the record title holder. An individual employed by a business entity means a person employed and directly compensated by the business entity. An independent contractor is not an employee.
4. Trade associations or other organizations that provide an electronic listing service for their members, but do not receive compensation when the real estate is sold, are not required to be licensed under the Act.
5. Auctioneers are not required to be licensed under the Act when auctioning real property for sale. However, a licensed auctioneer may not show the real property, prepare offers, or negotiate contracts unless the auctioneer is also licensed under the Act.
6. An answering service or clerical or administrative employees identified to callers as such to confirm information concerning the size, price, and terms of property advertised are not required to be licensed under the Act.
7. A business entity which receives compensation on behalf of a license holder that is earned by the license holder while engaged in real estate brokerage is not required to be licensed by the Commission if the business entity:
   1. performs no other acts of a broker;
   2. is:
      1. a limited liability company as defined by §101.001, Business Organizations Code; or
      2. an S corporation as defined by 26 U.S.C. Section 1361;
   3. is at least 51 percent owned by the license holder on whose behalf the business entity receives compensation; and
   4. is registered with the Commission as provided by §535.35 of this chapter (relating to Registration of Certain Business Entities).

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§535.6 Equitable Interests in Real Property

1. A person may acquire an option or enter into a contract to purchase real property and then sell or offer to sell the option or assign or offer to assign the interest in the contract without having a real estate license if the person:
   1. does not use the option or contract to purchase to engage in real estate brokerage; and
   2. discloses in writing the nature of the equitable interest to any seller or potential buyer.
2. A person selling or offering to sell an option or assigning or offering to assign an interest in a contract to purchase real property without disclosing the nature of that interest as provided by subsection (a) of this section is engaging in real estate brokerage.
3. A license holder acting on his or her own behalf or in a capacity described by §535.144(a) of this chapter (relating to When Acquiring or Disposing of Own Property or Property of Spouse, Parent or Child) who is selling an option or assigning an interest in a contract to purchase real property must disclose in writing to any seller or potential buyer that the license holder is selling an option or assigning an interest in a contract and that the license holder does not have legal title to the real property.

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§535.16 Listings; Net Listings

1. A broker is obligated under a listing contract to negotiate the best possible transaction for the principal, the broker has agreed to represent.
2. A "net listing" is a listing agreement in which the broker's commission is the difference ("net") between the sales proceeds and an amount desired by the owner of the real property. A broker may not take net listings unless the principal requires a net listing and the principal appears to be familiar with current market values of real property. The use of a net listing places an upper limit on the principal's expectancy and places the broker's interest above the principal's interest with reference to obtaining the best possible price. If a net listing is used, the listing agreement must assure the principal of not less than the principal's desired price and limit the broker to a specified maximum commission.
3. A real estate license holder is obligated to provide a broker price opinion or comparative market analysis on a property when negotiating a listing or offering to purchase the property for the license holder's own account as a result of contact made while acting as a real estate agent.

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§535.17 Broker Price Opinion, Comparative Market Analysis, or Sales Price Estimate

1. A real estate license holder may not perform an appraisal of, or provide an opinion of value for, real property unless the license holder is licensed or certified under Texas Occupations Code, Chapter 1103.
2. If a real estate license holder provides a broker price opinion, comparative market analysis, or estimated worth or sale price under the Act, the license holder shall also provide the person for whom the opinion, analysis, or estimate is prepared with a written statement containing the following language: "This represents an estimated sale price for this property. It is not the same as the opinion of value in an appraisal developed by a licensed appraiser under the Uniform Standards of Professional Appraisal Practice."
3. The statement required by subsection (b) of this section must be made part of any written opinion, analysis, or estimate of worth or sale price and must be reproduced verbatim in at least 12-point font.
4. A sales agent may prepare, sign, and present a broker price opinion, comparative market analysis, or estimate of worth or sale price for the sales agent's sponsoring broker, but the sales agent must submit the broker price opinion, comparative market analysis, or estimate of worth or sale price in the broker's name and the broker is responsible for it.

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§535.20 Referrals from Unlicensed Persons

1. Referring a prospective buyer, seller, landlord, or tenant to another person in connection with a proposed real estate transaction is an act requiring the person making the referral to be licensed if the referral is made with the expectation of receiving valuable consideration. For the purposes of this section, the term "valuable consideration" includes but is not limited to:
   1. money;
   2. gifts of merchandise having a retail value greater than $50;
   3. rent bonuses; and
   4. discounts.
2. A person is not required to be licensed as a real estate broker or sales agent if all of the following conditions are met.
   1. The person is engaged in the business of selling goods or services to the public.
   2. The person sells goods or services to a real estate license holder who intends to offer the goods or services as an inducement to potential buyers, sellers, landlords or tenants.
   3. After selling the goods or services to the real estate license holder, the person refers the person's customers to the real estate license holder.
   4. The payment to the person for the goods or services is not contingent upon the consummation of a real estate transaction by the person's customers.

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§535.21 Mailing Address and Other Contact Information

1. Each license holder shall provide a mailing address, phone number, and email address used for business to the Commission and shall report all subsequent changes not later than the 10th day after the date of a change of any of the listed contact information. If a license holder fails to update the contact information, the last known contact information provided to the Commission is the license holder's contact information.
2. The Commission shall send a notice or correspondence to an active broker or an inactive license holder to the mailing or email address of the broker or license holder as shown in the Commission's records. The Commission shall send a notice or correspondence to an active sales agent to the mailing or email address of the sales agent's sponsoring broker as shown in the Commission's records.

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Subchapter C Exemptions to Requirements of Licensure

§535.31 Attorneys at Law

An attorney licensed and eligible to practice law in Texas is exempt from the requirements of the Act but cannot sponsor real estate sales agents or act as the designated broker for a licensed business entity unless the attorney is also licensed as a real estate broker. This provision does not waive the standards of eligibility and qualification elsewhere established in the Act.

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§535.32 Attorneys in Fact

A person holding a valid power of attorney recorded in the county in which the particular real property is located and which specifically describes the real property may act as a real estate agent for the owner of such property without being licensed as a real estate broker or sales agent, provided the person does not use powers of attorney to engage in more than three real estate transactions per calendar year.

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§535.33 Public Officials

Public officials and employees of governmental or quasi-governmental units are exempt from the requirement of being licensed as a real estate broker or sales agent while performing their official duties.

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§535.34 Sales Agents Employed by an Owner of Land and Structures Erected by the Owner

1. For the purposes of the Act and this title, "sales agent, employed by an owner" means a person employed and directly compensated by an owner. An independent contractor is not an employee.
2. Withholding income taxes and Federal Insurance Contributions Act (F.I.C.A.) taxes from wages paid to another person is considered evidence of employment.

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§535.35 Registration of Certain Business Entities

1. For purposes of this section, an "exempt business entity" means a business entity which is exempt from the requirements of being licensed under §535.5(g) of this chapter (relating to License Not Required) and §1101.355(d) of the Act.
2. Before an exempt business entity may receive compensation on behalf of a license holder, the license holder must:
   1. register the business entity with the Commission on a form approved by the Commission;
   2. pay a $140 fee to the Commission; and
   3. provide supporting documentation satisfactory to the Commission demonstrating the entity meets the requirements for exemption.
3. Term of Registration; Certification.
   1. A registration issued under this section is valid for two years from the date of issuance.
   2. The Commission will deliver a notice regarding expiration of the registration to the license holder three months before the expiration of the registration.
   3. Failure to receive the notice from the Commission does not relieve a license holder from the requirements of this subsection.
   4. Prior to the expiration of the registration, a license holder must:
      1. certify on a form approved by the Commission that the exempt business entity continues to meet the requirements under this section;
      2. pay a $70 fee to the Commission; and
      3. provide supporting documentation as provided in subsection (b)(3) of this section, if determined necessary by the Commission.
   5. Failure to timely certify will result in expiration of the registration and loss of the exemption under §535.5(g) of this chapter and §1101.355(d) of the Act.
4. A license holder must notify the Commission not later than the 10th day after the date the business entity no longer satisfies the requirements of §535.5(g)(1)-(3) of this chapter and §1101.355(d) of the Act.

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Subchapter D The Commission

§535.41 Procedures

1. Meetings.
   1. The Commission shall meet in February of each year and at such other times as it deems proper.
   2. Meetings will be held at such places as the Commission deems proper.
   3. Meetings must be called by the chair on the chair's own motion or upon the written request of five members.
2. Quorum. Five members constitutes a quorum.
3. Officers.
   1. Officers of the Commission consist of a chair, a vice-chair, and secretary.
   2. The chair is designated by the governor and serves at the pleasure of the governor.
   3. The Commission shall elect a vice-chair and secretary at a regular meeting in February of each year. Elected officers shall serve until their successors are elected.
4. Order of business.
   1. With the exception of proceedings in contested cases, meetings must be conducted in accordance with Robert's Rules of Order.
   2. Proceedings in contested cases are conducted in accordance with the Administrative Procedure Act, Texas Government Code, Chapter 2001 and Chapter 533 of this title.
5. Public Comments at Regular Commission Meetings.
   1. A member of the public may comment for up to three minutes on any agenda item or non-agenda item at a regular quarterly Commission meeting.
   2. The Chair of the Commission may extend the time for public comments at the Chair's discretion.

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§535.42 Jurisdiction and Authority

The Commission does not:
1. mediate disputes between or among license holders concerning their working relationships or their entitlement to compensation; or
2. recommend individual license holders to the public.

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§535.43 Education Standards Advisory Committee

1. The Commission establishes an Education Standards Advisory Committee to regularly review and revise curriculum standards, course content requirements and instructor qualifications for qualifying and continuing education courses.
2. The committee consists of 12 members appointed by the Commission as follows:
   1. Seven members who are license holders and who have been engaged in the practice of real estate for at least five years before the member's appointment and who are actively engaged in that practice;
   2. Four education members who are real estate instructors or owners of real estate schools, accredited by the Commission, that provide qualifying or continuing education;
   3. One member who represents the public.
3. The Commission may appoint a non-voting member from the Commission.
4. Appointments to the committee shall be made without regard to the race, color, disability, sex, religion, age, or national origin of the appointee.
5. Members of the committee serve staggered two-year terms. The terms of the committee members expire as follows:
   1. on December 31 of each even-numbered year, the terms of four license holder members and two education members expire; and
   2. on December 31 of each odd-numbered year, the terms of three license holder members, two education members, and the public member expire.
6. A member may serve up to three consecutive terms on the committee, and may be reappointed after a break in service of at least two years. A member whose term has expired holds office until the member's successor is appointed. If a vacancy occurs during a member's term, the Commission shall appoint a person to fill the unexpired term.
7. At a regular meeting in January of each year, the committee shall elect from its members a presiding officer, assistant presiding officer, and secretary.
8. The Commission may remove a committee member if the member:
   1. does not have the qualifications required by subsection (b)(1) of this section;
   2. cannot discharge the member's duties for a substantial part of the member's term;
   3. is absent from more than half of the regularly scheduled committee meetings that the member is eligible to attend during each calendar year, unless the absence is excused by majority vote of the committee; or
   4. violates Chapter 1101 or Chapter 1102.
9. If the Executive Director of the Commission has knowledge that a potential ground for removal exists, the Executive Director shall notify the presiding officer of the Commission that the potential ground exists.
10. The validity of an action of the committee is not affected by the fact that it is taken when a ground for removal of a committee member exists.
11. The committee may meet at the call of a majority of its members. The committee shall meet at the call of the Commission.
12. A quorum of the committee consists of seven members.
13. The committee shall conduct its meetings in substantial compliance with Robert's Rules of Order.
14. The secretary of the committee shall work with Commission staff to prepare written minutes of each meeting and submit the minutes to the committee for approval and for filing with the Commission.
15. At least twice a year, the Committee Chair shall report on the activities of the Committee to the Commission. The Committee may submit its written recommendations concerning the requirements or qualifications, as applicable, for real estate education providers, instructors, and courses to the Commission at any time the Committee deems appropriate. If the Commission submits a rule to the Committee for development, the chair of the Committee or the chair's designate shall report to the Commission after each meeting at which the proposed rule is discussed on the Committee's consideration of the rule.
16. The committee is automatically abolished on September 1, 2031 unless the Commission subsequently establishes a different date.

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§535.44 Commission Seal

The Commission shall adopt a seal. The seal may be used only by the Commission in connection with official agency business. Any use by other persons, including persons licensed or registered under the Act or Chapter 1102, is prohibited.

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§535.45 Certain Uses of Seal, Logo, or Name Prohibited

A license holder or provider may not use all or part of the seal, logo, or name of the Commission or another governmental agency in a manner that implies that the person:
1. is a governmental agency;
2. is endorsed by the Commission or other agency other than as a license holder or provider; or
3. holds a special status that the Commission or other agency has not granted.

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§535.46 Broker Responsibility Advisory Committee

1. The Commission establishes a Broker Responsibility Advisory Committee to regularly examine issues surrounding broker responsibility within the real estate industry, make recommendations regarding possible legislative changes associated with broker responsibility, and examine Commission rules related to broker responsibility.
2. The committee consists of 9 members appointed by the Commission who must meet the following requirements:
   1. members must hold an active real estate broker license issued by the Commission; and
   2. members must have been engaged in the practice of brokerage activity for at least five years prior to appointment and be actively engaged in that practice.
3. The Commission may appoint a non-voting member(s) from the Commission.
4. Appointments to the committee shall be made without regard to the race, color, disability, sex, religion, age, or national origin of the appointee.
5. Members of the committee serve staggered four-year terms with terms beginning on January 1.
6. Notwithstanding subsection (e) of this section, the Commission shall initially appoint nine members as follows:
   1. three members to serve a two-year term to expire on December 31, 2026, regardless of the date the members are appointed;
   2. three members to serve a three-year term to expire on December 31, 2027, regardless of the date the members are appointed; and
   3. three members to serve a four-year term to expire on December 31, 2028, regardless of the date the members are appointed.
7. A member whose term has expired holds office until the member's successor is appointed. If a vacancy occurs during a member's term, the Commission shall appoint a person to fill the unexpired term.
8. At a regular meeting in January of each year, the committee shall elect from its members a presiding officer, assistant presiding officer, and secretary.
9. The Commission may remove a committee member if the member:
   1. does not have the qualifications required by subsection (b) of this section;
   2. cannot discharge the member's duties for a substantial part of the member's term;
   3. is absent from more than half of the regularly scheduled committee meetings that the member is eligible to attend during each calendar year, unless the absence is excused by majority vote of the committee; or
   4. violates Chapter 1101 or Chapter 1102.
10. If the executive director of the Commission has knowledge that a potential ground for removal exists, the executive director shall notify the presiding officer of the Commission that the potential ground exists.
11. The validity of an action of the committee is not affected by the fact that it is taken when a ground for removal of a committee member exists.
12. The committee may meet at the call of a majority of its members. The committee shall meet at the call of the Commission.
13. A quorum of the committee consists of five members.
14. The committee shall conduct its meetings in substantial compliance with Robert's Rules of Order.
15. The secretary of the committee shall work with Commission staff to prepare and approve written minutes of each meeting and submit the minutes for filing with the Commission.
16. At least twice a year, the presiding officer of the committee shall report on the activities of the committee to the Commission. The committee may submit its written recommendations concerning broker responsibility to the Commission at any time the committee deems appropriate. If the Commission submits a rule to the committee for development, the presiding officer of the committee or the presiding officer's designate shall report to the Commission after each meeting at which the proposed rule is discussed on the committee's consideration of the rule.
17. The committee is automatically abolished on September 1, 2031, unless the Commission subsequently establishes a different date.

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Subchapter E Requirements for Licensure

§535.50 Definitions

The following words and terms, when used in Subchapter E, F, or G of this chapter, shall have the following meanings, unless the context clearly indicates otherwise or a definition from that subchapter supersedes the definition.
1. Applicant–A person seeking a license, certificate, registration, approval, or permit from the Commission.
2. Broker Responsibility Course–The course required by §1101.458 of the Act.
3. Designated broker–An individual holding an active Texas real estate broker license designated by a business entity licensed by the Commission to act on its behalf. The designated broker must be an officer of a corporation, a manager of a limited liability company, or a general partner of a partnership.
4. Hour–Fifty minutes of actual session time.
5. Non-elective Courses–The legal update courses required by §1101.455 of the Act and the broker responsibility course required by §1101.458 of the Act.
6. Related course–A course determined to be acceptable by the Commission to count towards related credit. The Commission will periodically publish lists of acceptable real estate related courses.

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§535.51 General Requirements for a Real Estate License

1. Application.
   1. A person who intends to be licensed by the Commission must:
      1. file an application for the license through the online process approved by the Commission or on the form prescribed by the Commission for that purpose; and
      2. submit the required fee under §535.101 of this chapter (relating to Fees).
   2. The Commission will reject an application submitted without a sufficient filing fee.
   3. The Commission may request additional information be provided to the Commission relating to an application.
2. General Requirements for Licensure.
   1. To be eligible for a real estate license, an applicant must:
      1. meet the following requirements at the time of the application:
         1. be 18 years of age;
         2. be a citizen of the United States or a lawfully admitted alien;
      2. comply with the fingerprinting, education, experience and examination requirements of the Act; and
      3. meet the honesty, trustworthiness, and integrity requirements under the Act.
   2. The fact that an individual has had disabilities of minority removed does not affect the requirement that an applicant be 18 years of age to be eligible for a license.
3. Termination of application. An application is terminated and is subject to no further evaluation or processing if:
   1. the applicant fails to satisfy a current, education, experience, or examination requirement within one year from the date the application is filed;
   2. the applicant fails to submit a required fee within twenty (20) days after the Commission makes written request for payment;
   3. the applicant fails to provide information or documentation requested by the Commission within one year from the date the application is filed; or
   4. the applicant fails to provide fingerprints to the Department of Public Safety within one year from the date the application is filed.
4. Completion of applicable education and experience.
   1. An applicant is not eligible to take an examination for a license until the Commission has received evidence of completion of all education and experience required by this subchapter.
   2. The Commission will not grant credit to an applicant for completing a course with substantially the same content as a course for which the applicant received credit within the previous two-year period.
   3. Except as provided by this subchapter and the Act, the Commission will not accept a person's license in another state to meet experience requirements.
5. Examination. An applicant must take and pass a licensing examination in accordance with §535.57 of this chapter (relating to Examinations).

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§535.52 Fitness Requirements for Individual Applicant

1. The Commission may deny a license to an applicant who fails to satisfy the Commission as to an individual applicant's honesty, trustworthiness, or integrity under the Act, Chapter 1102, and the rules of the Commission.
2. Conduct that tends to demonstrate that an applicant does not possess the requisite honesty, trustworthiness or integrity includes, but is not limited to:
   1. a plea of guilty or nolo contendere to or a conviction of any offense listed in §541.1 of this title (relating to Criminal Offense Guidelines);
   2. failing to successfully or satisfactorily complete any term or condition of parole, supervised release, probation, or community supervision;
   3. providing false or misleading information to the Commission;
   4. disciplinary action taken against, or the surrender or denial of, any professional or occupational license or registration, in this state, any other state, or the federal government;
   5. engaging in activities for which a license or registration is required without having the legal authorization to do so, in this or any other state;
   6. violating any provision of the Act;
   7. violating any provision of the rules of the Commission;
   8. failing to pay a judgment (including any court-ordered costs, fees, penalties, or damages) that is not otherwise discharged in bankruptcy;
   9. failing to provide information or documentation related to fitness requirements not later than the 60th day after the date the Commission sends a written request to an applicant; and
   10. failing to comply with any term of an administrative order issued by this state, any other state, or the federal government, including failure to pay an administrative penalty.

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§535.53 Business Entity; Designated Broker

1. Business Entity.
   1. A business entity must be qualified to transact business in Texas to receive, maintain, or renew a broker's license.
   2. A Franchise Tax Account Status page from the Texas Comptroller of Public Accounts issued within 21 days prior to the date of its license or renewal application constitutes evidence of being qualified to transact business in Texas.
   3. A business entity must notify the Commission not later than the 10th day after the date it receives notice that it is not qualified to transact business in Texas.
   4. A foreign business entity must meet the additional requirements of §535.132 of this chapter (relating to Eligibility for Licensure) to be eligible for a broker's license.
2. Designated Broker.
   1. For the purposes of qualifying for, maintaining, or renewing a license, a business entity must designate an individual holding an active Texas real estate broker license in good standing with the Commission to act for it.
   2. An individual licensed broker is not in good standing with the Commission if:
      1. the broker's license is revoked or suspended, including probated revocation or suspension;
      2. a business entity licensed by the Commission while the broker was the designated broker for that business entity had its license revoked or suspended, including probated revocation or suspension, in the past two years;
      3. the broker has any unpaid or past due monetary obligations to the Commission, including administrative penalties, Real Estate Recovery Trust Account payments, or Real Estate Inspection Recovery Fund payments; or
      4. a business entity licensed by the Commission has any unpaid or past due monetary obligations to the Commission, including administrative penalties or Real Estate Recovery Trust Account payments, that were incurred while the broker was the designated broker for the entity.
   3. Regardless of the type of business entity, the designated broker must have managing authority for the business entity.
   4. The business entity may not act as a broker during any period in which it does not have a designated broker to act for it who meets the requirements of the Act.
   5. To obtain or renew a license, or upon any change in the business entity's designated broker, the entity must provide to the Commission:
      1. proof of the designated broker's current status as a corporate officer, an LLC manager, an LLC member with managing authority, or a general partner for that entity; and
      2. if the designated broker does not own at least 10 percent of the business entity, proof that the business entity maintains errors and omissions insurance:
         1. in at least the minimum coverage limits required by the Act; and
         2. that provides coverage for losses due to a violation of the Act or this Chapter.
   6. A broker may not act as a designated broker at any time while the broker's license is inactive, expired, suspended, or revoked.

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§535.54 Hearing on License Denial: Probationary Licenses

1. The Commission will notify an applicant if the application for license is denied. Any hearing on denial of a license will be conducted in accordance with §1101.364 of the Act and Chapter 533 of this title (relating to Practice and Procedure).
2. If the Commission determines that issuance of a probationary license is appropriate, the order entered by the Commission with regard to the application must set forth the terms and conditions for the probationary license. Terms for a probationary license may include any of the following:
   1. that the probationary license holder comply with the Act and with the rules of the Commission;
   2. that the probationary license holder fully cooperate with the Commission in the investigation of any complaint filed against the license holder;
   3. that the probationary license holder attend a prescribed number of classroom hours in specific areas of study during the probationary period;
   4. that the probationary license holder limit real estate brokerage practice as prescribed in the order;
   5. that the probationary license holder report regularly to the Commission on any matter which is the basis of the probationary license holder;
   6. that the probationary license holder comply with any other terms contained in the order which have been found to be reasonable and appropriate by the Commission after consideration of the circumstances involved in the particular application; or
   7. that the probationary license holder comply with any other terms contained in an order from any other court or administrative agency under which the probationary license holder is bound.
3. Unless the order granting a probationary license specifies otherwise, a probationary license holder may renew the license after the probationary period by filing a renewal application, satisfying applicable education requirements and paying the prescribed renewal fee.
4. If a license expires before the completion of a probationary term and the license holder files a late renewal application as authorized by §535.91 of this chapter (relating to Renewal of a Real Estate License), any remaining probationary period shall be reinstated effective as of the day following the renewal of the previous license.

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§535.55 Education and Sponsorship Requirements for a Sales Agent License

1. Education requirements for an initial sales agent license. An applicant for an initial sales agent license must provide the Commission with satisfactory evidence of completion of 180 hours of qualifying real estate courses as required under the Act as follows:
   1. 60 hours of Principles of Real Estate;
   2. 30 hours of Law of Agency;
   3. 30 hours of Law of Contracts;
   4. 30 hours of Promulgated Contracts Forms; and
   5. 30 hours of Real Estate Finance.
2. Additional education requirements. A sales agent must successfully complete an additional 90 classroom hours in qualifying courses, including the 30 hour qualifying real estate brokerage course, by the expiration date of the sales agent's initial licensing period in accordance with the requirements of §535.91 of this chapter (relating to Renewal of a Real Estate License).
3. The Commission will issue an applicant an inactive sales agent license upon satisfaction of subsection (a) of this section and subsection (c) of §535.57 of this subchapter (relating to Examinations). An inactive sales agent may not practice as a licensed sales agent until sponsored by an active Texas licensed broker.

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§535.56 Education and Experience Requirements for a Broker License

1. Education requirements.
   1. An applicant for a broker license must provide the Commission with satisfactory evidence of completion of:
      1. 270 hours of qualifying real estate courses as required under §535.55 of this subchapter (relating to Education and Sponsorship Requirements for a Sales Agent License), which must include the 30 hour qualifying real estate brokerage course completed not more than two years before the application date; and
      2. an additional 630 classroom hours of related education from one or more of the following categories:
         1. qualifying courses defined under §535.64 of this chapter (relating to Content Requirements for Qualifying Real Estate Courses);
         2. Commission-approved continuing education courses; or
         3. courses taken for credit from an accredited college or university in any of the following areas: accounting, advertising, architecture, business or management, construction, finance, investments, law, marketing, or real estate.
   2. An applicant who has earned a bachelor's degree or higher from an accredited college or university will be deemed to have satisfied the related education requirements for a broker license. A copy of the college transcript awarding the degree must be submitted as evidence of completion of the degree.
2. Experience Requirements.
   1. An applicant for a broker license must have four years of experience actively practicing as a broker or sales agent in Texas during the five years preceding the date the application is filed. For purposes of this section:
      1. Experience is measured from the date a license is issued, and inactive periods caused by lack of sponsorship, or any other reason, cannot be included as active experience.
      2. A person licensed in another state may derive the required four years' experience from periods in which the person was licensed in one or more states. A person who is the designated broker of a business entity that is licensed as a real estate broker in another state is deemed to be a licensed real estate broker in another state.
      3. An applicant must have performed at least one transaction per year as described in subsection (c) of this section for at least four of the five years preceding the date the application is filed.
   2. An applicant for a broker license must demonstrate not less than 360 points of qualifying practical experience obtained during the period required by subsection (b)(1) of this section, using TREC No. BL-A, Supplement A-Qualifying Experience Report for a Broker License. An applicant must use TREC No. BL-B, Supplement B-Qualifying Experience Report for a Broker License After an Application Has Been Filed, to report qualifying experience after an application for a broker license is filed.
      1. An applicant will receive credit for such experience according to the point system set forth in subsection (c) of this section.
      2. Upon request by the Commission, either prior to or after licensure, an applicant shall provide documentation to substantiate any or all of the experience claimed by the applicant.
      3. Failure to promptly provide the requested documentation or proof shall be grounds to deny the application. Any false claim of experience shall be grounds to deny the application, or shall be grounds to suspend or revoke the applicant's current license.
3. Credit for experience. Experience points shall be credited to an applicant in accordance with the following schedule for active licensed sales agent or broker activity only:
   1. Residential transactions including single family, condo, co-op unit, multi-family (1 to 4-unit) and apartment unit leases:
      1. Closed purchase or sale–30 points per transaction.
      2. An executed lease for a landlord or tenant–5 points per transaction.
      3. rental property management rent collection–2.5 points per property.
      4. Closed purchase or sale of an unimproved residential lot–30 points per transaction.
   2. Commercial transactions, including apartments (5 units or more), office, retail, industrial, mixed use, hotel/motel, parking facility/garage, and specialty:
      1. Closed purchase or sale–50 points per transaction.
      2. An executed lease, renewal or extension for a landlord or tenant–10 points per year of the lease, renewal or extension up to a five year maximum per transaction.
      3. rental property management rent collection–15 points per property.
   3. Farm and Ranch and unimproved land transactions:
      1. Closed purchase or sale–30 points.
      2. An executed lease for a landlord or tenant–5 points per transaction.
      3. Rental property management rent collection–5 points per property.
   4. Delegated supervision–12 points per month.
4. Documentation of applicable experience.
   1. An applicant shall have the burden of establishing to the satisfaction of the Commission that the applicant actually performed the work associated with the real estate transaction claimed for experience credit.
   2. If an applicant is unable to obtain documentation and/or the signature of a sponsoring broker to support their claim for experience, the applicant must use TREC No. AFF-A, Affidavit in Lieu of Documentation and/or Signature, to explain that the applicant made a good faith effort to obtain the documentation and/or signature, describing the effort to obtain the documentation and reasons why it is not available. In addition, the applicant must submit two TREC No. AFF-B, Affidavit in Support of Applicant's Claim of Experience, each signed by a different individual who knows the applicant or is familiar with the transaction(s) at issue attesting to the applicant's efforts to obtain the documentation and/or signature, and attesting to the fact that the applicant performed the work for which the applicant is requesting points.
   3. The Commission may request additional documentation, rely on the documentation provided under this section, or utilize any other information provided by the applicant to determine whether the applicant has sufficient experience as required by §1101.356 of the Act and this section.
5. Experience forms. Forms and affidavits required to be used to report experience under this section are adopted by reference, published by and available from the Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188, www.trec.texas.gov.

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§535.57 Examinations

1. Administration of licensing examinations.
   1. An examination required for any license issued by the Commission will be conducted by the testing service with which the Commission has contracted for the administration of examinations.
      1. The testing service shall schedule and conduct the examinations in the manner required by the contract between the Commission and the testing service.
      2. Except as otherwise provided by law, the examination fee must be paid each time the examination is taken.
   2. The testing service administering the examinations is required to provide reasonable accommodations for any applicant with a verifiable disability. Applicants must contact the testing service to arrange an accommodation.
   3. To be authorized for admittance to an examination, the applicant must present to the testing service administering the examinations appropriate documentation required by the testing service under contract with the Commission. The testing service shall require official photo-bearing personal identification of individuals appearing for an examination and shall deny entrance to anyone who cannot provide adequate identification. The testing service may refuse to admit an applicant who arrives after the time the examination is scheduled to begin or whose conduct or demeanor would be disruptive to other persons taking examinations at the site. The testing service may confiscate examination materials, dismiss the applicant, and fail the applicant for violating or attempting to violate the confidentiality of the contents of an examination.
   4. An applicant is permitted to use certain hand-held calculators. If a calculator has printout capability, the testing service must approve use of such calculator before the examination. No other electronic devices are permitted.
2. Conduct during examination.
   1. The following conduct with respect to licensing examinations is prohibited and is grounds to impose disciplinary action against any applicant, license holder, or education provider accredited by the Commission, and shall further be grounds for disapproval of an application for any license, accreditation, or approval issued by the Commission:
      1. obtaining or attempting to obtain specific questions or answers from an applicant, a Commission employee, or any person hired by or associated with the testing service;
      2. removing or attempting to remove questions or answers from an examination site; or
      3. providing or attempting to provide examination questions or answers to another person.
   2. The Commission, or the testing service under contract with the Commission, may file theft charges against any person who removes or attempts to remove an examination or any portion thereof or any material furnished with the examination whether by actual physical removal or by transcription.
3. Passing Scores. A broker applicant must attain a passing score of at least 75% in each portion of the broker licensing examination. A sales agent applicant must attain a passing score of at least 70% in each portion of the sales agent licensing examination.
4. Waiver of examination requirement for licensure.
   1. The Commission shall waive the examination requirement for an applicant for a broker license who has been licensed as a broker in this state within two years before the filing of the application. The Commission shall waive the examination requirement for an applicant for a sales agent license who has been licensed in this state as a broker or sales agent within two years before the filing of the application.
   2. The Commission may waive the national portion of the examination of an applicant for a broker or sales agent license if the applicant maintains an active license in another state equivalent to the license being applied for, and has passed a comparable national examination accredited or certified by a nationally recognized real estate regulator association.
5. Examination results for the national part and state part of the examination are valid for a period of one year from the date each part of the examination is passed.
6. An applicant who fails the examination three consecutive times may not apply for reexamination or submit a new license application unless the applicant submits evidence satisfactory to the Commission that the applicant has completed additional mandatory qualifying education listed in §535.64(a) of this chapter (relating to Content Requirements for Qualifying Real Estate Courses) as follows, after the date the applicant failed the examination for the third time:
   1. for an applicant who failed the national part of the examination, 30 hours;
   2. for an applicant who failed the state part of the examination, 30 hours; and
   3. for an applicant who failed both parts of the examination, 60 hours.

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§535.58 License for Military Service Members, Veterans, or Military Spouses

1. Definitions.
   1. "Military service member" means a person who is on current full-time military service in the armed forces of the United States or active duty military service as a member of the Texas military forces, as defined by §437.001, Government Code, or similar military service of another state.
   2. "Military spouse" means a person who is married to a military service member.
   3. "Veteran" means a person who has served as a military service member and who was discharged or released from active duty.
2. Except as otherwise provide by this section:
   1. a person applying for a sales agent or broker license under this chapter must comply with all requirements of §535.51 of this chapter (relating to General Requirements for a Real Estate License);
   2. a person applying for an inspector license under this chapter must comply with all requirements of §535.208 of this chapter (relating to Application for a License); and
   3. a person applying for a certificate of registration under this chapter must comply with all requirements of §535.400 of this chapter (relating to Registration of Easement or Right-of-Way Agents).
3. Expedited application.
   1. The Commission shall process a license for an applicant who is a military service member, military veteran, or military spouse on an expedited basis.
   2. If the applicant holds a current certificate or license issued by a country, territory, or state other than Texas that has licensing requirements that are substantially equivalent to the requirements for the certificate or license issued in Texas, the Commission shall issue the license not later than the 30th day after receipt of the application.
4. Waiver of fees and requirements.
   1. The Commission shall waive application and examination fees for an applicant who is a:
      1. military service member or veteran whose military service, training, or education substantially meets all of the requirements for a license; or
      2. military service member, veteran, or military spouse who holds a current license issued by another jurisdiction that has licensing requirements that are substantially equivalent to the requirements for the same license in this state.
   2. The Executive Director may waive any other requirements for obtaining a license for an applicant who:
      1. meets the requirements of subsection (c)(2) of this section; or
      2. held a license in Texas within the five years preceding the date the application is filed with the Commission.
5. Credit for military service.
   1. For an applicant who is a military service member or veteran, the Commission shall credit any verifiable military service, training or education obtained by an applicant that is relevant to a license toward the requirements of a license.
   2. This subsection does not apply to an applicant who holds a restricted license issued by another jurisdiction.
6. Alternate methods of competency. The Commission may accept alternative methods for demonstrating an applicant's competency in the place of passing the specific licensing examination, or completing education and/or experience required to obtain a particular license. Based on the applicant's circumstances and the requirements of a particular license, the Commission may consider any combination of the following as alternative methods of demonstrating competency:
   1. education;
   2. continuing education;
   3. examinations (written and/or practical);
   4. letters of good standing;
   5. letters of recommendation;
   6. work experience; or
   7. other methods required by the Executive Director.
7. Limited reciprocity for military service members and military spouses.
   1. A person who is a military service member or military spouse who holds a current certificate or license issued by a country, territory, or state other than Texas that has licensing requirements that are substantially equivalent to the requirements for the certificate or license issued in Texas who wants to practice in Texas in accordance with §55.0041, Occupations Code, must:
      1. notify the Commission of the person's intent to practice in Texas on a form approved by the Commission; and
      2. submit a copy of the military identification card issued to the person; and
   2. Upon receipt of the documents required under paragraph (1) of this subsection, the Commission will:
      1. no later than 30 days, verify that the person is currently licensed and in good standing by another jurisdiction with substantially equivalent licensing requirements to Texas; and
      2. upon confirmation from the other jurisdiction that the person is currently licensed and in good standing with that jurisdiction, issue a license to the person for the same period in which the person is licensed or certified by the other jurisdiction.
   3. A person may not practice in Texas in accordance with this subsection without receiving confirmation from the Commission that the Commission has verified that the person is currently licensed and in good standing with another jurisdiction. Confirmation is provided by the Commission when the person is issued a license as provided for in paragraph (2) of this subsection.
   4. A license issued under this subsection may not be renewed.
   5. The time period for which a person may practice under this subsection without meeting the requirements for licensure in Texas is limited to the lesser of:
      1. the period during which the person or person's spouse is stationed at a military installation in this state; or
      2. three years.
   6. A person authorized to practice in this state under this subsection must comply will all other laws and regulations applicable to the license, including any sponsorship requirements.
   7. Notwithstanding paragraph (5) of this subsection, in the event of a divorce or similar event that affects a person's status as a military spouse, the spouse may continue to practice for three years from the date of the issuance of the license under this subsection.
8. The purpose of this section is to establish procedures authorized or required by Texas Occupations Code, Chapter 55, and is not intended to modify or alter rights that may be provided under federal law.

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Subchapter F Requirements for Education Providers, Courses and Instructors for Qualifying Education

§535.60 Definitions

The following words and terms, when used in Subchapter F of this chapter, shall have the following meanings, unless the context clearly indicates otherwise.
1. Classroom delivery–A method of course delivery where the instructor and students interact face to face and in real time, in either the same physical location, or through the use of technology.
2. Distance Education delivery–A method of course delivery other than classroom delivery, including online and correspondence delivery.
3. Combination delivery–A combination of classroom and distance education where at least 50% of the course is offered through classroom delivery.
4. Instructor–A person chosen by a provider to teach qualifying courses.
5. Legal Update Courses–Required courses created for and approved by the Commission to satisfy the eight hours of continuing education required by §1101.455 of the Act.
6. Mandatory qualifying course–A qualifying course that an applicant is required to take to fulfill licensing requirements as mandated by §1101.358 of the Act.
7. Elective qualifying course–A qualifying course, other than a mandatory qualifying course, for which the subject matter of the course is specified by the Act or Commission rule, that an applicant may take to fulfill licensing requirements.
8. Person–Any individual, partnership, corporation, or other legal entity, including a state agency or governmental subdivision.
9. Provider–Any person approved by the Commission; or specifically exempt by the Act, Chapter 1102, or Commission rule; that offers a course for which qualifying credit may be granted by the Commission to a license holder or applicant.
10. Proctor–A person who monitors a final examination for a course offered by a provider under the guidelines contained in this section. A proctor may be a course instructor, the provider, an employee of a college or university testing center, a librarian, or other person approved by the Commission.
11. Scenario-based learning–The use of scenarios to support active learning strategies such as problem-based or case-based learning where students must apply their subject knowledge, critical thinking and problem-solving skills in a real-world context.
12. Topic–Subject matter that must be covered in a specific course as defined by the Act, Chapter 1102 and this chapter.
13. Unit–A subtopic that must be covered within a topic.

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§535.61 Approval of Providers of Qualifying Courses

1. Application for approval.
   1. Unless otherwise exempt under subsection (b) of this section, a person desiring to be approved by the Commission to offer real estate, easement or right-of-way, or real estate inspection qualifying courses shall:
      1. file an application on the appropriate form approved by the Commission, with all required documentation;
      2. submit the required fee under §535.101 of this chapter (relating to Fees) or §535.210 of this chapter (relating to Fees);
      3. submit the statutory bond or other security acceptable to the Commission under §1101.302 of the Act; and
      4. maintain a fixed office in the state of Texas or designate a resident of this state as attorney-in-fact to accept service of process and act as custodian of any records in Texas which the provider is required to maintain by this subchapter.
   2. The Commission may:
      1. request additional information be provided to the Commission relating to an application; and
      2. terminate an application without further notice if the applicant fails to provide the additional information not later than the 60th day after the Commission mails the request.
   3. An approved provider is permitted to offer courses in real estate, easement or right-of-way, and real estate inspection that have been approved by the Commission.
2. Exempt Providers.
   1. The following persons may submit real estate qualifying courses for approval for credit in §535.62(i) of this subchapter (relating to Approval of Qualifying Courses) without becoming an approved provider of qualifying courses:
      1. a person approved by a real estate regulatory agency to offer qualifying real estate courses in another state that has approval requirements for providers that are substantially equivalent to the requirements for approval in this state;
      2. an accredited college or university in accordance with §535.66 of this subchapter (relating to Credit for Courses Offered by Accredited Colleges or Universities) where courses are offered in accordance with national or regional accreditation standards;
      3. a post-secondary educational institution established in and offering qualifying real estate courses in another state;
      4. a United States armed forces institute; and
      5. a nationally recognized professional designation institute or council in the real estate industry.
   2. The following persons may submit real estate inspector qualifying courses for approval for credit under §535.62(i) of this subchapter without becoming an approved provider of qualifying courses:
      1. a provider approved by an inspector regulatory agency of another state that has approval requirements for providers that are substantially equivalent to the requirements for approval in this state;
      2. an accredited college or university in accordance with §535.66 of this subchapter where courses are offered in accordance with national or regional accreditation standards;
      3. a United States armed forces institute;
      4. a unit of federal, state or local government;
      5. a nationally recognized building, electrical, plumbing, mechanical or fire code organization;
      6. a professional trade association in the inspection field or in a related technical field; or
      7. an entity whose courses are approved and regulated by an agency of this state.
   3. The following persons may submit easement or right-of-way qualifying courses for approval for credit in §535.62(i) of this subchapter without becoming an approved provider of qualifying courses:
      1. an accredited college or university in accordance with §535.66 of this subchapter where courses are offered in accordance with national or regional accreditation standards; and
      2. a United States armed forces institute.
3. Standards for approval. To be approved as a provider by the Commission, the applicant must meet the following standards:
   1. the applicant must satisfy the Commission as to the applicant's ability to administer courses with competency, honesty, trustworthiness and integrity. If the applicant proposes to employ another person to manage the operation of the applicant, that person must meet this standard as if that person were the applicant;
   2. the applicant must demonstrate that the applicant has sufficient financial resources to conduct its proposed operations on a continuing basis without risk of loss to students taking courses; and
   3. that any proposed facilities will be adequate and safe for conducting courses.
4. Financial review. An applicant shall provide the following information to enable the Commission to determine if an applicant has sufficient financial resources to conduct its proposed operations:
   1. business financial statements prepared in accordance with generally accepted accounting principles, which shall include a current income statement and balance sheet;
   2. a proposed budget for the first year of operation; and
   3. a market survey indicating the anticipated enrollment for the first year of operation.
5. Insufficient financial condition. The existence of any of the following conditions shall constitute prima facie evidence that an applicant's financial condition is insufficient:
   1. nonpayment of a liability when due, if the balance due is greater than 5% of the approved provider's current assets in the current or prior accounting period;
   2. nonpayment of three or more liabilities when due, in the current or prior accounting period, regardless of the balance due for each liability;
   3. a pattern of nonpayment of liabilities when due, in two or more accounting periods, even if the liabilities ultimately are repaid;
   4. a current ratio of less than 1.75 for the current or prior accounting period, this ratio being total current assets divided by total current liabilities;
   5. a quick ratio of less than 1.60 for the current or prior accounting period, this ratio being the sum of all cash equivalents, marketable securities, and net receivables divided by total current liabilities;
   6. a cash ratio of less than 1.40 for the current or prior accounting period, this ratio being the sum of cash equivalents and marketable securities divided by total current liabilities;
   7. a debt ratio of more than .40 for the current or prior accounting period, this ratio being total liabilities divided by total assets;
   8. a debt-to-equity ratio of greater than .60 for the current or prior accounting period, this ratio being total liabilities divided by owners' or shareholders' equity;
   9. a final judgment obtained against the approved provider for nonpayment of a liability which remains unpaid more than 30 days after becoming final; or
   10. the execution of a writ of garnishment on any of the assets of the approved provider.
6. Approval notice. An applicant shall not act as or represent itself to be an approved provider until the applicant has received written notice of approval from the Commission.
7. Period of initial approval. The initial approval of a provider of qualifying courses is valid for four years.
8. Statutory bond or other security. An approved provider whose statutory bond or other security has been cancelled will be placed on inactive status until the bond or security is reinstated.
9. Payment of an annual operation fee.
   1. An approved provider shall submit the Commission approved form and pay an annual operation fee prescribed by §535.101 of this chapter no later than the last day of the month of each anniversary date of the provider's approval.
   2. An approved provider who fails to pay the annual operation fee as prescribed shall be placed on inactive status and notified in writing by the Commission.
   3. The approved provider will remain on inactive status and unable to offer courses until the annual fee is paid.
   4. The Commission will not give credit for courses offered by a provider on inactive status.
10. Denial of application.
    1. If the Commission determines that an applicant does not meet the standards for approval, the Commission will provide written notice of denial to the applicant.
    2. The denial notice, applicant's request for a hearing on the denial, and any hearing are governed by the Administrative Procedure Act, Chapter 2001, Texas Government Code, and Chapter 533 of this title (relating to Practice and Procedure).
11. Renewal.
    1. A provider may not enroll a student in a course during the 60-day period immediately before the expiration of the provider's current approval unless the provider has submitted an application for renewal for another four year period not later than the 60th day before the date of expiration of its current approval.
    2. Approval or disapproval of a renewal shall be subject to:
       1. the standards for initial applications for approval set out in this section; and
       2. whether the approved provider has met or exceeded the exam passage rate benchmark established by the Commission under subsection (l) of this section.
    3. The Commission will not require a financial review for renewal if the applicant has provided a statutory bond or other security acceptable to the Commission under §1101.302 of the Act, and there are no unsatisfied final money judgments against the applicant.
    4. The Commission may deny an application for renewal if the provider is in violation of a Commission order.
12. Exam passage rates and benchmark.
    1. The exam passage rate for an approved provider shall be:
       1. calculated for each license category for which the provider offers courses and an examination is required; and
       2. displayed on the Commission website by license category.
    2. A student is affiliated with a provider under this subsection if the student took the majority of his or her qualifying education with the provider in the two year period prior to taking the exam for the first time.
    3. The Commission will calculate the exam passage rate of an approved provider on a monthly basis, rounded to two decimal places on the final calculated figure, by:
       1. determining the number of students affiliated with that approved provider who passed the examination on their first attempt in the two-year period ending on the last day of the previous month; and
       2. dividing that number by the total number of students affiliated with that provider who took the exam for the first time during that same period.
    4. For purposes of approving a renewal application under subsection (j) of this section, the established exam passage rate benchmark for each license category is 80% of the average percentage of the total examinees for that license category who passed the examination on the first attempt in the two year period ending on the last day of the previous month.
    5. If at the time the Commission receives a renewal application from the provider requesting approval for another four year term, the provider's exam passage rate does not meet the established benchmark for a license category the provider will be:
       1. denied approval to continue offering courses for that license category if the provider's exam passage rate is less than 50% of the average percentage of the total examinees for that license category who passed the examination on the first attempt in the two year period ending on the last day of the previous month; or
       2. placed on probation by the Commission if the provider's exam passage rate is greater than 50% but less than 80% of the average percentage of the total examinees for that license category who passed the examination on the first attempt in the two year period ending on the last day of the previous month.
    6. The exam passage rate of a provider on probation will be reviewed annually at the time the annual operating fee is due to determine if the provider can be removed from probation, remain on probation or have its license revoked, based on the criteria set out in paragraph (5) of this subsection.

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§535.62 Approval of Qualifying Courses

1. Application for approval of a qualifying course.
   1. For each qualifying course a provider intends to offer, the provider must:
      1. submit the course application and course approval forms, including all materials required; and
      2. pay the fee required by §535.101 or §535.210 of this title.
   2. A provider may file a single application for a qualifying course offered through multiple delivery methods. A fee is required for content and examination review of each qualifying course and for each distinct delivery method utilized by a provider for that course.
   3. A provider who seeks approval of a new delivery method for a currently approved qualifying course must submit a new application and pay all required fees, including a fee for content and examination review.
   4. The Commission may:
      1. request additional information be provided to the Commission relating to an application;
      2. terminate an application without further notice if the applicant fails to provide the additional information not later than the 60th day after the Commission mails the request; and
      3. prior to approval of a proposed qualifying real estate inspector course, submit the course to the Texas Real Estate Inspector Committee for review and recommendation.
2. Standards for course approval. To be approved as a qualifying course by the Commission, a provider must satisfy the Commission that the course:
   1. covers all topics and units for the course subject required by the Act, Chapter 1102 and this chapter;
   2. covers all units within the prescribed topic;
   3. contains sufficient content to satisfy the number of hours for which credit is being requested as evidenced by:
      1. word count studies;
      2. samples of student time studies; or
      3. other methods acceptable to the Commission;
   4. will be scheduled for the full clock hours of time for which credit is awarded and presented in full hourly units;
   5. does not have daily course segments that exceed 12 hours;
   6. will be delivered by one of the following delivery methods:
      1. classroom delivery;
      2. distance education delivery; or
      3. a combination of (A) and (B) of this paragraph, if at least 50% of the combined course is offered by classroom delivery;
   7. include at a minimum, the following methods to assess a student's comprehension of the course material:
      1. topic quizzes, with at least three questions related to the subject matter in each course topic;
      2. at least one scenario-based learning exercise per every increment of 10 credit hours or less; and
      3. if the course is delivered by distance education delivery:
         1. prevent the student from moving from one topic to the next topic until the student answers all topic quiz questions correctly and receives a passing grade on the scenario based learning exercises; and
         2. for quiz questions answered incorrectly, employ a method to present the rationale behind the correct answer and ask a subsequent related quiz question that will count toward passing the topic if answered correctly; and
   8. include at least four versions of a final examination, and ensure that each version of the examination:
      1. covers each topic required by the Act or Rules for the specific course;
      2. does not contain any true/false questions;
      3. does not repeat more than one third of the questions from other versions of the final examination;
      4. for all qualifying courses other than a real estate math course:
         1. consists of at least two questions per credit course hour; and
         2. draws from a question bank consisting of at least four questions per credit course hour; and
      5. for all qualifying real estate math courses, consists of at least 20 questions that are drawn from a question bank consisting of at least 40 questions.
3. If the course is currently certified by a distance learning certification center acceptable to the Commission, the provider will be deemed to have met requirements for verification of clock/course hours for distance education delivery.
4. Approval of currently approved courses by a secondary provider.
   1. If a secondary provider wants to offer a course currently approved for another provider, the secondary provider must:
      1. submit the course application and approval forms including all materials required;
      2. submit written authorization to the Commission from the owner of the rights to the course material granting permission for the secondary provider to offer the course; and
      3. pay the fee required by §535.101 or §535.210 of this title.
   2. If approved to offer the previously approved course, the secondary provider is required to:
      1. offer the course as originally approved, assume the original expiration date, include any approved revisions, use all materials required for the course; and
      2. meet the requirements of §535.65 of this title.
5. Required revision of a currently approved qualifying course.
   1. Providers are responsible for keeping current on changes to the Act and Commission Rules and must revise or supplement materials for approved courses when changes are adopted on or before the effective date of those statutes or rules.
   2. If the Commission adopts new requirements for a course, including but not limited to a course approval form that divides selected qualifying course subjects into topics and units, the Commission will determine, at the time the Commission adopts the new requirements, whether a provider must revise the course or supplement the course. Any provider currently offering a course that is subject to change must:
      1. revise or supplement any currently approved classroom qualifying course covering that subject no later than 12 months after the effective date of the new requirements; and
      2. revise or supplement any currently approved qualifying course offered by distance or combination delivery no later than 15 months after the effective date of the new requirements.
   3. If the Commission determines that a qualifying course should be supplemented, a provider must submit the supplemental materials required by the Commission. No fee will be required and the course will maintain its original expiration date.
   4. If the Commission determines that a qualifying course should be revised, a provider must:
      1. submit the course application and approval forms including all materials required; and
      2. pay the fee required by §535.101 or §535.210 of this title.
   5. A provider may not offer a course for qualifying credit after the deadlines established by this subsection following a required revision or supplement if the provider has not received written approval from the Commission to offer the revised or supplemented course.
   6. If a provider paid a fee for the initial course approval, the provider will receive a prorated credit on the fee paid under this subsection for a revised course for the unexpired time remaining on that initial approval. The Commission will calculate the prorated credit by dividing the fee paid for the initial approval by 48 months and multiplying that amount by the number of full months remaining between the approval date of the revised course and the expiration date of the currently approved version of the course.
   7. A revised course approved under this subsection expires four years from the date of approval of the revision.
   8. No later than 90 days before the effective date of a revised or supplemented course, a provider shall send written notice to all students who have purchased the currently approved course and not completed it, that credit will no longer be given for the current course as of the effective date of the revised or supplemented course.
   9. If an approved provider fails to give the notice set out in paragraph (8) of this subsection, the provider shall allow the student to take the revised or supplemented course at no additional charge.
6. Voluntary revision of a currently approved qualifying course.
   1. A provider who voluntarily revises a currently approved course, shall, prior to implementation of any course materials:
      1. file any updated course materials and revisions of the course outline with the Commission; and
      2. pay the fee required by §535.101 and §535.210 of this title.
   2. If after review the Commission is not satisfied with the updated course materials and revised course outline, the Commission may direct a provider to:
      1. further revise the materials;
      2. cease use of materials; or
      3. withdraw a course text.
   3. If a provider paid a fee for the initial course approval, the provider will receive a prorated credit on the fee paid under this subsection for the unexpired time remaining on that initial approval. The Commission will calculate the prorated credit by dividing the fee paid for the initial approval by 48 months and multiplying that amount by the number of full months remaining between the approval date of the revised course and the expiration date of the currently approved version of the course.
   4. A revised course approved under this subsection expires four years from the date of approval of the revision.
   5. No later than 90 days before the effective date of a revised course, a provider shall send written notice to all students who have purchased the currently approved course and not completed it, that credit will no longer be given for the current course as of the effective date of the revised course.
   6. If an approved provider fails to give the notice set out in paragraph (5) of this subsection, the provider shall allow the student to take the revised course at no additional charge.
7. Approval and Expiration of approval.
   1. A Qualifying provider shall not offer qualifying education courses until the provider has received written notice of the approval from the Commission.
   2. A Qualifying course expires four years from the date of approval and providers must reapply and meet all current requirements of this Section to offer the course for another four years.
   3. Courses approved for use by a subsequent provider under subsection (d) of this section expire on the same date that the originally approved course expires.
8. Renewal of course approval.
   1. Not earlier than 90 days before the expiration of a course approval, a provider may apply for a renewal of course approval for another four-year period.
   2. Approval of an application to renew course approval shall be subject to the standards for initial approval set out in this section.
   3. The Commission may deny an application to renew course approval if the provider is in violation of a Commission order.
9. Course preapproval for exempt providers.
   1. Providers exempt from approval by the Commission may submit courses to the Commission for preapproval by meeting the standards for course approval under this section, including submitting all applicable forms and fees.
   2. Any course offered by an exempt provider without preapproval by the Commission will be evaluated by the Commission to determine whether it qualifies for credit at such time as a student submits a course completion certificate to the Commission for credit.
   3. The Commission will determine whether or not a course offered by an exempt provider without preapproval by the Commission qualifies for credit using the standards set out under this section.
   4. An exempt provider may not represent that a course qualifies for credit by the Commission unless the exempt provider receives written confirmation from the Commission that the course has been preapproved for credit.

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§535.63 Qualifications for Instructors of Qualifying Courses

1. A provider must ensure that an instructor who teaches real estate, easement or right-of-way, or real estate inspection qualifying courses is competent in the subject matter to be taught and has the ability to teach effectively.
2. Except as provided by subsection (c) of this section, the provider must use an instructor who possesses the following qualifications:
   1. a college degree in the subject area to be taught and three years of experience in teaching or training;
   2. five years of active experience as a license holder (broker for Real Estate Brokerage and Broker Responsibility courses) and three years of experience in teaching or training; or
   3. the equivalent of subsection (b)(1) or (2) of this section as determined by the provider after consideration of the instructor's professional experience, research, authorship, or other significant endeavors in real estate, easement or right-of-way, or real estate inspection.
3. For Texas Standards of Practice or Inspector Legal and Ethics and Standards of Practice Review, the provider must use an instructor who has five years of active licensure as a Texas professional inspector, and has:
   1. performed a minimum of 200 real estate inspections as a Texas professional inspector; or
   2. three years of experience in teaching and/or sponsoring trainees or inspectors.

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§535.64 Content Requirements for Qualifying Real Estate Courses

1. Mandatory qualifying courses. To be approved by the Commission, the following mandatory qualifying courses must contain the content outlined below:
   1. Principles of Real Estate I shall contain the topics and units outlined in the PRINS 1-1, Qualifying Real Estate Course Approval Form, Principles of Real Estate I, hereby adopted by reference.
   2. Principles of Real Estate II shall contain the topics and units outlined in the PRINS 2-1, Qualifying Real Estate Course Approval Form, Principles of Real Estate II, hereby adopted by reference.
   3. Law of Agency shall contain the topics and units outlined in the LOA-1, Qualifying Real Estate Course Approval Form, Law of Agency, hereby adopted by reference.
   4. Law of Contracts shall contain the topics and units outlined in the LOC-0, Qualifying Real Estate Course Approval Form, Law of Contracts, hereby adopted by reference.
   5. Promulgated Contract Forms shall contain the topics and units outlined in the PCF-0, Qualifying Real Estate Course Approval Form, Promulgated Contract Forms, hereby adopted by reference.
   6. Real Estate Finance shall contain the topics and units outlined in the REF-0, Qualifying Real Estate Course Approval Form, Real Estate Finance, hereby adopted by reference.
   7. Real Estate Brokerage (mandatory for a broker's license) shall contain the topics and units outlined in the REB-1, Qualifying Real Estate Course Approval Form, Real Estate Brokerage, hereby adopted by reference.
2. Elective qualifying courses. To be approved by the Commission, the following elective qualifying courses must contain the content outlined below.
   1. Residential Property Management shall contain the topics and units outlined in the PROPM-1, Qualifying Real Estate Course Approval Form, Residential Property Management, hereby adopted by reference.
   2. Real Estate Marketing shall contain the topics and units outlined in the REM-0, Qualifying Real Estate Course Approval Form, Real Estate Marketing, hereby adopted by reference.
   3. Real Estate Math shall contain the topics and units outlined in the REMath-0, Qualifying Real Estate Course Approval Form, Real Estate Math, hereby adopted by reference.
   4. Real Estate Appraisal shall contain the topics outlined in the REA-0, Qualifying Real Estate Course Approval Form, Real Estate Appraisal, hereby adopted by reference.
   5. Real Estate Investment shall contain the topics outlined in the REI-0, Qualifying Real Estate Course Approval Form, Real Estate Investment, hereby adopted by reference.
   6. Real Estate Law shall contain the topics outlined in the REL-0, Qualifying Real Estate Course Approval Form, Real Estate Law, hereby adopted by reference.
   7. Residential Inspection for Real Estate Agents shall contain the outlined in the RIREA-0, Qualifying Real Estate Course Approval Form, Residential Inspection for Real Estate Agents, hereby adopted by reference.
   8. A 30 hour advanced course on any qualifying course subject matter or a combination of several different qualifying course subject matter topics as set out in subsections (a) and (b) of this section.
3. Course Approval forms. All forms adopted by this section are available from the Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188, www.trec.texas.gov.

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§535.65 Responsibilities and Operations of Providers of Qualifying Courses

1. Responsibility of Providers.
   1. A provider is responsible for:
      1. the administration of each course, including, but not limited to, compliance with any prescribed period of time for any required course topics required by the Act, Chapter 1102, and Commission rules;
      2. maintaining student attendance records and pre-enrollment agreements;
      3. verifying instructor qualification, performance and attendance;
      4. proper examination administration;
      5. validation of student identity acceptable to the Commission;
      6. maintaining student course completion records;
      7. ensuring all advertising complies with subsection (c) of this section;
      8. ensuring that instructors or other persons do not recruit or solicit prospective sales agents, brokers, easement or right-of-way agents, or inspectors during course presentation; and
      9. ensuring staff is reasonably available for public inquiry and assistance.
   2. A provider may not promote the sale of goods or services during the presentation of a course.
   3. A provider may remove a student and not award credit if a student does not participate in class, or disrupts the orderly conduct of a class, after being warned by the provider or the instructor.
   4. If a provider approved by the Commission does not maintain a fixed office in Texas for the duration of the provider's approval to offer courses, the provider shall designate a resident of this state as attorney-in-fact to accept service of process and act as custodian of any records in Texas that the provider is required to maintain by this section. A power-of-attorney designating the resident must be filed with the Commission in a form acceptable to the Commission.
2. Use of Qualified Instructor.
   1. Except as provided by this subsection, a provider must use an instructor that is currently qualified under §535.63 of this subchapter (relating to Qualifications for Instructors of Qualifying Courses) to teach the specified course.
   2. Each instructor shall be selected on the basis of expertise in the subject area of instruction and ability as an instructor.
   3. A provider shall require specialized training or work experience for instructors teaching specialized subjects such as law, appraisal, investments, taxation or home inspection.
   4. An instructor shall teach a course in substantially the same manner represented to the Commission in the instructor's manual or other documents filed with the application for course approval.
   5. A provider may use the services of a guest instructor who does not meet the instructor qualifications under §535.63 of this subchapter for qualifying real estate, easement or right-of-way, or inspector courses provided that person instructs for no more than 10% of the total course time.
3. Advertising.
   1. The following practices are prohibited:
      1. using any advertising which does not clearly and conspicuously contain the provider's name on the first page or screen of the advertising;
      2. representing that the provider's program is the only vehicle by which a person may satisfy educational requirements;
      3. conveying a false impression of the provider's size, superiority, importance, location, equipment or facilities, except that a provider may use objective information published by the Commission regarding pass rates if the provider also displays next to the passage rate in a readily noticeable fashion:
         1. A hyperlink to the Commission website's Education Provider Exam Passage Rate page labeled "TREC Provider Exam Pass Rates" for digital media; or
         2. A URL to the Commission website's Education Provider Exam Passage Rate page labeled "TREC Provider Exam Pass Rates" for non-digital media;
      4. promoting the provider directly or indirectly as a job placement agency, unless the provider is participating in a program recognized by federal, state, or local government and is providing job placement services to the extent the services are required by the program;
      5. making any statement which is misleading, likely to deceive the public, or which in any manner tends to create a misleading impression;
      6. advertising a course under a course name other than the course name approved by the Commission; or
      7. advertising using a name that implies the course provider is the Texas Real Estate Commission, including use of the acronym "TREC", in all or part of the course provider's name.
   2. Any written advertisement by a provider that includes a fee that the provider charges for a course must display any additional fees that the provider charges for the course in the same place in the advertisement and with the same degree of prominence.
   3. The provider shall advertise a course for the full clock hours of time for which credit is awarded.
   4. The provider is responsible for and subject to sanctions for any violation of this subsection by any affiliate or other third party marketer or web hosting site associated with or used by the provider.
4. Pre-enrollment agreements for approved providers.
   1. Prior to a student enrolling in a course, a provider approved by the Commission shall provide the student with a pre-enrollment agreement that includes all of the following information:
      1. the tuition for the course;
      2. an itemized list of any fees charged by the provider for supplies, materials, or books needed in course work;
      3. the provider's policy regarding the refund of tuition and other fees, including a statement addressing refund policy when a student is dismissed or withdraws voluntarily;
      4. the attendance requirements;
      5. the acceptable makeup procedures, including any applicable time limits and any fees that may be charged for makeup sessions;
      6. the procedure and fees, if applicable, associated with exam proctoring;
      7. the procedure and fees for taking any permitted makeup final examination or any permitted re-examination, including any applicable time limits; and
      8. the notices regarding potential ineligibility for a license based on criminal history required by §53.152, Texas Occupations Code.
   2. A pre-enrollment agreement must be signed by a representative of the provider and the student prior to commencement of the course.
5. Refund of fees by approved provider.
   1. A provider shall establish written policies governing refunds and contingency plans in the event of course cancellation.
   2. If a provider approved by the Commission cancels a course, the provider shall:
      1. fully refund all fees collected from students within a reasonable time; or
      2. at the student's option, credit the student for another course.
   3. The provider shall inform the Commission when a student requests a refund because of a withdrawal due to the student's dissatisfaction with the quality of the course.
   4. If a provider fails to give the notice required by subsection (d)(1)(H) of this section, and an individual's application for a license is denied by the Commission because the individual has been convicted of a criminal offense, the provider shall reimburse the individual the amounts required by §53.153, Texas Occupations Code.
6. Course materials.
   1. Before the course starts, a provider shall give each student copies of or, if a student has online access, provide online access to any materials to be used for the course.
   2. A provider shall update course materials to ensure that current and accurate information is provided to students as provided for under §535.62 of this subchapter (relating to Approval of Qualifying Courses).
7. Presentation of courses.
   1. Classroom Delivery.
      1. The location for the course must:
         1. be conducive to instruction, such as a classroom, training room, conference room, or assembly hall that is separate and apart from work areas;
         2. be adequate for the class size;
         3. pose no threat to the health or safety of students; and
         4. allow the instructor to see and hear each student and the students to see and hear the instructor, including when offered through the use of technology.
      2. The provider must:
         1. check the photo identification of each student at class sign up and when signing in for each subsequent meeting of the class;
         2. ensure the student is present for the course for the hours of time for which credit is awarded;
         3. provide a 10 minute break per hour at least every two hours; and
         4. not have daily course segments that exceed 12 hours.
      3. If the course is a qualifying or non-elective continuing education course delivered through the use of technology and there are more than 20 students registered for the course, the provider will also use:
         1. a monitor at the broadcast origination site to verify identification of each student, monitor active participation of each student and facilitate questions for the instructor; and
         2. a proctor at each remote site with more than 20 students to verify identification of each student, monitor active participation of each student and proctor any on-site examination.
      4. Makeup Session for Classroom Courses.
         1. A provider may permit a student who attends at least two-thirds of an originally scheduled qualifying course to complete a makeup session to satisfy attendance requirements.
         2. A member of the provider's staff must approve the makeup procedure to be followed. Acceptable makeup procedures are:
            1. attendance in corresponding class sessions in a subsequent offering of the same course; or
            2. the supervised presentation by audio or video recording of the class sessions actually missed.
         3. A student shall complete all class makeup sessions no later than the 90th day after the date of the completion of the original course.
         4. A student who attends less than two-thirds of the originally scheduled qualifying course is not eligible to complete a makeup session. The student shall automatically be dropped from the course with no credit.
   2. Distance Education Delivery. The provider must ensure that:
      1. the student taking all topics of the course and completing all quizzes and exercises is the student receiving credit for the course through a student identity verification process acceptable to the Commission;
      2. a qualified instructor is available to answer students' questions or provide assistance as necessary in a timely manner;
      3. a student has completed all instructional modules and attended any hours of live instruction required for a given course; and
      4. a qualified instructor is responsible for providing answers and rationale for the grading of the course work.
   3. A provider is not required to present topics in the order outlined for a course on the corresponding course approval form.
   4. The periods of time prescribed to each unit of a topic for a qualifying course as outlined on the corresponding course approval form are recommendations and may be altered to allow instructors flexibility to meet the particular needs of their students.
   5. Notwithstanding subsections (3) - (4) of this section, all units must be presented within the prescribed topic.
8. Course examinations.
   1. The final examination given at the end of each course must be given in the manner submitted to and approved by the Commission. All final examinations must be closed book.
   2. Final examination questions must be kept confidential and be significantly different from any quiz questions and exercises used in the course.
   3. A provider shall not permit a student to view or take a final examination before the completion of regular course work and any makeup sessions required by this section.
   4. A provider must rotate all versions of the examination required by §535.62(b)(7) of this subchapter throughout the approval period for a course in a manner acceptable to the Commission and examinations must:
      1. require an unweighted passing score of 70%; and
      2. be proctored by a member of the provider faculty or staff, or third party proctor acceptable to the Commission, who:
         1. is present at the test site or able to monitor the student through the use of technology acceptable to the Commission; and
         2. has positively identified that the student taking the examination is the student registered for and who took the course.
   5. The following are examples of acceptable third party proctors:
      1. employees at official testing or learning/tutoring centers;
      2. librarians at a school, university, or public library;
      3. college or university administrators, faculty, or academic advisors;
      4. clergy who are affiliated with a specific temple, synagogue, mosque, or church; and
      5. educational officers of a military installation or correctional facility.
   6. A provider may not give credit to a student who fails a final examination and a subsequent final examination as provided for in subsection (i) of this section.
9. Subsequent final course examination.
   1. If a student fails a final course examination, a provider may permit the student to take a subsequent final examination only after the student has completed any additional course work prescribed by the provider.
   2. A student shall complete the subsequent final examination no later than the 90th day after the date the original class concludes. The subsequent final examination must be a different version of the original final examination given to the student and must comply with §535.62(b)(8) of this subchapter and subsection (h) of this section.
   3. If a student fails to timely complete the subsequent final examination as required by this subsection, the student shall be automatically dropped from the course with no credit.
   4. A student who fails the final course examination a second time is required to retake the course and the final course examination.
10. Course completion certificate.
    1. Upon successful completion of a qualifying course, a provider shall issue a course completion certificate. The course completion certificate shall include:
       1. the provider's name and approval number;
       2. the instructor's name;
       3. the course title;
       4. course numbers;
       5. the number of classroom credit hours;
       6. the course delivery method;
       7. the dates the student began and completed the course; and
       8. the printed name and signature of an official of the provider on record with the Commission.
    2. A provider may withhold any official completion documentation required by this subsection from a student until the student has fulfilled all financial obligations to the provider.
    3. A provider shall maintain adequate security against forgery for official completion documentation required by this subsection.
11. Instructor and course evaluations.
    1. A provider shall provide each student enrolled in a course with an instructor and course evaluation form or provide a link to an online version of the form that a student can complete and submit any time after course completion.
    2. An instructor may not be present when a student is completing the evaluation form and may not be involved in any manner with the evaluation process.
    3. When evaluating an instructor or course, a provider shall use all of the questions from the evaluation form approved by the Commission, in the same order as listed on that form. A provider may add additional questions to the end of the Commission evaluation questions or request the students to also complete the provider's evaluation form.
    4. A provider shall maintain any comments made by the provider's management relevant to instructor or course evaluations with the provider's records.
    5. At the Commission's request, a provider shall produce instructor and course evaluation forms for inspection by Commission staff.
12. Maintenance of records for a provider of qualifying courses.
    1. A provider shall maintain records of each student enrolled in a course for a minimum of four years following completion of the course, including course and instructor evaluations and student enrollment agreements.
    2. A provider shall maintain financial records sufficient to reflect at any time the financial condition of the school.
    3. A school's financial statement and balance sheets must be available for audit by Commission staff, and the Commission may require presentation of financial statements or other financial records.
    4. All records may be maintained electronically but must be in a common format that is legible and easily printed or viewed without additional manipulation or special software.
13. Changes in ownership or operation of an approved provider of qualifying courses.
    1. An approved provider shall obtain the approval of the Commission at least 30 days in advance of any material change in the operations of the provider by submitting the Qualifying Education Provider Supplement Application, including but not limited to changes in:
       1. operations or records management; and
       2. the location of the main office and any other locations where courses are offered.
    2. An approved provider requesting approval of a change in ownership shall provide all of the following information or documents to the Commission:
       1. an Education Provider Application reflecting all required information for each owner and the required fee;
       2. a Principal Information Form for each proposed new owner who holds at least 10% interest in the school;
       3. financial documents to satisfy standards imposed by §535.61 of this subchapter (relating to Approval of Providers of Qualifying Courses), including a $20,000 surety bond for the proposed new owner; and
       4. business documentation reflecting the change.

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§535.66 Credit for Courses Offered by Accredited Colleges or Universities

1. For the purposes of this section, an "accredited college or university" is defined as a college or university accredited by a regional accrediting association, such as the Commission on Colleges of the Southern Association of Colleges and Schools, or by a recognized national or international accrediting body.
2. Exemption. Pursuant to §1101.301, Texas Occupations Code, the Commission does not approve qualifying educational programs or courses of study in real estate and real estate inspection offered by an accredited college or university; however, the Commission has the authority to determine whether a real estate or real estate inspection course satisfies the requirements of the Act and Chapter 1102.
3. Credit for real estate courses offered by an accredited college or university. To be eligible to receive credit by the Commission, qualifying courses offered by an accredited college or university must meet the following requirements:
   1. cover the subject and topics listed in §1101.003, Texas Occupations Code, or §535.64 of this subchapter (relating to Content Requirements for Qualifying Real Estate Courses); and
   2. comply with the curriculum accreditation standards required of the college or university by the applicable accreditation association for verification of clock/course hours, design and delivery method.
4. Credit for real estate inspector courses offered by an accredited college or university. To be eligible to receive credit by the Commission, qualifying courses offered by an accredited college or university meet the following requirements:
   1. meet the subject and topic definitions set out in §1102.001(5), Texas Occupations Code, as clarified by the Commission in §535.213 of this chapter (relating to Qualifying Real Estate Inspector Instructors and Courses); and
   2. comply with the curriculum accreditation standards required of the college or university by the applicable accreditation association for verification of clock/course hours, design and delivery method.
   3. any courses offered to fulfill the substitute experience requirements allowed under §1102.111 must meet the requirements set out in §535.214 of this chapter (relating to Education and Experience Requirements for a License).
5. Credit for easement or right-of-way courses offered by an accredited college or university. To be eligible to receive credit by the Commission, qualifying courses offered by an accredited college or university must meet the following requirements:
   1. cover the subject and topics set out in §1101.509, Occupations Code, in substantially the same manner as clarified by the Commission in §535.68 of this subchapter (relating to Content Requirements for Easement or Right-of-Way Qualifying Course); and
   2. comply with the curriculum accreditation standards required of the college or university by the applicable accreditation association for verification of clock/course hours, design, and delivery method.
6. Preapproval of a course offered under subsections (c), (d), or (e).
   1. An accredited college and university may submit qualifying courses to the Commission for preapproval by filing a form approved by the Commission.
   2. Any course offered by an accredited college or university without preapproval by the Commission will be evaluated by the Commission, using the standards set out in this section, to determine whether it qualifies for credit at such time as a student submits a transcript with the course to the Commission for credit.
   3. An accredited college or university may not represent that a course qualifies for credit by the Commission unless the accredited college or university receives written confirmation from the Commission that the course has been preapproved for credit.
7. Required approval of qualifying courses not offered under subsections (c), (d), or (e) of this section or that are not subject to academic accreditation standards.
   1. To be eligible for credit from the Commission, a qualifying course offered by an accredited college and university that is not offered under subsections (c), (d), or (e) of this section or that is not subject to academic accreditation standards is required to be submitted for approval by the Commission in accordance with §535.62 of this subchapter (relating to Approval of Qualifying Courses), including payment of any fee required.
   2. An accredited college or university may not represent that a course qualifies for credit by the Commission unless the accredited college or university receives written confirmation from the Commission that the course has been approved.
8. Complaints and audits.
   1. If the Commission receives a complaint, or is presented with other evidence acceptable to the Commission, alleging that an accredited college or university is not in compliance with their accreditation association's curriculum accreditation standards for a real estate, easement or right-of-way, or real estate inspection course offered under subsections (c), (d), or (e) of this section, or is not complying with the requirements of this subchapter for a real estate, easement or right-of-way, or real estate inspection course not offered under subsections (c), (d), or (e) of this section, the Commission may investigate the allegation and/or anonymously audit the course in question.
   2. If after an investigation and/or audit, the Commission determines that an accredited college or university is not in compliance with their accreditation association's curriculum accreditation standards for a real estate, easement or right-of-way, or real estate inspection course offered under subsections (c), (d), or (e), or is not complying with the requirements of this subchapter for a real estate, easement or right-of-way, or real estate inspection course not offered under subsections (c), (d), or (e) of this section, the Commission will no longer issue credit to applicants for that course.
9. Required approval of CE program and courses. An accredited college or university is not exempt from approval for real estate and real estate inspection CE programs and courses and must comply with all requirements for approval for providers, courses and instructors required by Subchapter G of this chapter.

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§535.67 Qualifying Education: Compliance and Enforcement

1. Audits.
   1. The Commission staff may:
      1. conduct on-site audits without prior notice to an approved provider; and
      2. enroll and attend a course without identifying themselves as employees of the Commission for purposes of auditing a course.
   2. An audit report indicating noncompliance with the Act or Commission rules may be treated as a written complaint against the approved provider concerned.
2. Complaints, investigations, and hearings.
   1. The Commission shall investigate complaints against approved providers which allege acts constituting violations of the Act, Chapter 1102, and Commission rules.
   2. Complaints must be in writing, and the Commission may not initiate an investigation, or take action against an approved provider based on an anonymous complaint.
   3. Commission staff may initiate a complaint for any violation of the Act, Chapter 1102, and Commission rules, including a complaint against an approved provider, if a course completion certificate or other document filed with the Commission provides reasonable cause to believe a violation of this subchapter has occurred.
   4. The Commission shall provide the approved provider named in the complaint a copy of the complaint.
   5. Proceedings against approved providers will be conducted in the manner required by §1101.657 of the Act, the Administrative Procedure Act, Chapter 2001, Texas Government Code, and Chapter 533 of this title (relating to Practice and Procedure).
3. Cooperation with audit or complaint investigation. An approved provider shall provide records in the provider's possession for examination by the Commission or provide such information as is requested by the Commission not later than the 14th day after the date of receiving a request for examination of records or information.
4. Grounds for disciplinary action against an approved provider.
   1. The following acts committed by an approved provider or qualified instructor acting on behalf of the provider, are grounds for disciplinary action by the Commission against the provider:
      1. procuring or attempting to procure approval for a provider or course by fraud, misrepresentation or deceit, or by making a material misrepresentation of fact in an application filed with the Commission;
      2. making a false representation to the Commission, either intentionally or negligently, that a person had attended a course or a portion of a course for which credit was awarded, that a person had completed an examination, or that the person had completed any other requirement for course credit;
      3. aiding or abetting a person to circumvent the requirements for attendance established by these sections, the completion of any examination, or any other requirement for course credit;
      4. failing to provide, not later than the 14th day after the date of a request, information requested by the Commission as a result of a complaint which would indicate a violation of these sections;
      5. making a materially false statement to the Commission in response to a request from the Commission for information relating to a complaint against the approved provider;
      6. disregarding or violating a provision of the Act or Commission rules; or
      7. a provider of qualifying education failing to maintain sufficient financial resources to continue operation of the provider.
   2. If the Commission receives a complaint, or is presented with other evidence acceptable to the Commission alleging that a provider or instructor is not adequately teaching to the curriculum standards as required by this chapter, the Commission may initiate a complaint against that provider.
   3. If after an investigation the Commission determines that a provider or instructor engaged in any of the acts listed in this subsection, or failed to teach to the curriculum standards as required by this chapter, the Commission may take the following disciplinary action against a provider:
      1. reprimand;
      2. impose an administrative penalty;
      3. require additional education; or
      4. suspend or revoke approval.
5. Probation. The Commission may probate an order of suspension or revocation issued under this section upon reasonable terms and conditions.

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§535.68 Content Requirements for Easement or Right-of-Way Qualifying Course

To be approved by the Commission, the easement or right-of-way mandatory qualifying course must contain the topics required by §1101.509(b), Texas Occupations Code, and the units outlined in the ERW_QE-0, Qualifying Easement or Right-of-Way Course Approval (ERW–QE-0) Form, hereby adopted by reference.

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Subchapter G Requirements for Continuing Education Providers, Courses and Instructors

§535.70 Definitions

The following words and terms, when used in Subchapter G of this chapter, shall have the following meanings, unless the context clearly indicates otherwise.
1. Broker Responsibility Course–The course required by §1101.458 of the Act.
2. CE–Continuing education.
3. CE instructor–A person chosen by a provider to teach continuing education courses.
4. CE provider–Any person approved by the Commission; or specifically exempt by the Act, Chapter 1102, Texas Occupation Code, or Commission rule; that offers a course for which continuing education credit may be granted by the Commission to a license holder or applicant.
5. Classroom delivery–A method of course delivery where the instructor and students interact face to face and in real time, in either the same physical location, or through the use of technology.
6. Distance education delivery–A method of course delivery other than classroom delivery, including online and correspondence delivery.
7. Combination delivery–A combination of classroom and distance education where at least 50% of the course is offered through classroom delivery.
8. Elective CE course–A continuing education course, other than a Non-elective CE course, approved by the Commission as acceptable to fulfil the continuing education hours needed to renew a license.
9. Non-elective CE course–A continuing education course, for which the subject matter of the course is specifically mandated by the Act, Chapter 1102, or Commission rule, that a license holder is required to take prior to renewal of a license.
10. Legal Update Courses–Required courses created for and approved by the Texas Real Estate Commission to satisfy the eight hours of continuing education required by §1101.455 of the Act.
11. Person–Any individual, partnership, corporation, or other legal entity, including a state agency or governmental subdivision.
12. Proctor–A person who monitors a final examination for a course offered by a provider under the guidelines contained in this section. A proctor may be a course instructor, the provider, an employee of a college or university testing center, a librarian, or other person approved by the Commission.

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§535.71 Approval of CE Providers

1. Application for approval.
   1. A person desiring to be approved by the Commission to offer real estate, easement or right-of-way, or real estate inspection continuing education courses shall:
      1. file an application on the appropriate form approved by the Commission, with all required documentation;
      2. submit the required fee under §535.101 of this chapter (relating to Fees) or §535.210 of this chapter (relating to Fees); and
      3. maintain a fixed office in the state of Texas or designate a resident of this state as attorney-in-fact to accept service of process and act as custodian of any records in Texas which the continuing education provider is required to maintain by this subchapter.
   2. The Commission may:
      1. request additional information be provided to the Commission relating to an application; and
      2. terminate an application without further notice if the applicant fails to provide the additional information not later than the 60th day after the Commission sends the request.
   3. A CE provider is permitted to offer continuing education courses in real estate, easement or right-of-way, and real estate inspector that have been approved by the Commission.
2. Standards for approval. To be approved by the Commission to offer real estate, easement or right-of-way, or real estate inspector continuing education courses, the applicant must satisfy the Commission as to the applicant's ability to administer courses with competency, honesty, trustworthiness, and integrity. If the applicant proposes to employ another person to manage the operation of the applicant, that person must meet this standard as if that person were the applicant.
3. Approval notice. An applicant shall not act as or represent itself to be an approved CE provider until the applicant has received written notice of the approval from the Commission.
4. Period of initial approval. The initial approval of a CE provider is valid for two years.
5. Denial.
   1. If the Commission determines that an applicant does not meet the standards for approval, the Commission will provide written notice of denial to the applicant.
   2. The denial notice, applicant's request for a hearing on the denial, and any hearing are governed by the Administrative Procedure Act, Chapter 2001, Texas Government Code, and Chapter 533 of this title (relating to Practice and Procedure).
6. Renewal.
   1. Not earlier than 90 days before the expiration of its current approval, an approved provider may apply for renewal for another two year period.
   2. Approval or disapproval of a renewal application shall be subject to the standards for initial applications for approval set out in this section.
   3. The Commission may deny an application for renewal if the provider is in violation of a Commission order.

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§535.72 Approval of Non-elective Continuing Education Courses

1. General requirements.
   1. The non-elective continuing education courses must be conducted as prescribed by the rules in this subchapter.
   2. Elective continuing education courses are approved and regulated under §535.73 of this subchapter (relating to Approval of Elective Continuing Education Courses).
2. Application for approval to offer non-elective real estate or inspector CE courses.
   1. A CE provider seeking to offer a specific non-elective real estate or inspector CE course as outlined in this section shall:
      1. for a non-elective real estate course:
         1. submit a Real Estate Non-Elective Continuing Education CE Course Application to the Commission; and
         2. pay the fee required by §535.101 of this chapter (relating to Fees); and
      2. for a non-elective real estate inspection course:
         1. submit an Inspector Non-Elective Continuing Education CE Course Application to the Commission; and
         2. pay the fee required by §535.210 of this chapter (relating to Fees).
   2. A provider may file a single application for a CE course offered through multiple delivery methods. A fee is required for content review of each CE course and for each distinct delivery method utilized by a provider for that course.
   3. A provider who seeks approval of a new delivery method for a currently approved CE course must submit a new application, and pay all required fees, including a fee for content review.
   4. The Commission may:
      1. request additional information be provided to the Commission relating to an application; and
      2. terminate an application without further notice if the applicant fails to provide the additional information not later than the 60th day after the Commission mails the request.
3. Commission approval of non-elective course materials. Every two years, the Commission shall approve subject matter and course materials to be used for the following non-elective continuing education courses:
   1. a four-hour Legal Update I: Laws, Rules and Forms course;
   2. a four-hour Legal Update II: Agency, Ethics and Hot Topics course;
   3. a six-hour Broker Responsibility course; and
   4. an eight-hour Inspector Legal and Ethics and Standards of Practice Review course.
4. Course expiration.
   1. Each legal update course expires on December 31 of each odd-numbered year.
   2. Each broker responsibility course expires on December 31 of each even-numbered year.
   3. Each Inspector Legal and Ethics and Standards of Practice Review course expires on August 31 of each odd-numbered year.
5. Delivery method. Non-elective CE courses must be delivered by one of the following delivery methods:
   1. classroom delivery;
   2. distance education delivery; or
   3. a combination of (1) and (2) of this subsection if at least 50% of the combined course is offered by classroom delivery.
6. Except as provided in this section, non-elective CE courses must meet the presentation requirements of §535.65(g) of this chapter (relating to Responsibilities and Operations of Providers of Qualifying Courses). The provider must submit a course completion roster in accordance with §535.75(d) of this subchapter (relating to Responsibilities and Operations of Continuing Education Providers). Non-elective real estate courses are designed by the Commission for interactive classroom delivery. Acceptable demonstration of methods to engage students in interactive discussions and activities to meet the course objectives and time requirements are required for approval.
7. Course examinations. A provider must administer a final examination promulgated by the Commission for non-elective CE courses.
   1. Real estate non-elective CE courses. The examination will be included in course instruction time. Each student will complete the examination independently followed by a review of the correct answers by the instructor. There is no minimum passing grade required to receive credit.
   2. Inspector non-elective CE courses for classroom delivery.
      1. The examination will be given as a part of class instruction time with each student answering the examination questions independently followed by a review of the correct answers by the instructor.
      2. A student is not required to receive a passing grade on the examination to receive course credit.
   3. Inspector non-elective CE courses for distance education delivery.
      1. An examination is required after completion of regular course work.
      2. The examination must be:
         1. proctored by a member of the provider faculty or staff, or third party proctor set out in §535.65(h)(5) of this chapter, who is present at the test site and has positively identified that the student taking the examination is the student who registered for and took the course; or
         2. administered using a computer under conditions that satisfy the Commission that the student taking the examination is the student who registered for and took the course; and
         3. kept confidential.
      3. A provider may permit a student to take one subsequent final examination if the student fails the initial final examination. The subsequent final examination must be:
         1. different from the initial final examination; and
         2. completed no later than the 30th day after the date the original course concludes.
      4. Credit will not be awarded to a student for a course where the student receives a pass rate on a final examination or subsequent final exam below 70%.
      5. A student who fails the subsequent final course examination is required to retake the course and the final course examination.
8. Approval of currently approved courses by a secondary provider.
   1. If a CE provider wants to offer a course currently approved for another provider, that secondary provider must:
      1. submit the CE course application supplement form(s);
      2. submit written authorization to the Commission from the provider for whom the course was initially approved granting permission for the subsequent provider to offer the course; and
      3. pay the fee required by §535.101 of this chapter or §535.210 of this chapter.
   2. If approved to offer the currently approved course, the secondary provider is required to:
      1. offer the course as originally approved, assume the original expiration date, include any approved revisions, use all materials required for the course; and
      2. meet the requirements of §535.75 of this subchapter.
9. Approval notice. A CE Provider shall not offer non-elective continuing education courses until the provider has received written notice of the approval from the Commission.
10. Required revision of a currently approved non-elective CE course. Providers are responsible for keeping current on changes to the Act and Commission rules and must supplement materials for approved non-elective CE courses to present the current version of all applicable statutes and rules on or before the effective date of those changes.

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§535.73 Approval of Elective Continuing Education Courses

1. General requirements.
   1. This subsection applies to continuing education providers seeking to offer an elective CE course approved by the Commission.
   2. Non-elective CE courses are approved and regulated under §535.72 of this subchapter (related to Approval of Non-elective Continuing Education Courses).
2. Application for approval of an elective CE course.
   1. For each continuing education course an applicant intends to offer, the applicant must:
      1. submit the appropriate CE Course Application form;
      2. pay the fee required by §535.101 (relating to Fees) and §535.210 of this title (relating to Fees); and
      3. submit a timed course outline that includes:
         1. course topics;
         2. assignments and activities, if applicable;
         3. topic or unit quizzes, if applicable; and
         4. the amount of time dedicated for each item listed in clauses (i) - (iii) of this subparagraph.
   2. A provider may file a single application for a CE course offered through multiple delivery methods. A fee is required for content review of each CE course and for each distinct delivery method utilized by a provider for that course.
   3. A provider who seeks approval of a new delivery method for a currently approved CE course must submit a new application and pay all required fees, including a fee for content review.
   4. The Commission may:
      1. request additional information be provided to the Commission relating to an application; and
      2. terminate an application without further notice if the applicant fails to provide the additional information not later than the 60th day after the Commission mails the request.
3. Standards for course approval of elective CE course.
   1. To be approved as an elective CE course by the Commission, the course must:
      1. cover subject matter appropriate for a continuing education course for real estate, easement or right-of-way, or real estate inspection license holders;
      2. be current and accurate; and
      3. be at least one hour long with daily presentations no more than 10 hours long.
   2. A provider must demonstrate that a course meets the requirements under paragraph (1) of this subsection by submitting a statement describing the objective of the course and the relevance of the subject matter to activities for which a real estate, easement or right-of-way, or inspector license is required, including but not limited to relevant issues in the real estate market or topics which increase or support the license holder's development of skill and competence.
   3. The course must be presented in full hourly units.
   4. The course must be delivered by one of the following delivery methods:
      1. classroom delivery;
      2. distance education delivery; or
      3. a combination of (A) and (B), if at least 50% of the combined course is offered by classroom delivery.
4. Approval notice. A CE provider shall not offer elective continuing education courses until the provider has received written notice of the approval from the Commission.
5. Renewal of elective CE course approval.
   1. An elective CE course expires two years from the date of approval.
   2. Not earlier than 90 days before the expiration of a course approval, a provider may apply for a renewal of course approval for another two-year period.
   3. Approval of an application to renew an elective CE course approval shall be subject to the standards for initial approval set out in this section.
   4. The Commission may deny an application to renew an elective CE course approval if the provider is in violation of a Commission order.
6. Approval of currently approved courses by a subsequent provider.
   1. If a CE provider wants to offer a course currently approved for another provider, that subsequent provider must:
      1. submit the applicable course approval form(s);
      2. submit written authorization to the Commission from the owner of the rights to the course material granting permission for the subsequent provider to offer the course; and
      3. pay the fee required by §535.101 or §535.210 of this title.
   2. If approved to offer the currently approved course, the subsequent provider is required to:
      1. offer the course as originally approved, with any approved revisions, using all materials required for the course; and
      2. meet the requirements of §535.75 of this subchapter (relating to Responsibilities and Operations of Continuing Education Providers).

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§535.74 Qualifications for Continuing Education Instructors

1. A provider must ensure that an instructor who teaches continuing education courses is competent in the subject matter to be taught and has the ability to teach effectively.
2. The provider must use an instructor who possesses the following additional qualifications to teach real estate non-elective CE courses:
   1. meet the criteria to teach qualifying courses under §535.63 of this chapter (relating to Qualifications for Instructors of Qualifying Courses);
   2. successfully complete an instructor training program authorized by the Commission for the version of the non-elective CE course to be taught; and
   3. receive a passing grade of at least 80% on the non-elective CE course final examination promulgated by the Commission.
3. For Inspector Legal and Ethics and Standards of Practice Review, the provider must use an instructor who has five years of active licensure as a Texas professional inspector, and has:
   1. performed a minimum of 200 real estate inspections as a Texas professional inspector; or
   2. three years of experience in teaching and/or sponsoring trainees or inspectors.
4. An inspector is qualified to instruct a Ride-Along Course as defined in §535.218 of this chapter (relating to Continuing Education Required for Renewal) if the inspector has five years of active licensure as a Texas professional inspector, and has:
   1. performed a minimum of 200 real estate inspections as a Texas professional inspector; or
   2. three years of experience in teaching and/or sponsoring trainees or inspectors.

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§535.75 Responsibilities and Operations of Continuing Education Providers

1. Except as provided by this section, CE providers must comply with the responsibilities and operations requirements of §535.65 of this chapter (relating to Responsibilities and Operations of Providers of Qualifying Courses).
2. Use of Qualified Instructor.
   1. Except as provided by this subsection, a CE provider must use an instructor that:
      1. is currently qualified under §535.74 of this subchapter (relating to Qualifications for Continuing Education Instructors); and
      2. has expertise in the subject area of instruction and ability as an instructor;
   2. A CE instructor shall teach a course in substantially the same manner represented to the Commission in the instructor's manual or other documents filed with the application for course approval form;
   3. A CE provider may use the services of a guest instructor who is not qualified under §535.74 of this subchapter for real estate, easement or right-of-way, or inspector elective CE courses provided that:
      1. the guest instructor instructs for no more than a total of 50% of the course; and
      2. a CE instructor qualified under §535.74 of this subchapter remains in the classroom during the guest instructor's presentation.
   4. A CE provider may use the services of a guest instructor who is not qualified under §535.74 of this subchapter for 100% of a real estate, easement or right-of-way, or inspector elective CE courses provided that:
      1. The CE provider is:
         1. an accredited college or university;
         2. a professional trade association that is approved by the Commission as a CE provider under §535.71 of this subchapter (relating to Approval of Continuing Education Providers); or
         3. an entity exempt under §535.71 of this subchapter; and
      2. the course is supervised and coordinated by a CE instructor qualified under §535.74 of this subchapter who is responsible for verifying the attendance of all who request CE credit.
3. CE course examinations.
   1. For real estate CE courses, examinations are only required for non-elective CE courses and must comply with the requirements in §535.72(g) of this subchapter (relating to Approval of Non-elective Continuing Education Courses) and have a minimum of four questions per course credit hour.
   2. For inspector CE courses, examinations are only required for CE courses offered through distance education delivery and must comply with the requirements in §535.72(g) of this subchapter and have a minimum of four questions per course credit hour.
4. Course completion roster. Upon completion of a course, a CE provider shall submit a class roster to the Commission as outlined by this subsection.
   1. Classroom delivery.
      1. A provider shall maintain a course completion roster and submit information contained in the roster by electronic means acceptable to the Commission not sooner than the number of course credit hours has passed and not later than the 10th calendar day after the date a course is completed.
      2. A course completion roster shall include:
         1. the provider's name and license;
         2. a list of all instructors whose services were used in the course;
         3. the course title;
         4. the course numbers;
         5. the number of classroom credit hours;
         6. the course delivery method;
         7. the dates the student started and completed the course; and
         8. the signature of an authorized representative of the provider for whom an authorized signature is on file with the Commission.
      3. The Commission shall not accept unsigned course completion rosters.
   2. Distance education delivery. A provider shall maintain a Distance Education Reporting form and submit information contained in that form by electronic means acceptable to the Commission, for each student completing the course not sooner than the number of course credit hours has passed after the student starts the course and not later than the 10th calendar day after the student completed the course.
   3. A provider may withhold any official completion documentation required by this subsection from a student until the student has fulfilled all financial obligations to the provider.
   4. A provider shall maintain adequate security against forgery for official completion documentation required by this subsection.
5. Maintenance of records. Maintenance of CE provider's records is governed by this subsection.
   1. A CE provider shall maintain records of each student enrolled in a course for a minimum of four years following completion of the course, including course and instructor evaluations and student enrollment agreements.
   2. All records may be maintained electronically but must be in a common format that is legible and easily printed or viewed without additional manipulation or special software.
   3. A CE provider shall maintain any comments made by the provider's management relevant to instructor or course evaluations with the provider's records.
   4. Upon request, a CE provider shall produce instructor and course evaluation forms for inspection by Commission staff.
6. Changes in ownership or operation of an approved CE Provider. Changes in ownership or operation of an approved CE provider are governed by this subsection.
   1. An approved provider shall obtain the approval of the Commission at least 30 days in advance of any material change in the operation of the provider, including but not limited to changes in:
      1. ownership;
      2. management; and
      3. the location of the main office and any other locations where courses are offered.
   2. An approved provider requesting approval of a change in ownership shall provide a CE Provider Application including all required information and the required fee.

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§535.77 CE Providers: Compliance and Enforcement

Compliance and enforcement of CE Providers is governed by §535.67 of this title.

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Subchapter H Recovery Fund

§535.82 Proration of Payments from the Real Estate Recovery Trust Account

In the event of multiple valid pending claims against a license holder in excess of the limitations in §1101.610 of the Act, the claims shall be prorated as follows:
1. Actual damages shall be allocated first. If the total of the eligible actual damages of all claims exceeds the maximum that may be paid from the Real Estate Recovery Trust Account, the actual damages shall be prorated, and no interest, attorney fees, or court costs shall be paid.
2. If, after allocating the actual damages as provided by paragraph (1) of this section, the limitations in §1101.610 of the Act are not reached, interest on actual damages (pre-judgment and post-judgment) shall be allocated second. If the total of the interest on eligible actual damages of all claims exceeds the amount remaining to be paid from the Real Estate Recovery Trust Account, the interest on eligible actual damages shall be prorated, and no other interest, attorney fees, or court costs shall be paid.
3. If, after allocating the actual damages and interest thereon as provided by paragraphs (1) and (2) of this section, the limitations in §1101.610 of the Act are not reached, other interest, attorney fees, and court costs shall be allocated third. If the total of the other interest, attorney fees, and court costs of all claims exceeds the amount remaining to be paid from the Real Estate Recovery Trust Account, the other interest, attorney fees, and court costs shall be prorated.

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§535.83 Association of Designated Broker on Claim

For purposes of §1101.6011 and §1101.610(e) of the Act, the designated broker associated with the claim against a business entity is the broker who was the designated broker at the time of the act that is the subject of the underlying judgment.

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Subchapter I License Renewal

§535.91 Renewal of a Real Estate License

1. Renewal application.
   1. A real estate license expires on the date shown on the face of the license issued to the license holder.
   2. If a license holder intends to renew an unexpired license, the license holder must, on or before the expiration date of the current license:
      1. file a renewal application through the online process on the Commission's website or on the applicable form approved by the Commission;
      2. submit the appropriate fee required by §535.101 of this chapter (relating to Fees);
      3. comply with the fingerprinting requirements under the Act; and
      4. except as provided for in subsections (g) and (h) of this section, satisfy the continuing education requirements applicable to that license.
   3. The Commission may request additional information be provided to the Commission in connection with a renewal application.
   4. A license holder is required to provide information requested by the Commission not later than the 30th day after the date the Commission requests the information. Failure to provide information is grounds for disciplinary action.
2. Renewal Notice.
   1. The Commission will deliver a license renewal notice to a license holder three months before the expiration of the license holder's current license.
   2. If a license holder intends to renew a license, failure to receive a license renewal notice from the Commission does not relieve a license holder from the requirements of this subsection.
   3. The Commission has no obligation to notify any license holder who has failed to provide the Commission with the person's mailing address and email address or a corporation, limited liability company, or partnership that has failed to designate an officer, manager, or partner who meets the requirements of the Act.
3. Timely renewal of a license.
   1. A renewal application for an individual broker or sales agent is filed timely if it is received by the Commission, or postmarked, on or before the license expiration date.
   2. A renewal application for a business entity broker is filed timely, if the application and all required supporting documentation is received by the Commission, or postmarked, not later than the 10th business day before the license expiration date.
   3. If the license expires on a Saturday, Sunday or any other day on which the Commission is not open for business, a renewal application is considered to be filed timely if the application is received or postmarked no later than the first business day after the expiration date of the license.
4. Initial renewal of sales agent license. A sales agent applying for the first renewal of a sales agent license must:
   1. successfully complete the additional educational requirements of §535.55 of this chapter (relating to Education and Sponsorship Requirements for a Sales Agent License) before the sales agent files the renewal application; and
   2. fulfill the continuing education requirements of §535.92(a)(1), (a)(2), and (a)(4) of this chapter (relating to Continuing Education Requirements), if applicable.
5. Renewal of license issued to a business entity. The Commission will not renew a license issued to a business entity unless the business entity:
   1. has designated a corporate officer, an LLC manager, an LLC member with managing authority, or a general partner who:
      1. is a licensed broker in active status and good standing with the Commission; and
      2. completes any applicable continuing education required under §535.92 of this chapter;
   2. maintains errors and omissions insurance with a minimum annual limit of $1 million per occurrence if the designated broker owns less than 10 percent of the business entity; and
   3. is currently eligible to transact business in Texas.
6. Renewal and pending complaints.
   1. The Commission may renew the current license of a license holder that has a complaint pending with the Commission, provided the license holder meets all other applicable requirements of this section.
   2. Upon completion of the investigation of the pending complaint, the Commission may suspend or revoke the license, after notice and hearing in accordance with the Administrative Procedure Act, Chapter 2001, Texas Government Code.
7. Renewal on inactive status.
   1. A license holder may renew a license on inactive status.
   2. A license holder is not required to complete continuing education courses as a condition of renewing a license on inactive status, but must satisfy continuing education requirements before returning to active status.
8. Renewal with deferred continuing education.
   1. A license holder may renew an active license without completion of required continuing education and may defer completion of any outstanding continuing education requirements for an additional 60 days from the expiration date of the current license if the license holder:
      1. meets all other applicable requirements of this section; and
      2. pays the continuing education deferral fee required by §535.101 of this chapter at the time the license holder files the renewal application with the Commission.
   2. If after expiration of the 60 day period set out in paragraph (1) of this subsection, the Commission has not been provided with evidence that the license holder has completed all outstanding continuing education requirements, the license holder's license will be placed on inactive status.
   3. Credit for continuing education courses for a subsequent licensing period does not accrue until after all deferred continuing education has been completed for the current licensing period.
9. Late Renewal.
   1. Subject to the requirements of this subsection and §1101.451(e) of the Act, a license holder may late renew a license after the expiration date of that license if:
      1. the license has been expired for less than six months.
      2. the license holder files the application to renew on a form approved by the Commission for that purpose; and
      3. the license holder submits the required fees under §535.101 of this chapter.
   2. Provided the license holder meets all the requirements of paragraph (1) of this subsection, the Commission will renew the license on inactive status.
10. License Reinstatement.
    1. If a license has been expired for more than six months, a license holder may not renew the license.
    2. A license holder may reinstate an expired license if the license holder:
       1. has held an individual broker or sales agent license in this state within the two years preceding the date the reinstatement application is filed;
       2. submits the required fees under §535.101 of this chapter; and
       3. satisfies the Commission as to the applicant's honesty, trustworthiness, and integrity.
    3. An applicant for reinstatement is not required to take an examination.
    4. Provided the license holder meets the requirements of paragraph (2) of this subsection, the Commission will reinstate:
       1. a broker license on active status if the continuing education that would have been required for a timely renewal during the two years preceding the date the application is filed is completed, except as provided in paragraph (5) of this subsection
       2. a sales agent license on inactive status.
    5. A broker may file an application to reinstate a license on inactive status under this subsection.
11. Reactivation of a license on inactive status under this section is governed by Subchapter L of this chapter (relating to Inactive License Status).
12. Denial of Renewal. The Commission may deny an application for renewal of a license if the license holder is in violation of the terms of a Commission order.
13. Renewal of license for military service member. A license holder on active duty in the United States armed forces is entitled to two years of additional time to renew an expired license without being subject to any increase in fee, any education or experience requirements or examination if the license holder:
    1. provides a copy of official orders or other official documentation acceptable to the Commission showing that the license holder was on active duty during the license holder's last renewal period; and
    2. pays the renewal application fee in effect when the previous license expired.

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§535.92 Continuing Education Requirements

1. Required continuing education. 18 hours of continuing education are required for each renewal of a real estate sales agent or broker license and must include:
   1. a four hour Legal Update I: Laws, Rules and Forms course;
   2. a four hour Legal Update II: Agency, Ethics and Hot Topics course;
   3. three hours on the subject of real estate contracts from one or more Commission approved courses; and
   4. a six hour broker responsibility course, if the license holder:
      1. sponsors one or more sales agent at any time during the current license period;
      2. is a designated broker of a business entity that sponsors one or more sales agent at any time during the designated broker's current license period; or
      3. is a delegated supervisor under §535.2(e) of this chapter (relating to Broker Responsibility).
2. Awarding continuing education credit. The Commission will award credit to a license holder for an approved continuing education course upon receipt of a course completion roster from a CE provider as required under §535.75 of this chapter (relating to Responsibilities and Operations of Continuing Education Providers).
3. Continuing education credit for qualifying courses. Real estate license holders may receive continuing education elective credit for qualifying real estate courses or qualifying real estate inspection courses that have been approved by the Commission or that are accepted by the Commission for satisfying educational requirements for obtaining or renewing a license. Qualifying real estate courses must be at least 30 classroom hours in length to be accepted for continuing education elective credit.
4. Continuing education credit for course taken outside of Texas. A course taken by a Texas license holder to satisfy continuing education requirements of a country, territory, or state other than Texas may be approved on an individual basis for continuing education elective credit in Texas upon the Commission's determination that:
   1. the Texas license holder held an active real estate license in a country, territory, or state other than Texas at the time the course was taken;
   2. the course was approved for continuing education credit for a real estate license by a country, territory, or state other than Texas and, if a correspondence course, was offered by an accredited college or university;
   3. the Texas license holder's successful completion of the course has been evidenced by a course completion certificate, a letter from the provider or other proof satisfactory to the Commission;
   4. the subject matter of the course was predominately devoted to a subject acceptable for continuing education credit in Texas; and
   5. the Texas license holder has filed a Credit Request for an Out-of-State Course, with the Commission.
5. Continuing education credit for courses offered by the State Bar. To request continuing education elective credit for real estate related courses approved by the State Bar of Texas for minimum continuing legal education participatory credit, a license holder is required to file an Individual Credit Request for State Bar Course.
6. Continuing education credit for attendance at Commission meeting. A real estate license holder may receive up to four hours of continuing education elective credit per license period for attendance in person at a single quarterly Commission meeting. Credit will only be awarded to license holders who attend the meeting in its entirety; no partial credit for attendance will be awarded. Credit will not be awarded to license holders appearing as a party to a contested case before the Commission.
7. Continuing education credit for instructors. Instructors may receive continuing education credit for real estate qualifying courses subject to the following guidelines:
   1. An instructor may receive credit for those segments of the course that the instructor teaches by filing an Instructor Credit Request.
   2. An instructor may receive full course credit by attending any segment that the instructor does not teach in addition to those segments the instructor does teach.
8. Limitations. The Commission will not award credit to a license holder who attends or instructs the same course more than once during:
   1. the term of the current license period; or
   2. the two-year period preceding the filing of a renewal application for a license after the license expiration date as provided for under §535.91 of this subchapter (relating to Renewal of a Real Estate License) or return to active status as provided for under Subchapter L of this chapter (relating to Inactive License Status).

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Subchapter J Fees

§535.101 Fees

1. The Commission shall charge and collect the following fees:
   1. a fee of $150 for filing an original or reinstatement application for a real estate broker license, which includes a fee for transcript evaluation;
   2. a fee of $72 for the timely renewal of a real estate broker license;
   3. a fee of $120 for filing an application to change from a real estate broker license to a real estate sales agent license;
   4. a fee of $150 for filing an original or reinstatement application for a real estate sales agent license, which includes a fee for transcript evaluation;
   5. a fee of $66 for the timely renewal of a real estate sales agent license;
   6. a fee equal to 1-1/2 times the timely renewal fee for the late renewal of a license within 90 days of expiration;
   7. a fee equal to two times the timely renewal fee for the late renewal of a license more than 90 days but less than six months after expiration;
   8. the fee charged by an examination provider pursuant to a contract with the Commission for taking a license examination;
   9. a fee of $10 for deposit into the Real Estate Recovery Trust Account upon the filing of an original sales agent or broker application;
   10. a fee of $50 to request an inactive broker license be returned to active status;
   11. a fee of $50 for filing a fitness determination;
   12. a fee of $400 for filing an application for accreditation of a qualifying education program for a period of four years;
   13. after initial approval of accreditation, a renewal fee of $200 a year for operation of a qualifying real estate education program;
   14. a fee of $50 plus the following fees per classroom hour approved by the Commission for each qualifying education course for a period of four years:
       1. $10 for content and examination review;
       2. $10 for classroom delivery design and presentation review; and
       3. $20 for distance education delivery design and presentation review;
   15. a fee of $400 for filing an application for accreditation as a continuing education provider for a period of two years;
   16. a fee of $50 plus the following fees per classroom hour approved by the Commission for each continuing education course for a period of two years:
       1. $5 for content and examination review;
       2. $5 for classroom delivery design and presentation review; and
       3. $10 for distance education delivery design and presentation review;
   17. the fee required under paragraphs (14)(C) and (16)(C) will be waived if the course has already been certified by a distance learning certification center acceptable to the Commission;
   18. the fee charged by the Federal Bureau of Investigation and Texas Department of Public Safety for fingerprinting or other service for a national or state criminal history check in connection with a license application;
   19. the fee required by the Department of Information Resources as a subscription or convenience fee for use of an online payment system; and
   20. a continuing education deferral fee of $200.
2. Fees established by this section must be paid when an application is filed and are not refundable once an application has been accepted for filing.
3. If the Commission receives an application that requires payment of a fee, and a sufficient fee was not submitted with the application, the Commission will return the application and notify the person filing the application that the person must pay the fee before the application will be processed.
4. If a payment to the Commission by or on behalf of a license holder or applicant is dishonored or reversed by a bank or other financial institution, the Commission shall send a request for payment of the dishonored or reversed payment by certified mail to the last known mailing address of the license holder or applicant as shown in the records of the Commission. If the Commission has sent a request for payment in accordance with the provisions of this section, and the license holder or applicant fails to make good on the payment in the form of a cashier's check, money order, or credit card payment within 30 days after the Commission has mailed the request, the license will be placed on inactive status.
5. Placing a license on inactive status under this section does not preclude the Commission from proceeding under §1101.652(a)(3) of the Act against a license holder who has failed to make good a payment issued to the Commission within a reasonable time.

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Subchapter L Inactive License Status

§535.120 Prohibited Activity While on Inactive License Status

A license holder may not engage in real estate brokerage activity while on inactive status.

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§535.121 Inactive Sales Agent License

1. The license of a sales agent becomes inactive upon:
   1. the death of the sales agent's sponsoring broker;
   2. the expiration, suspension, revocation or inactivation of the license of the sponsoring broker;
   3. if the sponsoring broker is a business entity, the dissolution of the entity or the forfeiture of its charter;
   4. if the sponsoring broker is a business entity, the expiration, suspension, revocation, or inactivation of the license of the designated broker of the entity;
   5. termination of sponsorship by the sales agent or sponsoring broker;
   6. failure to timely complete continuing education required under the Act and this chapter; or
   7. receipt by the Commission of an application for inactive status.
2. If the broker intends to terminate the sponsorship, the broker must immediately:
   1. notify the sales agent in writing; and
   2. terminate the sponsorship:
      1. through the online process approved by the Commission; or
      2. on the appropriate form delivered to the Commission.
3. If the sales agent intends to terminate the sponsorship, the sales agent must immediately:
   1. notify the broker in writing; and
   2. terminate the sponsorship:
      1. through the online process approved by the Commission; or
      2. on the appropriate form delivered to the Commission.
4. If a sponsorship is terminated on a form under this section, the effective date of the termination of the sponsorship is the date the Commission receives the completed form and any applicable fee.
5. It is the responsibility of the sales agent on inactive status to pay all required license renewal fees timely to prevent the inactive license from expiring.

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§535.122 Reactivation of Sales Agent License

In order to reactivate a license on inactive status, the license holder must:
1. provide the Commission with documentation that the license holder has satisfied all continuing education requirements under the Act and this chapter;
2. certify, on a form acceptable to the Commission, that the license holder has not engaged in activity requiring a license at any time after the license became inactive;
3. establish a sponsorship relationship with a broker:
   1. through the online process approved by the Commission; or
   2. following receipt by the Commission of the applicable sales agent sponsorship form signed by the sales agent and the sponsoring broker; and
4. pay the appropriate fee.

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§535.123 Inactive Broker Status

1. The license of an individual broker becomes inactive when:
   1. the Commission receives an application for inactive status from the broker; or
   2. the broker is placed on inactive status by the Commission for failure to comply with a requirement of the Act or this chapter.
2. The license of a business entity broker becomes inactive when:
   1. the Commission receives an application for inactive status from the broker;
   2. the entity is not qualified to transact business in Texas;
   3. the designated broker's license:
      1. expires;
      2. is suspended, including a probated suspension; or
      3. is revoked, including a probated revocation; or
   4. the designated broker dies or resigns as designated broker, except as provided in §535.124 of this subchapter (relating to Death of a Designated Broker).
3. The broker must confirm to the Commission in writing that the broker has given all sales agents sponsored by the broker written notice of termination of sponsorship at least 30 days before filing the application for inactive status.
4. It is the responsibility of the broker on inactive status to pay all required license renewal fees timely to prevent the inactive license from expiring.
5. To return to active status, a broker on inactive status must apply to the Commission for return to active status on a form approved by the Commission, pay the appropriate fee, and satisfy any continuing education requirements under the Act and this chapter.

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§535.124 Death of a Designated Broker

If the business entity broker sponsors any sales agents, the license of the business entity and any sponsored sales agent becomes inactive upon the expiration of 14 days after the date the designated broker dies, unless prior to the 14th day, the entity:
1. names a new designated broker;
2. provides to the Commission the information required by section 535.53(b)(5) of this chapter (relating to Business Entity; Designated Broker); and
3. the Commission approves the new designated broker.

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Subchapter M Nonresidents

§535.131 Unlawful Conduct; Splitting Fees

1. A broker licensed in Texas may cooperate with a foreign broker and share earned commissions with a foreign broker.
2. Only Texas license holders may handle negotiations physically conducted within Texas.
3. A resident of a foreign country or territory that does not require a person to be licensed to act as a real estate broker is considered to be licensed as a foreign broker for the purposes of §1101.651 of the Act, if the person practices as a real estate broker in compliance with the law of the foreign country or territory.

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§535.132 Eligibility for Licensure

1. An individual licensed as a broker who subsequently moves to a state other than Texas is not required to maintain an office in Texas.
2. To be eligible to receive a license and maintain an active license, a business entity created or chartered in a state other than Texas must designate a person to act for it who meets the requirements of §1101.355 of the Act, although the designated broker is not required to be a resident of Texas. Foreign business entities must also be permitted to engage in business in Texas to receive a Texas real estate broker license.

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§535.133 Consent To Be Sued; Exception to Requirements

A broker or sales agent who resides in or moves to a state other than Texas must file a consent to service of legal process with the Commission. A consent to service is not required when the broker's or sales agent's place of business is in Texas.

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Subchapter N Suspension and Revocation of Licensure

§535.141 Initiation of Investigation; Order Requirements

1. A complaint which names a licensed real estate sales agent as the subject of the complaint but does not specifically name the sales agent's sponsoring broker, is a complaint against the broker sponsoring the sales agent at the time of any alleged violation for the limited purposes of determining the broker's involvement in any alleged violation and whether the broker fulfilled the broker's professional responsibilities provided the complaint concerns the conduct of the sales agent as an agent for the broker.
2. The designated broker is responsible for all real estate brokerage activities performed by, on behalf of, or through a business entity. A complaint which names a business entity licensed as a broker as the subject of the complaint but which does not specifically name the designated broker is a complaint against the designated broker at the time of any alleged violation for the limited purposes of determining the designated broker's involvement in any alleged violation and whether the designated broker fulfilled the designated broker's professional responsibilities. A complaint which names a sales agent sponsored by a licensed business entity but which does not specifically name the designated broker of the business entity is a complaint against the designated broker at the time of any alleged violation by the sales agent for the limited purposes of determining the designated broker's involvement in any alleged violation and whether the designated broker fulfilled the designated broker's professional responsibilities provided the complaint concerns the conduct of the sales agent as an agent of the business entity.
3. Using the criteria specified by §1101.204 of the Act, the Commission prioritizes and investigates complaints received by the Commission as follows:
   1. Level 1.
      1. Fraud or misrepresentation that involves loss of $10,000 or more.
      2. Continuing threat to public welfare.
      3. Unlicensed activity.
   2. Level 2.
      1. Fraud or misrepresentation that involves loss of less than $10,000.
      2. Negligence.
      3. Violations of Chapter 1102:
         1. 1102.301 negligence or incompetence by an inspector.
         2. 1102.302 employment contingent on inspection report.
         3. 1102.303 acting in conflicting capacities, i.e. inspector, broker, principal.
         4. 1102.305 agreeing to perform repairs in connection with inspection.
      4. Violations of Standards of Practice, §§535.227 - 535.233 of this chapter.
   3. Level 3.
      1. Technical violations.
      2. Chapter 1102 complaints other than those listed in Level 2 above.
      3. Allegations involving education providers.
4. If information obtained during the course of an investigation of a complaint reveals reasonable cause to believe the respondents to the complaint may have committed other violations of the Act or rules, no additional authorization shall be required to investigate and take action based upon the information.
5. If the Commission suspends or revokes a license or probates an order of suspension or revocation against a license holder, the Commission may monitor compliance with its order and initiate action based on the authority of the original complaint or original authorization by the members of the Commission.
6. A person whose license has been suspended may not during the period of any suspension perform, attempt to perform, or advertise to perform any act for which a license is required by the Act or Commission rules.
7. A person whose license is subject to an order suspending the license must provide notice in writing not later than the third day before the date of the suspension as follows:
   1. if the person is a sales agent, notify his or her sponsoring broker in writing that his or her license will be suspended;
   2. if the person is a broker, notify any sponsored sales agent, or any business entity for which the person is designated broker that:
      1. his or her broker license will be suspended; and
      2. once the suspension is effective, any sponsored sales agent, or who is sponsored by the business entity, will no longer be authorized to engage in real estate brokerage unless:
         1. the sales agent is sponsored by another broker and files a change of sponsorship with the Commission; or
         2. the business entity designates a new broker and files a change of designated broker with the Commission;
   3. If the person is an apprentice inspector or real estate inspector, notify his or her sponsoring professional inspector that his or her license will be suspended;
   4. if the person is a professional inspector notify any sponsored apprentice or real estate inspectors that:
      1. his or her professional inspector license will be suspended; and
      2. once the suspension is effective any sponsored apprentice or real estate inspectors will no longer be authorized to inspect any real property unless the apprentice or real estate inspectors associate with another professional inspector and file a change of sponsorship with the Commission.
   5. if the person has a contractual obligation to perform services for which a license is required by law or Commission rule, notify all other parties to the contract that the services cannot be performed during the suspension;
   6. if the person is a sales agent and is directly involved in any real estate transaction in which the sales agent acts as an agent, notify all other parties, including principals and other brokers, that the person cannot continue performing real estate brokerage services during the suspension; and
   7. if the person holds money in trust in any transaction in which the person is acting as a broker, remit such money in accordance with the instructions of the principals.
8. If, in conjunction with an application or disciplinary matter, an applicant or license holder agrees to automatic suspension or revocation of his or her license for failing to comply with an administrative term or requirement of an agreed order such as payment of a penalty or completion of coursework, the license may be automatically suspended or revoked with no further action by the Commission.

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§535.142 Consumer Complaint Processing

1. Not later than the 7th day after receipt of a signed, written complaint, Commission staff shall:
   1. assign the complaint a case number in the complaint tracking system; and
   2. send written acknowledgement of receipt to the complainant.
2. Once a signed, written complaint has been filed with the Commission, the Commission has jurisdiction to consider, investigate, and take action based on the complaint. Complaints may be withdrawn only with the consent of the Commission.
3. Not later than the 30th day after receiving a complaint, Commission staff will send written notice to the complainant of Commission staff's evaluation regarding the complaint. This evaluation may be that the case will be investigated or that the Commission lacks jurisdiction over the complaint.
4. Dismissal of Complaints.
   1. Commission staff will dismiss a complaint with no further processing if staff determines at any time that:
      1. the complaint is:
         1. not within the Commission's jurisdiction; or
         2. inappropriate or without merit;
      2. no violation exists; or
      3. there is insufficient evidence to prove a case at a hearing.
   2. Commission staff will send written notice to the complainant and each respondent who has been notified of the complaint within 14 days after a complaint is dismissed under this subsection.
5. Commission staff may request additional information from any person, if necessary, to determine how to proceed with the complaint.
   1. When information is requested from a complainant, the complainant must respond within a reasonable time, or the complaint may be closed and no further action will be taken. If the complaint is closed under this subsection, Commission staff will send written notice to the complainant and to the respondent, if the respondent has been notified of the complaint.
   2. When information, documents, books, or records are requested from a respondent, the respondent must respond within a reasonable time, or the failure to respond may violate §1101.652(a) or (a-1) of the Act.
   3. For purposes of this section and §1101.652(a) and (a-1) of the Act, "a reasonable time" means 14 days from receipt of a request made by Commission staff.
   4. Commission staff may agree to extend the time to respond for good cause upon receipt of a written request for more time from a complainant or respondent.
6. If Commission staff determines that a complaint is within the Commission's jurisdiction, a copy of the complaint, including attachments, will be sent to the respondent.
7. The Commission will protect the identity of a complainant to the extent possible by excluding the complainant's identifying information from a complaint notice sent to a respondent.
8. Commission staff may assign a complaint to an investigator to conduct a field investigation or conduct an investigation by requesting a written response and documents. Absent good cause, a field investigation must be completed within six months after a complaint is opened.
9. Commission staff will periodically send written notice to the complainant and each respondent of the status of the complaint until final disposition. For purposes of this subsection, "periodically" means at least once every 120 days.
10. Commission staff may issue an advisory letter to a respondent when it determines that a warning is sufficient to deter certain conduct or when it seeks to educate a respondent about proper conduct to avoid a future violation.
11. When Commission staff determines a violation exists, Commission staff may seek to resolve the case through an agreed order with the respondent.
12. Absent good cause, a case that is not dismissed or resolved by an advisory letter or agreed order must be set for a hearing at the State Office of Administrative Hearings not later than one year after the complaint is filed with the Commission.

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§535.143 Fraudulent Procurement of License

A violation of, §1101.652(a)(2) of the Act occurs if an applicant, including a designated broker for any business entity eligible for licensure under this chapter, omits material information or makes material misstatements, written or oral, in connection with the filing of an application or renewal application to obtain licensure. This does not include an unintentional mistake of fact the determination of which is within the discretion of the Commission and subject to judicial review.

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§535.144 When Acquiring or Disposing of Own Property or Property of Spouse, Parent or Child

1. For purposes of §1101.652(a-1)(1) of the Act "license holder" includes a license holder acting on behalf of:
   1. the license holder's spouse, parent or child;
   2. a business entity in which the license holder is more than a 10% owner; or
   3. a trust for which the license holder acts as trustee or of which the license holder or the license holder's spouse, parent or child is a beneficiary.
2. A license holder engaging in a real estate transaction on his or her own behalf or in a capacity described by subsection (a), is obligated to disclose in writing that he or she is a licensed real estate broker or sales agent acting on his or her own behalf or in a capacity described by subsection (a) in any contract of sale or rental agreement or in any other writing given before entering into any contract of sale or rental agreement.
3. A license holder acting on his or her own behalf or in a capacity described by subsection (a) shall not use the license holder's expertise to the disadvantage of a person with whom the license holder deals.

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§535.145 False Promise

For purposes of §1101.652(b)(5) of the Act "false promise" includes both oral and written promises. The fact that a written agreement between the parties to a real estate transaction does not recite a promise made by a real estate license holder to one of the parties or that a person did not detrimentally rely on the false promise will not prevent the Commission from determining that a false promise was made. In determining whether this section has been violated, neither a written contractual provision disclaiming oral representations nor the Texas Rules of Evidence Rule 1004, the parol evidence rule, shall prevent the Commission from considering oral promises made by a license holder.

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§535.146 Maintaining Trust Money

1. Definitions. In this section:
   1. "Trust money" means client's money, earnest money, rent, unearned fees, security deposits, or any money held on behalf of another person.
   2. "Trust account" means an account managed by one party for the benefit of another in a banking institution authorized to do business in Texas.
2. Acceptance of Trust Money.
   1. Any trust money accepted by a broker is held in a fiduciary capacity and must be maintained in a designated trust account maintained by the broker or delivered to an escrow agent authorized in Texas in accordance with the agreement of the principals of the transaction.
   2. A sales agent shall not maintain a trust account. Any trust money received by a sales agent must be immediately delivered to the sales agent's sponsoring broker.
   3. Unless a different time to deposit trust money is expressly agreed upon in writing by the principals to the transaction, any trust money received by the broker must be deposited in a trust account or delivered to an authorized escrow agent within a reasonable time, which the Commission has determined to be not later than the close of business of the second working day after the date the broker receives the trust money.
   4. The broker shall not:
      1. commingle trust money with the broker's personal money or other non-trust money; or
      2. deposit or maintain trust money in a personal account or any kind of business account.
   5. The following is prima facie evidence of commingling trust money with the broker's own money:
      1. placing trust money in a broker's personal or operating account; or
      2. paying operating expenses or making withdrawals from a trust account for any purpose other than proper disbursement of trust money.
3. Trust account requirements.
   1. The trust account must be clearly identified as a trust account;
   2. The broker may, but is not required to, maintain separate trust accounts for each client or type of trust money maintained by the broker, such as earnest money deposits or security deposits received for the management of rental property.
   3. If trust money held by a broker is deposited in an interest bearing account:
      1. the money must be available for disbursal at the appropriate time; and
      2. unless otherwise provided for by an agreement signed by the party depositing the money with the broker, any interest earned on the money must be distributed to any parties to whom the money is disbursed.
   4. A broker may deposit and maintain a reasonable amount of money in the trust account to cover bank service fees, including fees charged for insufficient funds. Detailed records must be kept for any funds deposited under this exception.
   5. If a broker acquires ownership of trust money held in a trust account, including entitlement to compensation, such money must be removed from the trust account not later the 30th day after the date the broker acquires ownership of the money.
   6. The broker must retain a documentary record of each deposit or withdrawal from the trust account and provide an accounting to each beneficiary of trust money at least monthly if there has been any activity in the account.
   7. A broker may only authorize another license holder to withdraw or transfer money from any trust account but the broker remains responsible and accountable for all trust money received by that broker and all deposits to or disbursements from the trust account.
   8. If a broker deposits trust money in the form of a check in a trust account and the check is dishonored by the financial institution on which it was drawn, the broker shall immediately notify all parties to the transaction in writing.
4. Disbursement of trust money.
   1. A broker may only disburse money from the broker's trust account in accordance with the agreement under which the money was received.
   2. If any or all of the parties to a real estate transaction make a written demand for payment of trust money, the broker must pay the trust money to the party or parties entitled to the money within a reasonable time, which the Commission has determined to be not later than the 30th day after the date the demand is made.
   3. If by a subsequent written agreement, all parties to a real estate transaction authorize the broker maintaining trust money to disburse the trust money in a manner not in accordance with the agreement under which the money was received, the broker must pay the trust money to the party or parties entitled to the money under the subsequent written agreement within a reasonable time, which the Commission has determined to be not later than the 30th day after the date the broker receives the subsequent written agreement.
   4. The broker must immediately notify all parties in writing of any disbursement of trust money under subsections (d)(2) or (3).
   5. If the broker cannot reasonably determine to which party or parties the trust money should be paid, the broker may pay the trust money into the registry of a court and interplead the parties.
5. Records. A broker must maintain all documentation regarding a trust account for four years from the date the document is received or created by the broker.

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§535.147 Splitting Fee with Unlicensed Person

1. Except as otherwise provided by the Act or Commission rules, a broker or sales agent may not share a commission or fees with any person who engages in acts for which a license is required and is not actively licensed as a broker or sales agent.
2. An unlicensed person may share in the income earned by a business entity licensed as a broker or exempted from the licensing requirements under the Act if the person engages in no acts for which a license is required and does not lead the public to believe that the person is in the real estate brokerage business.
3. A broker or sales agent may not share a commission or fees with an unlicensed business entity created by a license holder for the purpose of collecting a commission or fees on behalf of the license holder, unless the entity is exempted from the requirements of licensure as provided by §535.5 of this chapter (relating to License Not Required) and §1101.355(d) of the Act.
4. A license holder may rebate or pay a portion of the license holder's fee or commission to a party in the transaction when the sales agent has the written consent of the sales agent's sponsoring broker and the party represented by the license holder. A commission or fee may not be paid to any party to the transaction in a manner that misleads a broker, lender, title company, or governmental agency regarding the real estate transaction or the financial resources or obligations of the buyer. A license holder who intends to pay a portion of the license holder's fee or commission to a party the license holder does not represent must obtain the written consent of the party represented by the license holder before making the payment.

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§535.148 Receiving an Undisclosed Commission or Rebate

1. A license holder may not receive a commission, rebate, or fee in a transaction from a person other than the person the license holder represents without first disclosing to the license holder's client that the license holder intends to receive the commission, rebate, or fee, and obtaining the consent of the license holder's client.
2. If a party the license holder does not represent agrees to pay a service provider in the transaction, the license holder must also obtain the consent of that party to accept a fee, commission, or rebate from the service provider. As used in this section, the term "service provider" does not include a person acting in the capacity of a real estate broker or sales agent.
3. A license holder may not enter into a contract or agreement with a service provider to a real estate transaction in which the license holder represents one or both of the parties if, pursuant to the contract or agreement:
   1. the license holder provides services for or on behalf of the service provider; and
   2. the contract or agreement prohibits the license holder from offering similar services for or on behalf of a competing service provider.
4. A license holder may not pay or receive a fee or other valuable consideration to or from any other settlement service provider for, but not limited to, the following:
   1. the referral of inspections, lenders, mortgage brokers, or title companies;
   2. inclusion on a list of inspectors, preferred settlement providers, or similar arrangements; or
   3. inclusion on lists of inspectors or other settlement providers contingent on other financial agreements.
5. In this section, "settlement service" means a service provided in connection with a prospective or actual settlement, and "settlement service provider" includes, but is not limited to, any one or more of the following:
   1. a federally related mortgage loan originator;
   2. a mortgage broker;
   3. a lender or other person who provides any service related to the origination, processing or funding of a real estate loan;
   4. a title service provider;
   5. an attorney;
   6. a person who prepares documents, including notarization, delivery, and recordation;
   7. a person who provides credit report services;
   8. an appraiser;
   9. an inspector;
   10. a settlement agent;
   11. a person who provides mortgage insurance services;
   12. a person who provides services involving hazard, flood, or other casualty insurance, homeowner's warranties or residential service contracts;
   13. a real estate agent or broker; and
   14. a person who provides any other services for which a settlement service provider requires a borrower or seller to pay.
6. A license holder must use TREC No. RSC-4, Disclosure of Relationship with Residential Service Contract Provider or Administrator, to disclose to a party to a real estate transaction in which the license holder represents one or both of the parties any payments received for services provided for or on behalf of a residential service contract provider or administrator licensed under Texas Occupations Code Chapter 1304.
7. The Texas Real Estate Commission adopts by reference TREC No. RSC-4, Disclosure of Relationship with Residential Service Contract Provider or Administrator, approved by the Commission for use by license holders to disclose payments received from a residential service contract provider or administrator. This document is published by and available from the Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188, www.trec.texas.gov.
8. This section does not prohibit:
   1. normal promotional or educational activity that is not conditioned on the referral of business and that does not involve the defraying of expenses that otherwise would be incurred;
   2. a payment at market rates to any person for goods actually furnished or for services actually performed; or
   3. a payment pursuant to a cooperative brokerage or referral arrangement or agreement between active licensed real estate agents and real estate brokers.

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§535.149 Lottery or Deceptive Trade Practice

1. For the purposes of §1101.652(b)(14) of the Act, the elements of a "lottery" are the award or distribution of a prize or prizes by chance and the payment of consideration for the opportunity to win the prize.
2. The giving of gifts as an inducement for prospective clients does not violate this section or §1101.652(b)(14) of the Act, but license holders when procuring prospects must otherwise comply with the provisions of §535.20 of this title.
3. "Deceptive practices" include, but are not limited to the acts described in the Texas Business and Commerce Code §17.46, done in a manner defined in that section.

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§535.153 Violating an Exclusive Agency

Although a license holder, including one acting as agent for a prospective buyer or prospective tenant, may not attempt to negotiate a sale, exchange, lease, or rental of property under exclusive listing with another broker, the Act does not prohibit a license holder from soliciting a listing from the owner while the owner's property is subject to an exclusive listing with another broker.

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§535.154 Registration and Use of Alternate, Team and Assumed Business Names Used in Advertisements

1. Definitions. For the purposes of this section:
   1. "Advertisement" has the meaning assigned by §535.155.
   2. "Alternate name" (commonly known as an alias) means a name used by an individual license holder other than the name shown on the license issued by the Commission, such as a middle name, maiden name, or nickname. It does not include a common derivative of a name, such as Kim for Kimberly or Bill for William, which is considered the same as the name shown on the license.
   3. "Associated broker" means a broker who associates with and gets paid through another broker under a relationship that is intended to be a continuous relationship, including but not limited to, an employment or ongoing independent contractor relationship.
   4. "Assumed business name" (commonly known as a DBA or trade name) means any name used in business by a broker that meets the requirements of subsection (d), other than the name shown on the broker's license issued by the Commission, a team name, or an alternate name.
   5. "Team name" means a name used by a group of one or more license holders sponsored by or associated with the same broker that performs real estate activities under an exclusive collective name other than the broker's licensed name or assumed business name.
2. Alternate names.
   1. Before a license holder starts using an alternate name in an advertisement, the license holder must register the name with the Commission on a form approved by the Commission.
   2. The Commission may request supporting documentation evidencing the legal authority to use the alternate name if the last name submitted is different from the last name shown on the license issued by the Commission.
   3. A license holder must notify the Commission, and their sponsoring broker, not later than the 10th day after the date the license holder stops using an alternate name.
3. Team names:
   1. A team name may not include any terms that could mislead the public to believe that the team is offering brokerage services independent from its sponsoring broker.
   2. A team name must end with the word "team" or "group".
   3. Before an associated broker or a sales agent sponsored by a broker starts using a team name in an advertisement, the broker must register the name with the Commission on a form approved by the Commission.
   4. A broker must notify the Commission in writing not later than the 10th day after the date the associated broker or a sales agent sponsored by the broker stops using a team name.
4. Assumed business names.
   1. Before a broker, associated broker or a sales agent sponsored by a broker starts using an assumed business name of the broker in an advertisement, the broker must:
      1. register the name with the Commission on a form approved by the Commission; and
      2. provide written evidence of legal authority to use the assumed business name in Texas, such as registration of the name with the Secretary of State or county clerk's office.
   2. A broker must notify the Commission in writing not later than the 10th day after the date the broker stops using an assumed business name.

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§535.155 Advertisements

1. Each advertisement must include the following in a readily noticeable location in the advertisement:
   1. the name of the license holder or team placing the advertisement; and
   2. the broker's name in at least half the size of the largest contact information for any sales agent, associated broker, or team name contained in the advertisement.
2. For the purposes of this section:
   1. "Advertisement" is any form of communication by or on behalf of a license holder designed to attract the public to use real estate brokerage services and includes, but is not limited to, all publications, brochures, radio or television broadcasts, all electronic media including email, text messages, social media, the Internet, business stationery, business cards, displays, signs and billboards. Advertisement does not include:
      1. a communication from a license holder to the license holder's current client; and
      2. a directional sign that may also contain only the broker's name or logo.
   2. Associated broker has the meaning assigned by §535.154.
   3. "Broker's name" means:
      1. the broker's name as shown on a license issued by the Commission;
      2. if an individual, an alternate name registered with the Commission; or
      3. any assumed business name that meets the requirements of §535.154.
   4. "Contact Information" means any information that can be used to contact a license holder featured in the advertisement, including a name, phone number, email address, website address, social media handle, scan code or other similar information.
   5. "Party" means a prospective buyer, seller, landlord, or tenant, or an authorized legal representative of a buyer, seller, landlord, or tenant, including a trustee, guardian, executor, administrator, receiver, or attorney-in-fact. The term does not include a license holder who represents a party.
   6. "Team name" has the meaning assigned by §535.154.
3. For an advertisement on social media or by text, the information required by this section may be located on a separate page or on the account user profile page of the license holder, if the separate page or account user profile is:
   1. readily accessible by a direct link from the social media or text; and
   2. readily noticeable on the separate page or in the account user profile.
4. For purposes of this section and §1101.652(b)(23) of the Act, an advertisement that misleads or is likely to deceive the public, tends to create a misleading impression, or implies that a sales agent is responsible for the operation of the broker's real estate brokerage business includes, but is not limited to, any advertisement:
   1. that is inaccurate in any material fact or representation;
   2. that does not comply with this section;
   3. that identifies a sales agent as a broker;
   4. that uses a title, such as owner, president, CEO, COO, or other similar title, email or website address that implies a sales agent is responsible for the operations of a brokerage;
   5. that contains a team name with terms that imply that the team is offering brokerage services independent from its sponsoring broker, including, but not limited to, "brokerage", "company", and "associates";
   6. that contains the name of a sales agent that is not the name as shown on the sales agent's license issued by the Commission or an alternate name registered with the Commission;
   7. that contains the name of a sales agent whose name is, in whole or in part, used in a broker's name and that implies that the sales agent is responsible for the operation of the brokerage;
   8. that causes a member of the public to believe that a person not licensed to conduct real estate brokerage is engaged in real estate brokerage;
   9. that contains the name or likeness of an unlicensed person that does not clearly disclose that the person does not hold a license;
   10. that creates confusion regarding the permitted use of a property;
   11. about the value of a property, unless it is based on an appraisal that is disclosed and readily available upon request by a party or it is given in compliance with §535.17;
   12. that implies the person making the advertisement was involved in a transaction regarding a property when the person had no such role;
   13. about a property that is subject to an exclusive listing agreement without the permission of the listing broker and without disclosing the name of the listing broker unless the listing broker has expressly agreed in writing to waive disclosure;
   14. offering a listed property that is not discontinued within 10 days after the listing agreement is no longer in effect;
   15. about a property 10 days or more after the closing of a transaction unless the current status of the property is included in the advertisement;
   16. that offers to rebate a portion of a license holder's compensation to a party if the advertisement does not disclose that payment of the rebate is subject to the consent of the party the license holder represents in the transaction;
   17. that offers to rebate a portion of a license holder's commission contingent upon a party's use of a specified service provider, or subject to approval by a third party such as a lender, unless the advertisement also contains a disclosure that payment of the rebate is subject to restrictions;
   18. that offers or promotes the use of a real estate service provider other than the license holder and the license holder expects to receive compensation if a party uses those services, if the advertisement does not contain a disclosure that the license holder may receive compensation from the service provider;
   19. that ranks the license holder or another service provider unless the ranking is based on objective criteria disclosed in the advertisement; or
   20. that states or implies that the license holder teaches or offers Commission approved courses in conjunction with an approved school or other approved organization unless the license holder is approved by the Commission to teach or offer the courses.

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§535.156 Dishonesty; Bad Faith; Untrustworthiness

1. A license holder's relationship with the license holder's principal is that of a fiduciary. A license holder shall convey to the principal all known information which would affect the principal's decision on whether or not to make, accept or reject offers; however, if the principal has agreed in writing that offers are not to be submitted after the principal has entered into a contract to buy, sell, rent, or lease a property, the license holder shall have no duty to submit offers to the principal after the principal has accepted an offer.
2. The license holder must put the interest of the license holder's principal above the license holder's own interest. A license holder must deal honestly and fairly with all parties; however, the license holder represents only the principal and owes a duty of fidelity to such principal.
3. A license holder has an affirmative duty to keep the principal informed at all times of significant information applicable to the transaction or transactions in which the license holder is acting as agent for the principal.
4. A license holder has a duty to convey accurate information to members of the public with whom the license holder deals.

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§535.157 Obligation to Respond Timely

A broker or sales agent must respond to his or her principal, a broker or sales agent representing another party to a real estate transaction, or an unrepresented party to a real estate transaction within two calendar days.

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Subchapter P Enforcement Action for Unlicensed Activity

§535.181 Investigation and Actions

If the Commission receives information that indicates that a person has engaged in unlicensed activity, it shall conduct an investigation to determine if such information is accurate. If the information establishes evidence to indicate a probable violation of the Act, the Commission may impose an administrative penalty; issue an order to cease and desist; file a complaint alleging unlicensed activity with the appropriate law enforcement official; or take such other action as may be necessary and proper.

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Subchapter Q Administrative Penalties

§535.191 Schedule of Administrative Penalties

1. The Commission may suspend or revoke a license or take other disciplinary action authorized by the Act in addition to or instead of assessing the administrative penalties set forth in this section.
2. The administrative penalties set forth in this section take into consideration all of the criteria listed in §1101.702(b) of the Act.
3. An administrative penalty range of $100 - $1,500 per violation per day may be assessed for violations of the following sections of the Act and Rules:
   1. §1101.552;
   2. §1101.652(a)(3);
   3. §1101.652(a)(8);
   4. §1101.652(a-1)(3);
   5. §1101.652(b)(23);
   6. §1101.652(b)(29);
   7. §1101.652(b)(33);
   8. 22 TAC §535.21(a);
   9. 22 TAC §535.53;
   10. 22 TAC §535.65;
   11. 22 TAC §535.91(d);
   12. 22 TAC §535.121;
   13. 22 TAC §535.154;
   14. 22 TAC §535.155;
   15. 22 TAC §535.157; and
   16. 22 TAC §535.300.
4. An administrative penalty range of $500 - $3,000 per violation per day may be assessed for violations of the following sections of the Act and Rules:
   1. §§1101.652(a)(4) - (7);
   2. §1101.652(a-1)(2);
   3. §1101.652(b)(1);
   4. §§1101.652(b)(7) - (8);
   5. §1101.652(b)(12);
   6. §1101.652(b)(14);
   7. §1101.652(b)(22);
   8. §1101.652(b)(28);
   9. §§1101.652(b)(30) - (31);
   10. §1101.654(a);
   11. 22 TAC §531.18;
   12. 22 TAC §531.20;
   13. 22 TAC §535.2;
   14. 22 TAC §535.6(c) - (d);
   15. 22 TAC §535.16;
   16. 22 TAC §535.17; and
   17. 22 TAC §535.144.
5. An administrative penalty range of $1,000 - $5,000 per violation per day may be assessed for violations of the following sections of the Act and Rules:
   1. §1101.351;
   2. §1101.366(d);
   3. §1101.557(b);
   4. §1101.558;
   5. §§1101.559(a) and (c);
   6. §1101.560;
   7. §1101.561(b);
   8. §1101.615;
   9. §1101.651;
   10. §1101.652(a)(2);
   11. §1101.652(a-1)(1);
   12. §§1101.652(b)(2) - (6);
   13. §§1101.652(b)(9) - (11);
   14. §1101.652(b)(13);
   15. §§1101.652(b)(15) - (21);
   16. §§1101.652(b)(24) - (27);
   17. §1101.652(b)(32);
   18. 22 TAC §535.141(f);
   19. 22 TAC §§535.145 - 535.148; and
   20. 22 TAC §535.156.
6. The Commission may assess an additional administrative penalty of up to two times that assessed under subsections (c), (d) and (e) of this section, subject to the maximum penalties authorized under §1101.702(a) of the Act, if a person has a history of previous violations.

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Subchapter R Real Estate Inspectors

§535.201 Definitions

The following definitions shall apply to this subchapter.
1. Client–a buyer or seller, including a prospective buyer or seller, of real property that is the subject of a real estate inspection conducted under Chapter 1102, Occupations Code, and this Subchapter.
2. Committee–The Texas Real Estate Inspector Committee.
3. Standards of Practice (SOPs)–refers to §§535.227 - 535.233 of this title, which establish the minimum requirements for a real estate inspection conducted under Chapter 1102, Occupations Code, and this Subchapter.

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§535.206 The Texas Real Estate Inspector Committee

1. The functions of the Committee are as prescribed by Chapter 1102.
2. The Committee consists of nine members appointed by the Commission as follows:
   1. six members who have been engaged in the practice of real estate inspecting as professional inspectors for at least five years before the member's appointment and who are actively engaged in that practice; and
   2. three members who represent the public, who are not registered, certified, or licensed by an occupational or regulatory agency in the real estate industry.
3. Appointments to the Committee shall be made without regard to the race, color, disability, sex, religion, age, or national origin of the appointee.
4. Inspector members of the Committee serve staggered six-year terms, with the terms of two inspector members expiring on December 31 of each odd-numbered year. Inspector members may not serve more than two consecutive full terms. Public members of the Committee serve staggered two year terms, with the term of one public member expiring on December 31 of each even-numbered year and the terms of two public members expiring on December 31 of each odd-numbered year. Public members may not serve more than three consecutive full terms. Initial appointments may be made for terms shorter than six or two years, respectively, in order to establish staggered terms. A member whose term has expired holds office until the member's successor is appointed. If a vacancy occurs during a member's term, the Commission shall appoint a person to fill the unexpired term.
5. At a regular meeting in January of each year, the Committee shall elect from its members a presiding officer, assistant presiding officer, and secretary.
6. The Commission may remove a Committee member if the member:
   1. does not have the qualifications required by subsection (b)(1) of this section;
   2. cannot discharge the member's duties for a substantial part of the member's term;
   3. is absent from more than half of the regularly scheduled Committee meetings that the member is eligible to attend during each calendar year, unless the absence is excused by majority vote of the Committee; or
   4. violates Chapter 1102.
7. If the executive director of the Commission has knowledge that a potential ground for removal exists, the executive director shall notify the presiding officer of the Commission that the potential ground exists.
8. The validity of an action of the Committee is not affected by the fact that it is taken when a ground for removal of a Committee member exists.
9. The Committee may meet at the call of a majority of its members. The Committee shall meet at the call of the Commission.
10. A quorum of the Committee consists of five members.
11. The Committee shall conduct its meetings in substantial compliance with Robert's Rules of Order.
12. The secretary of the Committee, or in the secretary's absence, a member designated by the chair, shall prepare written minutes for each meeting and submit the minutes to the Committee for approval.
13. At least twice a year, the Committee Chair shall report on the activities of the Committee to the Commission. The Committee may submit its written recommendations concerning the licensing and regulation of real estate inspectors to the Commission at any time the Committee deems appropriate. If the Commission submits a rule to the Committee for development, the chair of the Committee or the chair's designee shall report to the Commission after each meeting at which the proposed rule is discussed on the Committee's consideration of the rule.
14. The Committee is automatically abolished on September 1, 2031 unless the Commission subsequently establishes a different date.

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§535.208 Application for a License

1. Application.
   1. A person who intends to be licensed by the Commission must:
      1. file an application for the license through the online process approved by the Commission or on a form approved by the Commission for that purpose; and
      2. submit the required fee under §535.210 of this chapter (relating to Fees).
   2. The Commission will reject an application submitted without a sufficient filing fee.
   3. The Commission may request additional information be provided to the Commission relating to an application.
2. General Requirements for Licensure.
   1. To be eligible for any inspector license, an applicant must:
      1. meet the following requirements at the time of the application:
         1. be 18 years of age;
         2. be a citizen of the United States or a lawfully admitted alien;
      2. comply with the fingerprinting, education, experience and examination requirements of the Act, Chapter 1102, and the rules of the Commission;
      3. meet the honesty, trustworthiness, and integrity requirements under the Act; and
      4. provide proof of financial responsibility as required by Chapter 1102.
   2. The fact that an individual has had disabilities of minority removed does not affect the requirement that an applicant be 18 years of age to be eligible for a license.
3. License for military service members, veterans, or military spouses. Unless otherwise excepted under §535.58 of this chapter (relating to License for Military Service Members, Veterans, or Military Spouses), an applicant who is a military service member, veteran, or the spouse of a person who is on full-time military service in the armed forces of the United States or serving on active duty as a member of the armed forces of the United States must meet all requirements of this section.
4. Terminated application. An application will be terminated and subject to no further evaluation or processing if the applicant fails to satisfy the requirements of subsection (b)(1) of this section within one year from the date the application is filed.
5. Denial of application.
   1. An application for a license may be denied if the Commission determines that the applicant has failed to satisfy the Commission as to the applicant's honesty, trustworthiness and integrity or if the applicant has been convicted of a criminal offense which is grounds for disapproval of an application under §541.1 of this title (relating to Criminal Offense Guidelines). Notice of the denial and any hearing on the denial shall be as provided in §1101.364, Texas Occupations Code, and §535.34 of this chapter (relating to Sales Agents Employed by an Owner of Land and Structures Erected by the Owner).
   2. Procuring or attempting to procure a license by fraud, misrepresentation or deceit or by making a material misstatement of fact in an application is grounds to deny the application or suspend or revoke the license. It is a violation of this section for a sponsoring professional inspector knowingly to make a false statement to the Commission in an application for a license for an apprentice or a real estate inspector.

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§535.209 Examinations

1. Examinations for licensure.
   1. The examination for a real estate inspector license and for a professional inspector license consists of a national part and a state part.
   2. The Commission adopts the National Home Inspector Examination developed by the Examination Board of Professional Home Inspectors for the national portion of the examination. For the state portion of the examination, questions shall be used which measure competency in the subject areas required for a license by Chapter 1102, and which demonstrate an awareness of its provisions relating to inspectors.
   3. Each real estate inspector applicant must achieve a score of at least 70% on the state portion of the examination. Each professional inspector applicant must achieve a score of at least 75% on the state portion of the examination. Examination results are valid for a period of one year from the date the examination is passed.
2. Administration of examination. Except as otherwise required by Chapter 1102 or this section, examinations shall be conducted as provided by §535.57 of this chapter (relating to Examinations). An applicant is eligible to take a qualifying examination for a license after the Commission has received evidence of completion of all education and experience required by this subchapter.
3. Exam Eligibility.
   1. Before the applicant is eligible to take the national portion of the examination, the applicant must submit evidence of completion of the following courses to the Commission:
      1. Property and Building Inspection Module I;
      2. Property and Building Inspection Module II;
      3. Business Operations and Professional Responsibilities Module; and
      4. Analysis of Findings and Reporting Module, if required for licensure under §535.214 of this subchapter (relating to Education and Experience Requirements for Licensure).
   2. Before the applicant is eligible to take the state portion of the examination, the applicant must submit evidence of completion of the following to the Commission, if required for licensure under §535.214 of this subchapter:
      1. Texas Law Module;
      2. Texas Standards of Practice Module; and
      3. Texas Practicum, as defined by §535.214(h) of this subchapter.
   3. If the applicant has previously passed the national portion of the examination, before the applicant is eligible to take the state portion of the examination, the applicant:
      1. must submit evidence of completion of the required coursework as provided under paragraph (2) of this subsection; and
      2. is not required to complete coursework outlined under paragraph (1) of this subsection.
   4. If the applicant fails the examination three consecutive times, the applicant may not apply for reexamination or submit a new license application unless the applicant submits evidence to the Commission that the applicant has successfully completed additional qualifying education after the date of the third failed examination, as follows:
      1. for an applicant who failed the national part of the examination, Property and Building Inspection Module I or Property and Building Inspection Module II; or
      2. for an applicant who failed the state part of the examination, Texas Law Module, or Texas Standards of Practice Module.
   5. If the applicant chooses to take the national portion and state portion of the exam separately, the national portion must be taken before the state portion of the exam.

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§535.210 Fees

1. The Commission shall charge and collect the following fees:
   1. a fee of $60 for filing an original or reinstatement application for a license as an apprentice inspector;
   2. a fee of $100 for filing an original or reinstatement application for a license as a real estate inspector, which includes a fee for transcript evaluation;
   3. a fee of $120 for filing an original or reinstatement application for a license as a professional inspector, which includes a fee for transcript evaluation;
   4. a fee of $30 for the timely renewal of the license of an apprentice inspector;
   5. a fee of $50 for the timely renewal of the license of a real estate inspector;
   6. a fee of $60 for the timely renewal of the license of a professional inspector;
   7. a fee equal to 1-1/2 times the timely renewal fee for the late renewal of a license within 90 days of expiration;
   8. a fee equal to two times the timely renewal fee for the late renewal of a license more than 90 days but less than six months after expiration;
   9. a fee for taking a license examination consisting of a national portion and a state portion or retaking the national part of the license examination;
   10. a fee for taking a license examination without a national portion or retaking the state part of the license examination;
   11. a fee of $50 to request an inactive professional inspector license be returned to active status;
   12. a fee of $50 for the filing of a fitness determination;
   13. the fee required by the Department of Information Resources as a subscription or convenience fee for use of an online payment system;
   14. a fee of $400 for filing an application for accreditation of a qualifying inspector education program for a period of four years;
   15. after initial approval of accreditation, a fee of $200 a year for operation of a qualifying inspector education program;
   16. a fee of $50 plus the following fees per classroom hour approved by the Commission for each qualifying inspector education course for a period of four years:
       1. $5 for content and examination review;
       2. $5 for classroom delivery design and presentation review; and
       3. $10 for distance education delivery design and presentation review.
   17. a fee of $400 for filing an application for accreditation as a continuing inspector education provider for a period of two years;
   18. a fee of $50 plus the following fees per classroom hour approved by the Commission for each continuing inspector education course for a period of two years:
       1. $2.50 for content and examination review;
       2. $2.50 for classroom delivery design and presentation review; and
       3. $5 for distance education delivery design and presentation review.
   19. the fee required under paragraphs (16)(C) and (18)(C) of this subsection will be waived if the course has already been certified by a distance learning certification center acceptable to the Commission;
   20. for an applicant who submits an application prior to September 1, 2023, a fee of $10 for deposit in the Real Estate Inspection Recovery Fund upon an applicant's successful completion of an examination; and
   21. the fee charged by the Federal Bureau of Investigation and Texas Department of Public Safety for fingerprinting or other service for a national or state criminal history check in connection with a license application.
2. Fees established by this section must be paid when an application is filed and are not refundable once an application has been accepted for filing.
3. If the Commission receives an application that requires payment of a fee, and a sufficient fee was not submitted with the application, the Commission will return the application and notify the person filing the application that the person must pay the fee before the application will be processed.
4. If a payment to the Commission by or on behalf of a license holder or applicant is dishonored or reversed by a bank or other financial institution, the Commission shall send a request for payment of the dishonored or reversed payment by certified mail to the last known mailing address of the license holder or applicant as shown in the records of the Commission. If the Commission has sent a request for payment in accordance with the provisions of this section, and the license holder or applicant fails to make good on the payment in the form of a cashier's check, money order, or credit card payment within 30 days after the Commission has mailed the request, the license will be placed on inactive status.
5. Placing a license on inactive status under this section does not preclude the Commission from proceeding under §1101.652(a)(3), Texas Occupations Code, against a license holder who has failed to make good a payment issued to the Commission within a reasonable time.

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§535.211 Professional Liability Insurance, or Any Other Insurance that Provides Coverage for Violations of Subchapter G of Chapter 1102

1. When an applicant for a license issued under Chapter 1102 has met all other licensing requirements, the Commission shall notify the applicant that the applicant must provide proof of professional liability insurance, or any other insurance that provides coverage for violations of Subchapter G of Chapter 1102, before the license will be issued.
2. An inspector must maintain financial responsibility during the period the license is active.
3. The applicant must provide proof of insurance using a Certificate of Insurance form approved by the Commission and signed by the applicant's insurance agent, or any other proof of insurance acceptable to the Commission.
4. An inspector must notify the Commission within 10 days of the cancellation or non-renewal of professional liability insurance coverage, or any other insurance that provides coverage for violations of Subchapter G of Chapter 1102.
5. An inspector must retain sufficient records of professional liability insurance coverage, or any other insurance that provides coverage for violations of Subchapter G of Chapter 1102, to document to the Commission continuous coverage for the preceding two year license period.
6. The requirement that an inspector carry financial responsibility does not require coverage for violations wherein providing such insurance coverage would be as against public policy.

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§535.213 Qualifying Real Estate Inspector Instructors and Courses

1. Approval of Inspector Qualifying Courses. Inspector qualifying courses are approved and regulated as required by §535.62 of this chapter (relating to Approval of Qualifying Courses).
2. Approved Qualifying Courses of Study. The subjects approved for credit for qualifying inspector courses consist of the following modules:
   1. Property and Building Inspection Module I (40 hours shall contain the topics and units outlined in the PBIM 1-0, Property and Building Inspection I Qualifying Inspector Course Approval Form, hereby adopted by reference.
   2. Property and Building Inspection Module II (40 hours) shall contain the topics and units outlined in the PBIM 2-0, Property and Building Inspection II Qualifying Real Estate Inspector Course Approval Form, hereby adopted by reference.
   3. Analysis of Findings and Reporting Module (20 hours) shall contain the topics and units outlined in the AFRM-0, Analysis of Findings and Reporting Module Qualifying Real Estate Inspector Course Approval Form, hereby adopted by reference.
   4. Business Operations and Professional Responsibilities Module (10 hours) shall contain the topics and units outlined in the BOPRM-0, Business Operations and Professional Responsibilities Qualifying Real Estate Inspector Course Approval Form, hereby adopted by reference.
   5. Texas Law Module (20 hours) shall contain the topics and units outlined in the TLM-1, Texas Law Module, Qualifying Real Estate Inspector Course Approval Form, hereby adopted by reference.
   6. Texas Standards of Practice Module (24 hours shall contain the topics and units outlined in the TSOPM-0, Texas Standards of Practice Module Qualifying Real Estate Inspector Course Approval Form, hereby adopted by reference.

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§535.214 Education and Experience Requirements for a License

1. Sponsored Experience and Education Requirements for a Real Estate Inspector License. To become licensed as a real estate inspector a person must:
   1. satisfy the 90-hour education requirement for licensure by completing the following coursework:
      1. Property and Building Inspection Module I, total 40 hours;
      2. Property and Building Inspection Module II, total 40 hours; and
      3. Business Operations and Professional Responsibilities Module, total 10 hours;
   2. have been licensed as an apprentice inspector on active status for a total of at least three months within the 12 month period before the filing of the application;
   3. complete 25 inspections; and
   4. pass the licensure examinations set out in §535.209 of this subchapter (relating to Examinations).
2. Sponsored Experience and Education Requirements for a Professional Inspector License. To become licensed as a professional inspector, a person must:
   1. satisfy the 134-hour education requirement for licensure by completing the following coursework:
      1. Property and Building Inspection Module I, total 40 hours;
      2. Property and Building Inspection Module II, total 40 hours;
      3. Business Operations and Professional Responsibilities Module, total 10 hours;
      4. Texas Law Module, total 20 hours; and
      5. Texas Standards of Practice Module, total 24 hours;
   2. have been licensed as a real estate inspector on active status for a total of at least 12 months within the 24 month period before the filing of the application;
   3. complete 175 inspections; and
   4. pass the licensure examinations set out in §535.209 of this subchapter.
3. Sponsored Experience Criteria. To meet the experience requirements for licensure under subsections (a) or (b) of this section, or to sponsor apprentice inspectors or real estate inspectors:
   1. the Commission considers an improvement to real property to be any unit capable of being separately rented, leased or sold; and
   2. an inspection of an improvement to real property that includes the structural and equipment/systems of the unit constitutes a single inspection.
4. Substitute Experience and Education Requirements for a Real Estate Inspector License. As an alternative to subsection (a) of this section, to become a licensed real estate inspector, a person must:
   1. complete a total of 114 hours of qualifying inspection coursework, which must include the following:
      1. Property and Building Inspection Module I, total 40 hours;
      2. Property and Building Inspection Module II, total 40 hours;
      3. Business Operations and Professional Responsibilities Module, total 10 hours; and
      4. Texas Standards of Practice Module, total 24 hours; and
   2. complete the Texas Practicum, as defined by subsection (h) of this section; and
   3. pass the licensure examinations set out in §535.209 of this subchapter; and
   4. be sponsored by a professional inspector.
5. Substitute Experience and Education Requirements for a Professional Inspector License. As an alternative to subsection (b) of this section, to become a licensed professional inspector, a person must:
   1. complete a total of 154 hours of qualifying inspection coursework, which must include the following:
      1. Property and Building Inspection Module I, total 40 hours;
      2. Property and Building Inspection Module II, total 40 hours;
      3. Business Operations and Professional Responsibilities Module, total 10 hours;
      4. Analysis of Findings and Reporting Module, total 20 hours;
      5. Texas Law Module, total 20 hours;
      6. Texas Standards of Practice Module, total 24 hours; and
   2. complete the Texas Practicum as defined by subsection (h) of this section; and
   3. pass the licensure examinations set out in §535.209 of this subchapter.
6. Courses completed for a real estate inspector license under this section shall count towards the identical qualifying inspection coursework for licensure as a professional inspector.
7. Experience Credit. The Commission may award credit for education required under subsections (d) and (e) of this section to an applicant who:
   1. has three years of experience in a field directly related to home inspection, including but not limited to installing, servicing, repairing or maintaining the structural, mechanical and electrical systems found in improvements to real property; and
   2. provides to the Commission two affidavits from persons who have personal knowledge of the applicant's work, detailing the time and nature of the applicant's relevant experience.
8. Texas Practicum.
   1. To receive credit for completion, the Texas Practicum must:
      1. be supervised by a licensed inspector who has:
         1. been actively licensed as a professional inspector for at least five years; and
         2. at least three years of supervisory or training experience with inspectors; or
         3. performed a minimum of 200 real estate inspections as a Texas professional inspector;
      2. consist of:
         1. a minimum of five complete and in-person inspections, totaling 40 hours, including the preparation by the applicant of a written inspection report for each completed inspection; and
         2. no more than four students per supervising inspector; and
      3. include a review of each inspection report prepared by the applicant in which the supervising inspector must find that each report:
         1. is considered satisfactory for release to an average consumer; and
         2. demonstrates an understanding of:
            1. report writing;
            2. client interaction;
            3. personal property protection; and
            4. concepts critical for the positive outcome of the inspection process.
   2. An applicant may request credit for completing the Texas Practicum by submitting to the Commission the credit request form approved by the Commission.
   3. Audits.
      1. The Commission staff may conduct an audit of any information provided on the credit request form, including verifying that the supervising inspector meets the qualifications in paragraph (1)(A) of this subsection.
      2. The following acts committed by a supervising inspector conducting the Texas Practicum are grounds for disciplinary action:
         1. making material misrepresentation of fact;
         2. making a false representation to the Commission, either intentionally or negligently, that an applicant completed the Texas Practicum in its entirety, satisfying all requirements for credit.

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§535.215 Inactive Inspector Status

1. For the purposes of this section, an "inactive" inspector is a licensed professional inspector, real estate inspector, or apprentice inspector who is not authorized by law to engage in the business of performing real estate inspections as defined by Chapter 1102.
2. The Commission may place an inspector on inactive status for any of the following reasons:
   1. the written request of the inspector to be placed on inactive status as provided for under subsection (c); or
   2. the inspector's failure to satisfy continuing education requirements. In addition, the inspector's license is inactive when the following occurs:
      1. termination of sponsorship by a professional inspector;
      2. the death of the inspector's sponsoring professional inspector;
      3. the expiration, suspension, or revocation of the license of the inspector's sponsoring professional inspector;
      4. the failure of the license holder to provide to the Commission proof of financial responsibility as required by Chapter 1102 and on a form approved by the Commission for that purpose; or
      5. the expiration or non-renewal of the inspector's financial responsibility as required by Chapter 1102.
3. To be placed on inactive status by request, an inspector must do the following:
   1. file a request for inactive status or submit a letter containing the inspector's name, license number and current mailing address; and
   2. if the inspector is a licensed professional inspector, confirm in writing that the inspector has, at least 30 days prior to filing the request for inactive status, given any real estate inspectors or apprentice real estate inspectors sponsored by the inspector written notice that the inspector will no longer be their sponsor.
4. A professional inspector on inactive status may apply to the Commission for return to active status by:
   1. filing a request online or on a form approved by the Commission;
   2. providing the Commission with documentation that the inspector has satisfied all continuing education requirements under Chapter 1102 and this chapter; and
   3. submitting any required fee.
5. An apprentice inspector or real estate inspector who has been placed on inactive status may return to status if:
   1. the inspector has completed all applicable continuing education requirements; and
   2. the inspector's sponsoring professional inspector has requested that the apprentice inspector or real estate inspector be returned to active status on a form approved by the Commission.
6. If a professional inspector terminates the sponsorship of an apprentice inspector or real estate inspector, the license of the apprentice inspector or real estate inspector immediately becomes inactive.
7. Inactive inspectors may not perform inspections. Performance of inspections while on inactive status is grounds for disciplinary action against the inactive license holder. A professional inspector who has been placed on inactive status may not return to practice or sponsor apprentices or inspectors until the professional inspector has met the requirements to be returned to active status under this section. It is a violation of this section and grounds for disciplinary action against a professional inspector for the professional inspector to permit an inactive apprentice inspector or an inactive real estate inspector to perform inspections in association with, or on behalf of, the professional inspector.

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§535.216 Renewal of License

1. Renewal application.
   1. A license issued by the Commission under Chapter 1102 expires on the date shown on the face of the license issued to the license holder.
   2. If a license holder intends to renew an unexpired license, the license holder must, on or before the expiration date of the current license:
      1. file a renewal application through the online process on the Commission's website or on the applicable form approved by the Commission;
      2. pay the appropriate fee as required by §535.210 of this subchapter (relating to Fees);
      3. comply with the fingerprinting requirements of Chapter 1102;
      4. satisfy the applicable continuing education requirements of Chapter 1102 and this subchapter; and
      5. provide proof of financial responsibility as required in Chapter 1102 on a form approved by the Commission.
   3. An apprentice inspector or a real estate inspector must be sponsored by a licensed professional inspector in order to renew a license on an active status.
2. Renewal Notice.
   1. The Commission will send a renewal notice to each license holder at least 90 days before the license expiration date.
   2. If a license holder intends to renew a license, failure to receive a renewal notice does not relieve the license holder from responsibility of applying for renewal as required in this section.
3. Request for information.
   1. The Commission may request a license holder to provide additional information to the Commission in connection with a renewal application.
   2. A license holder must provide the information requested by the Commission within 30 days after the date of the Commission's request.
   3. Failure to provide the information requested within the required time is grounds for disciplinary action under Chapter 1102.
4. Renewal on inactive status.
   1. Licensed professional inspectors, real estate inspectors and apprentice inspectors may renew a license on inactive status.
   2. Inspectors are not required to complete continuing education courses as a condition of renewing a license on inactive status, but must satisfy continuing education requirements before returning to active status.
5. Late Renewal.
   1. If a license has been expired for less than six months, a license holder may renew the license by:
      1. filing a renewal application through the online process on the Commission's website or on the applicable form approved by the Commission; and
      2. paying the appropriate late renewal fee as required by §535.210 of this subchapter;
   2. Provided the license holder meets all the requirements of this subsection, the Commission will renew the license on an inactive status.
   3. Reactivation of a license on inactive status under this subsection is governed by §535.211 of this subchapter (relating to Professional Liability Insurance, or Any other Insurance that Provides Coverage for Violations of Subchapter G of Chapter 1102) and §535.215 of this subchapter (relating to Inactive Inspector Status).
6. License Reinstatement.
   1. If a license has been expired for more than six months, a license holder may not renew the license.
   2. A license holder may reinstate an expired license if the license holder:
      1. has held a professional inspector or real estate inspector license during the 24 months preceding the date the reinstatement application is filed;
      2. submits evidence satisfactory to the commission of successful completion of the continuing education hours required for the renewal of that license; and
      3. satisfies the commission as to the applicant's honesty, trustworthiness, and integrity.
   3. Applicants for a real estate inspector license must submit evidence of sponsorship by a professional inspector.
   4. An applicant for reinstatement is not required to take an examination.
7. Denial of Renewal or Reinstatement. The Commission may deny an application for license renewal or reinstatement if a license holder is in violation of the terms of a Commission order.
8. Renewal of license for military service member. A license holder on active duty in the United States armed forces is entitled to two years of additional time to renew an expired license without being subject to any increase in fee, any education or experience requirements or examination if the license holder:
   1. provides a copy of official orders or other official documentation acceptable to the Commission showing that the license holder was on active duty during the license holder's last renewal period; and
   2. pays the renewal application fee in effect when the previous license expired.

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§535.217 Mailing Address and Other Contact Information

Each license holder shall provide a mailing address, phone number, and email address, if available, to the Commission and shall report all subsequent changes not later than the 30th day after the date of a change of any of the listed contact information. If a license holder fails to update the contact information, the last known contact information provided to the Commission is the license holder's contact information.

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§535.218 Continuing Education Required for Renewal

1. Continuing education required for renewal.
   1. Before renewal of an inspector license, a license holder must take 32 hours of continuing education which shall include the following:
      1. 24 hours in the following subjects:
         1. Foundations;
         2. Framing;
         3. Building Enclosures;
         4. Roof Systems;
         5. Plumbing Systems;
         6. Electrical Systems;
         7. HVAC Systems;
         8. Appliances;
         9. Texas Standard Report Form Writing;
         10. Other approved courses related real estate inspections; and
      2. eight hours of non-elective coursework in legal, ethics, SOPs, and report writing.
   2. An inspector who files an application for reinstatement of an expired license within two years of the expiration date of the previous license must provide evidence satisfactory to the Commission that the applicant has completed any continuing education that would have been otherwise required for timely renewal of the previous license had that license not expired.
   3. An inspector is not eligible to receive more than 16 hours continuing education credit for any one single subject described in subsection (a)(1) of this section.
2. Receiving continuing education credit for ride-along inspection course.
   1. Up to eight hours of continuing education credit per two year license period may be given to a license holder for completion of a ride-along inspection course.
   2. At a minimum, a ride-along inspection course must:
      1. consist of one full residential property inspection; and
      2. review applicable standards of practice and departure provisions contained in §§535.227 - 535.233 of this subchapter.
   3. In order to qualify for real estate inspector continuing education credit, a ride-along inspection course shall consist of no more than two students per session.
   4. The instructor of a ride-along inspection course may:
      1. review report writing; and
      2. deliver a notice regarding the ride-along session on a form approved by the Commission to the prospective buyer or seller of the home being inspected.
3. Continuing education credit for students.
   1. The Commission may not grant continuing education credit twice for a course with the same course content taken by a license holder within a two year period.
   2. Unless a real estate inspection continuing education course is offered by alternative delivery methods, completion of a final examination is not required for a license holder to receive continuing education credit for a course.
   3. The Commission will not grant partial credit to an inspector who attends a portion of a course.
4. Continuing education credit for course taken outside of Texas. An inspector may receive continuing education elective credit for a course taken to satisfy the continuing education requirements of a country, territory, or state other than Texas if:
   1. the inspector licensed in Texas held an active inspector license in a country, territory, or state other than Texas at the time the course was taken;
   2. the course was approved for continuing education credit for an inspector license by a country, territory, or state other than Texas at the time the course was taken;
   3. the successful completion of the course has been evidenced by a course completion certificate, a letter from the provider or such other proof satisfactory to the Commission;
   4. the subject matter of the course was predominately devoted to a subject acceptable for continuing education credit for an inspector licensed in Texas; and
   5. the inspector licensed in Texas has filed a Continuing Education (CE) Credit Request for an Out of State Course, with the Commission.
5. Continuing education credit for instructors.
   1. Providers may request continuing education credit be given to instructors of real estate inspection courses subject to the following guidelines:
      1. instructors may receive credit for only those portions of the course which they teach; and
      2. instructors may receive full course credit by attending all of the remainder of the course.
   2. An instructor may receive continuing education credit for a ride-along inspection course conducted by the instructor if:
      1. the course is completed during the term of the instructor's current license period; and
      2. the instructor provides the Commission a certification of course completion no later than the expiration date of that license period, on a form approved by the Commission.
   3. Instructors of ride-along inspection course sessions may only receive up to 8 hours of continuing education credit for teaching the course per license period.
6. Continuing education credit for attendance at a meeting of the Texas Real Estate Inspector Committee. An inspector licensed in Texas may receive up to four hours of continuing education elective credit per license period for attendance in person at any meeting of the full Texas Real Estate Inspector Committee, provided that the inspector attend the entire meeting. Partial credit will not be awarded.
7. Continuing education credit for courses taken by persons who hold another occupational license issued by a governmental body in Texas. An inspector licensed in Texas may receive continuing education credit for a course taken to satisfy the continuing education requirements for another occupational license if:
   1. the inspector files the applicable form with the Commission;
   2. the inspector holds one of the following occupational licenses, including but not limited to:
      1. plumber;
      2. electrician;
      3. architect;
      4. professional engineer;
      5. air conditioner and refrigeration technician; or
      6. structural pest control applicator or technician;
   3. at the time the course was taken:
      1. the inspector held an active occupational license issued by a governmental body in Texas; and
      2. the course was approved for continuing education credit for the other occupational license;
   4. the inspector demonstrates successful completion of the course by submitting:
      1. a course completion certificate;
      2. a letter from the provider; or
      3. other proof satisfactory to the Commission; and
   5. the primary subject matter of the course was a subject acceptable for continuing education credit for an inspector licensed in Texas.

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§535.219 Schedule of Administrative Penalties

1. The Commission may suspend or revoke a license or take other disciplinary action authorized by Chapter 1102 in addition to or instead of assessing the administrative penalties set forth in this section.
2. The administrative penalties set forth in this section consider the criteria listed in §1101.702(b) of the Act.
3. An administrative penalty range of $100 - $1,500 per violation per day may be assessed for violations of the following sections of Chapter 1101, Chapter 1102 and this subchapter:
   1. §1101.652(a)(8);
   2. §1102.118;
   3. §1102.305;
   4. 22 TAC §535.216(c);
   5. 22 TAC §535.217;
   6. 22 TAC §535.220(a) - (d) and (g);
   7. 22 TAC §535.221; and
   8. 22 TAC §535.223.
4. An administrative penalty range of $500 - $3,000 per violation per day may be assessed for violations of the following sections of Chapter 1101, Chapter 1102 and this subchapter:
   1. §§1101.652(a)(3) - (4);
   2. §1102.301;
   3. 22 TAC §535.222;
   4. 22 TAC §535.226(d) - (e); and
   5. 22 TAC §§535.227 - 535.233.
5. An administrative penalty of $1,000 - $5,000 per violation per day may be assessed for violations of the following sections of Chapter 1101, Chapter 1102 and this subchapter:
   1. §§1101.652(a)(2), (5) - (6);
   2. §1102.101;
   3. §1102.102;
   4. §1102.103;
   5. §1102.302;
   6. §1102.303;
   7. §1102.304;
   8. 22 TAC §535.208(e)(2);
   9. 22 TAC §535.211;
   10. 22 TAC §535.215;
   11. 22 TAC §535.220(e)(1), (3) - (7); and
   12. 22 TAC §535.224(b)(1) - (2).
6. The Commission may assess an administrative penalty of up to two times that outlined under subsections (c), (d), and (e) of this section, subject to the maximum penalties authorized under §1101.702(a) of the Act, if a person has a history of previous violations.

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§535.220 Professional Conduct and Ethics

1. The responsibility of those persons who engage in the business of performing independent inspections of improvements in real estate transactions imposes integrity beyond that of a person involved in ordinary commerce. Each inspector must maintain a high standard of professionalism, independence, objectivity and fairness while performing inspections in a real estate transaction. Each inspector license holder must also uphold, maintain, and improve the integrity, reputation, and practice of the home inspection profession.
2. The relationship between an inspector and a client should at a minimum meet the following guidelines.
   1. In accepting employment as an inspector, the inspector should protect and promote the interest of the client to the best of the inspector's ability and knowledge, recognizing that the client has placed trust and confidence in the inspector.
   2. In the interest of the client and the inspector's profession, the inspector should endeavor always to maintain and increase the inspector's level of knowledge regarding new developments in the field of inspection.
   3. The inspector should conduct the inspector's business in a manner that will assure the client of the inspector's independence from outside influence and interests that might compromise the inspector's ability to render a fair and impartial opinion regarding any inspection performed.
3. The relationship between an inspector and the public should at a minimum meet the following guidelines.
   1. The inspector should deal with the general public at all times and in all manners in a method that is conducive to the promotion of professionalism, independence and fairness to the inspector, the inspector's business and the inspection industry.
   2. The inspector should attempt to assist the general public in recognizing and understanding the need for inspections, whether the inspector is selected to perform such inspection or not.
   3. The inspector accepts the duty of protecting the public against fraud, misrepresentation or unethical practices in the field of real estate inspections.
4. The relationship of the inspector with another inspector should at a minimum meet the following guidelines.
   1. The inspector should bind himself to the duty of maintaining fairness and integrity in all dealings with other inspectors and other persons performing real estate inspections.
   2. The inspector should cooperate with other inspectors to ensure the continued promotion of the high standards of the real estate inspection profession and pledges himself or herself to the continued pursuit of increasing competence, fairness, education and knowledge necessary to achieve the confidence of the public.
   3. If an inspector has knowledge of a possible violation of the rules of the Commission or Chapter 1102, the inspector should report the possible violation to the Commission.
5. An inspector shall comply with the following requirements.
   1. An inspector shall not inspect a property when any compensation or future referrals depend on reported findings or on the closing or settlement of a property.
   2. In this section, "settlement service" means a service provided in connection with a prospective or actual settlement, and "settlement service provider" includes, but is not limited to, any one or more of the following:
      1. federally related mortgage loan originator;
      2. mortgage broker;
      3. a lender or other person who provides any service related to the origination, processing or funding of a real estate loan;
      4. a title service provider;
      5. an attorney;
      6. a person who prepares documents, including notarization, delivery, and recordation;
      7. a person who provides credit report services;
      8. an appraiser;
      9. an inspector;
      10. a settlement agent;
      11. a person who provides mortgage insurance services;
      12. a person who provides services involving hazard, flood, or other casualty insurance, homeowner's warranties, or residential service contract;
      13. a real estate agent or broker; and
      14. a person who provides any other services for which a settlement service provider requires a borrower or seller to pay.
   3. An inspector shall not pay or receive a fee or other valuable consideration to or from any other settlement service provider for, but not limited to, the following:
      1. the referral of inspections;
      2. inclusion on a list of inspectors, preferred providers, or similar arrangements; or
      3. inclusion on lists of inspectors contingent on other financial agreements.
   4. An inspector shall not receive a fee or other valuable consideration, directly or indirectly, for referring services that are not settlement services or other products to the inspector's client without the client's written consent.
   5. This section does not prohibit an inspector from paying or receiving a fee or other valuable consideration, such as to or from a contractor, for services actually rendered.
   6. An inspector shall not accept employment to repair, replace, maintain or upgrade systems or components of property covered by the Standards of Practice under this subchapter on which the inspector has performed an inspection under a real estate contract, lease, or exchange of real property within 12 months of the date of the inspection.
   7. Inspectors shall not disclose inspection results or client information without prior approval from the client. Inspectors, at their discretion, may disclose observed immediate safety hazards to occupants exposed to such hazards when feasible.
   8. This subsection does not prohibit:
      1. normal promotional or educational activity that is not conditioned on the referral of business and that does not involve the defraying of expenses that otherwise would be incurred; or
      2. a payment at market rates to any person for goods actually furnished or for services actually performed.
6. The inspector should make a reasonable attempt to cooperate with other professionals and related tradespersons at all times and in all manners in a method that is conducive to the promotion of professionalism, independence and fairness to the inspector, the inspector's business, and the inspection industry.
7. Each active licensed inspector shall provide the consumer notice adopted under §531.18 of this chapter (relating to Consumer Information) in the manner described by that section.

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§535.221 Advertisements

1. For the purposes of this section, advertisements are all communications created or caused to be created by a licensed inspector for the purpose of inducing or attempting to induce a member of the public to use the services of the inspector, including but not limited to the following types of communications when disseminated for this purpose: inspection reports, business cards, invoices, signs, brochures, email, the Internet, electronic transmissions, text messages, and purchased telephone directory displays and advertising by newspaper, radio and television.
2. Advertisements by a person licensed as an inspector must contain the name or assumed business name of the license holder. The advertisements must also contain the license number of the person. If the person is licensed as a real estate inspector or as an apprentice inspector, the advertisements must also contain the following:
   1. the name or assumed name of the person's sponsoring professional inspector; and
   2. a statement indicating that the person is sponsored by that professional inspector.
3. A licensed professional inspector, real estate inspector or apprentice inspector shall notify the Commission in writing within 30 days after the inspector starts or stops using a name in business other than the name in which the inspector is licensed.
4. Websites containing advertising by one or more inspectors must include the license number of each licensed person whose name or assumed business name appears on the website. For the purposes of an inspector's or inspection company's own website, it is sufficient for the license number(s) to appear on a single prominent page of the website, such as the main page or the "About Us" page. For the purposes of social networking websites, including websites through which license holders may transmit electronic messages to other members of the same site, it is sufficient for license number(s) to appear on the inspector's main or profile page.
5. The Commission may reprimand or suspend or revoke the license of a person who is found to have engaged in false or misleading advertising or to have failed to comply with provisions of this section.

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§535.222 Inspection Reports

1. For each inspection, the inspector shall prepare a written inspection report noting observed deficiencies and other items required to be reported. Unless otherwise agreed in writing by the client, the inspector shall:
   1. deliver the report to the client within two days of receipt of payment in full for the inspection; or
   2. if payment in full is received before the scheduled inspection, deliver the report to the client within two days of completion of the inspection.
2. The inspection report shall include:
   1. the name and license number of each inspector who participated in performing the inspection, as well as the name(s) and license number(s) of any supervising real estate inspector(s) and sponsoring professional inspector(s), if applicable;
   2. the address or other unique description of the property on each page of the report; and
   3. the client's name.

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§535.223 Standard Inspection Report Form

The Commission adopts by reference Property Inspection Report Form REI 7-6, approved by the Commission for use in reporting inspections results. This document is published by and available from the Commission website: www.trec.texas.gov, or by writing to the Commission at Texas Real Estate Commission, P.O. Box 12188, Austin, Texas 78711-2188.
1. Except as provided by this section, inspections performed for a prospective buyer or prospective seller of substantially complete one-to-four family residential property shall be reported on Form REI 7-6 adopted by the Commission ("the standard form").
2. If an inspector uses computer software or other means to produce an inspection report, the inspector must reproduce the text of the standard form verbatim and the spacing, borders and placement of text must be identical to the standard form.
3. An inspector may make the following changes to the standard form:
   1. delete the line for name and license number, of the sponsoring inspector, if the inspection was performed solely by a professional inspector;
   2. change the typeface; provided that it is no smaller than a 10 point font;
   3. change the color of the typeface and checkboxes;
   4. use legal sized (8-1/2" by 14") paper;
   5. add a cover page to the report form;
   6. add footers to each page of the report except the first page and may add headers to each page of the report;
   7. place the property identification and page number at either the top or bottom of the page;
   8. add subheadings under items, provided that the numbering of the standard items remains consistent with the standard form;
   9. list other items in the corresponding appropriate section of the report form and additional captions, letters, and check boxes for those items;
   10. delete inapplicable subsections of Section VI., Optional Systems, and re-letter any remaining subsections;
   11. delete "Other" subsections of Section I. through Section VI.;
   12. as the inspector deems necessary:
       1. allocate such space for comments in:
          1. the "Additional Information Provided by the Inspector" section; and
          2. each section provided for comments for each inspected item;
       2. attach additional pages of comments; or
       3. both;
   13. include a service agreement/inspection contract or contractual terms between the inspector and a client with the standard form under the "Additional Information Provided by the Inspector" section or as an attachment to the standard form;
   14. attach additional pages to the form if:
       1. it is necessary to report the inspection of a component, or system not contained in the standard form; or
       2. the space provided on the form is inadequate for a complete reporting of the Inspection;
   15. attach additional reporting information produced by computer software so long as the standard report form is provided before that information; and
   16. Remove the Commission's logo or substitute the inspector's logo in place of the Commission's logo.
4. The inspector shall renumber the pages of the standard form to correspond with any changes made necessary due to adjusting the space for comments or adding additional items and shall number all pages of the report, including any addenda.
5. The inspector shall indicate, by checking the appropriate boxes on the form, whether each item was inspected, not inspected, not present, or deficient and explain the findings in the corresponding section in the body of the report form. If multiple boxes are checked, the inspector must also include an explanation as to the reason for checking multiple boxes in the applicable section of the report form.
6. This section does not apply to the following:
   1. re-inspections of a property performed for the same client;
   2. inspections performed for or required by a lender or governmental agency;
   3. inspections for which federal or state law requires use of a different report;
   4. quality control construction inspections of new homes performed for builders, including phased construction inspections, inspections performed solely to determine compliance with building codes, warranty or underwriting requirements, or inspections required by a municipality and the builder or other entity requires use of a different report, and the first page of the report contains a notice either in bold or underlined reading substantially similar to the following: "This report was prepared for a builder or other entity in accordance with the builder's requirements. The report is not intended as a substitute for an inspection of the property by an inspector of the buyer's choice. Standard inspections performed by a license holder and reported on Commission promulgated report forms may contain additional information a buyer should consider in making a decision to purchase." If a report form required for use by the builder or builder's employee does not contain the notice, the inspector may attach the notice to the first page of the report at the time the report is prepared by the inspector; or
   5. an inspection of a building or addition that is not substantially complete.

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§535.224 Practice and Procedure

1. Proceedings shall be conducted in the manner contemplated by §§533.1 - 533.10, 533.20 - 533.21, 533.25, 533.30 - 533.37 and 533.40 of this chapter and with Chapter 2001, Texas Government Code.
2. In addition to the grounds for disciplinary action provided in Chapter 1102, a license of an inspector may be suspended or revoked by the Commission if the inspector:
   1. fails to maintain professional liability insurance coverage, a bond or any other security acceptable by the Commission that provides coverage for violations of Subchapter G of Chapter 1102 during the period a license is active; or
   2. fails to notify the Commission within 10 days of the cancellation or non-renewal of professional liability insurance coverage, a bond or any other security acceptable by the Commission that provides coverage for violations of Subchapter G of Chapter 1102.

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§535.226 Sponsorship of Apprentice Inspectors and Real Estate Inspectors

1. An apprentice inspector or real estate inspector may be sponsored by only one licensed professional inspector.
2. A change in sponsorship shall be reported to the Commission immediately. If the sponsorship has ended because the professional inspector has terminated the sponsorship, the professional inspector shall immediately so notify the apprentice or real estate inspector in writing. If the sponsorship has ended because the apprentice inspector or real estate inspector has left the sponsorship, the apprentice inspector or real estate inspector shall immediately so notify the professional inspector in writing.
3. An apprentice inspector or real estate inspector who is on active status may act for the new sponsoring professional inspector once the Commission has been notified of the change and any required fee has been submitted. If the apprentice or real estate inspector is on inactive status, the return to active status shall be subject to the requirements of §535.215 of this title.
4. A licensed professional inspector is responsible for the conduct of a sponsored apprentice inspector. At a minimum, a licensed professional inspector shall provide direct supervision of the apprentice inspector by:
   1. accompanying the apprentice inspector during the performance of all inspections performed by the apprentice or arranging for a real estate inspector to accompany the apprentice; and
   2. reviewing any written inspection report prepared by the apprentice inspector for compliance with the provisions of the standards of practice adopted by the Commission.
5. A licensed professional inspector is responsible for the conduct of a sponsored real estate inspector. A licensed professional inspector shall provide indirect supervision in a manner which protects the public when dealing with the real estate inspector. At a minimum a professional inspector shall provide indirect supervision of the real estate inspector by:
   1. communicating with the real estate inspector on a regular basis about the inspections being performed by the real estate inspector; and
   2. reviewing on a regular basis written inspection reports prepared by the real estate inspector for compliance with the provisions of the standards of practice adopted by the Commission.
6. A sponsoring professional inspector may delegate the supervision of an apprentice inspector or real estate inspector to another professional inspector who is qualified to sponsor, but the sponsor remains responsible for the conduct of the sponsored inspector.

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§535.227 Standards of Practice: General Provisions

1. Scope.
   1. These standards of practice apply when a professional inspector or real estate inspector who is licensed under this chapter accepts employment to perform a real estate inspection for a prospective buyer or seller of real property.
   2. These standards of practice define the minimum requirements for a real estate inspection conducted on a one to four family unit that is substantially completed. Substantially completed means the stage of construction when a new building, addition, improvement, or alteration to an existing building can be occupied or used for its intended purpose.
   3. For the purposes of these standards of practice a real estate inspection:
      1. is a limited visual survey and basic performance evaluation of the systems and components of a building using normal controls that provides information regarding the general condition of a residence at the time of inspection;
      2. is not intended to be a comprehensive investigation or exploratory probe to determine the cause or effect of deficiencies noted by the inspector; and
      3. requires the use of reasonable and appropriate tools to satisfy the requirements of the standards of practice. However an inspection does not require the use of:
         1. specialized equipment, including but not limited to:
            1. thermal imaging equipment;
            2. moisture meters;
            3. gas or carbon monoxide detection equipment;
            4. environmental testing equipment and devices;
            5. elevation determination devices;
            6. ladders capable of reaching surfaces over one story above ground surfaces;
            7. cameras or other tools used to inspect the interior of a drain or sewer line; or
            8. drones; or
         2. specialized procedures, including but not limited to:
            1. environmental testing;
            2. elevation measurement;
            3. calculations; or
            4. any method employing destructive testing that damages otherwise sound materials or finishes.
   4. These standards of practice do not prohibit an inspector from providing a higher level of inspection performance than required by these standards of practice or from inspecting components and systems in addition to those listed under the standards of practice. If an inspector provides services beyond the scope required by these standards of practice, including the use of specialized equipment, or inspects components and systems in addition to those listed under the standards of practice, the inspector must possess the competency required to do so.
2. Definitions.
   1. Accessible–In the reasonable judgment of the inspector, capable of being approached, entered, or viewed without:
      1. hazard to the inspector;
      2. having to climb over obstacles, moving furnishings or large, heavy, or fragile objects;
      3. using specialized equipment or procedures;
      4. disassembling items other than covers or panels intended to be removed for inspection;
      5. damaging property, permanent construction or building finish; or
      6. using a ladder for portions of the inspection other than the roof or attic space.
   2. Chapter 1102–Texas Occupations Code, Chapter 1102.
   3. Component–A part of a system.
   4. Cosmetic–Related only to appearance or aesthetics, and not related to performance, operability, or water penetration.
   5. Deficiency–In the reasonable judgment of the inspector, a condition that:
      1. adversely and materially affects the performance of a system, or component; or
      2. constitutes a hazard to life, limb, or property as specified by these standards of practice.
   6. Deficient–Reported as having one or more deficiencies.
   7. Gas distribution system–All gas lines between the point of delivery and appliance shutoff valves.
      1. The point of delivery for a natural gas system is:
         1. the outlet of the service meter assembly;
         2. the outlet of the service regulator; or
         3. the service shut valve where a meter is not provided. Where a system shutoff valve is provided after the outlet of the service meter assembly, such valve shall be considered to be downstream of the point of delivery.
      2. The point of delivery for undiluted liquefied petroleum gas systems is the outlet of the service pressure regulator, exclusive of line gas regulators, in the system.
   8. Inspect–To operate in normal ranges using ordinary controls at typical settings, look at and examine accessible systems or components and report observed deficiencies as specified by these standards of practice.
   9. Performance–Achievement of an operation, function or configuration relative to accepted industry standard practices with consideration of age and normal wear and tear from ordinary use.
   10. Report–To provide the inspector's opinions and findings regarding systems and components required by the standards of practice.
   11. Standards of practice–§§535.227 - 535.233 of this title.
3. General Requirements. The inspector shall:
   1. operate fixed or installed equipment and appliances listed herein in at least one mode with ordinary controls at typical settings;
   2. visually inspect accessible systems or components from near proximity to the systems and components, and from the interior of the attic and crawl spaces; and
   3. complete the standard inspection report form as required by §535.222 and §535.223 of this title.
4. General limitations. The inspector is not required to:
   1. inspect:
      1. items other than those listed within these standards of practice;
      2. elevators;
      3. detached buildings, decks, docks, fences, waterfront structures, or related equipment;
      4. anything buried, hidden, latent, or concealed;
      5. sub-surface drainage systems;
      6. automated or programmable control systems, automatic shutoff, photoelectric sensors, timers, clocks, metering devices, signal lights, lightning arrestor system, remote controls, security or data distribution systems, solar panels or smart home automation components; or
      7. concrete flatwork such as driveways, sidewalks, walkways, paving stones or patios;
   2. report:
      1. past repairs that appear to be effective and workmanlike except as specifically required by these standards;
      2. cosmetic or aesthetic conditions; or
      3. wear and tear from ordinary use;
   3. determine:
      1. the presence or absence of pests, termites, or other wood-destroying insects or organisms;
      2. the presence, absence, or risk of:
         1. asbestos;
         2. lead-based paint;
         3. mold, mildew;
         4. corrosive or contaminated drywall "Chinese Drywall"; or
         5. any other environmental hazard, environmental pathogen, carcinogen, toxin, mycotoxin, pollutant, fungal presence or activity, or poison;
      3. types of wood or preservative treatment and fastener compatibility;
      4. the cause or source of a condition;
      5. the cause or effect of deficiencies; or
      6. any of the following issues concerning a system or component:
         1. insurability or warrantability;
         2. suitability, adequacy, compatibility, capacity, reliability, marketability, or operating costs;
         3. recalls, counterfeit products, or product lawsuits;
         4. life expectancy or age;
         5. energy efficiency, vapor barriers, or thermostatic performance;
         6. compliance with any code, listing, testing or protocol authority;
         7. utility sources; or
         8. manufacturer or regulatory requirements, except as specifically required by these standards;
   4. anticipate future events or conditions, including but not limited to:
      1. decay, deterioration, or damage that may occur after the inspection;
      2. deficiencies from abuse, misuse or lack of use;
      3. changes in performance of any component or system due to changes in use or occupancy;
      4. the consequences of the inspection or its effects on current or future buyers and sellers;
      5. common household accidents, personal injury, or death;
      6. the presence of water penetrations; or
      7. future performance of any item;
   5. operate shutoff, safety, stop, pressure or pressure-regulating valves or items requiring the use of codes, keys, combinations, or similar devices;
   6. designate conditions as safe;
   7. recommend or provide engineering, architectural, appraisal, mitigation, physical surveying, realty, or other specialist services;
   8. review historical records, installation instructions, repair plans, cost estimates, disclosure documents, or other reports;
   9. verify sizing, efficiency, or adequacy of the ground surface drainage system;
   10. verify sizing, efficiency, or adequacy of the gutter and downspout system;
   11. operate recirculation or sump pumps;
   12. remedy conditions preventing inspection of any item;
   13. apply open flame or light a pilot to operate any appliance;
   14. turn on decommissioned equipment, systems or utility services; or
   15. provide repair cost estimates, recommendations, or re-inspection services.
5. In the event of a conflict between the general provisions set out in this section, and the specific provisions specified elsewhere in the standards of practice, specific provisions shall take precedence.
6. Departure provision.
   1. An inspector may depart from the inspection of a component or system required by the standards of practice only if:
      1. the inspector and client agree the item is not to be inspected;
      2. the inspector is not qualified to inspect the item;
      3. in the reasonable judgment of the inspector, the inspector determines that:
         1. conditions exist that prevent inspection of an item;
         2. conditions or materials are hazardous to the health or safety of the inspector; or
         3. the actions of the inspector may cause damage to the property; or
      4. the item is a common element of a multi-family development and is not in physical contact with the unit being inspected, such as the foundation under another building or a part of the foundation under another unit in the same building.
   2. If an inspector departs from the inspection of a component or system required by the standards of practice, the inspector shall:
      1. notify the client at the earliest practical opportunity that the component or system will not be inspected; and
      2. make an appropriate notation on the inspection report form, stating the reason the component or system was not inspected.
   3. If the inspector routinely departs from inspection of a component or system required by the standards of practice, and the inspector has reason to believe that the property being inspected includes that component or system, the inspector shall not perform the inspection of the property until the inspector notifies the client, or the prospective client, that the component or system will not be inspected.
7. Enforcement. Failure to comply with the standards of practice is grounds for disciplinary action as prescribed by Chapter 1102.

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§535.228 Standards of Practice: Minimum Inspection Requirements for Structural Systems

1. Foundations.
   1. The inspector shall:
      1. render a written opinion as to the performance of the foundation;
      2. report:
         1. the type of foundations; and
         2. the vantage point from which the crawl space was inspected;
      3. generally report present and visible indications used to render the opinion of adverse performance, such as:
         1. binding, out-of-square, non-latching doors;
         2. framing or frieze board separations;
         3. sloping floors;
         4. window, wall, floor, or ceiling cracks or separations; and
         5. rotating, buckling, cracking, or deflecting masonry cladding; and
      4. report as Deficient:
         1. deteriorated materials;
         2. deficiencies in foundation components such as; beams, joists, bridging, blocking, piers, posts, pilings, columns, sills or subfloor;
         3. deficiencies in retaining walls related to foundation performance;
         4. exposed or damaged reinforcement;
         5. crawl space ventilation that is not performing; and
         6. crawl space drainage that is not performing.
   2. The inspector is not required to:
      1. enter a crawl space or any area where headroom is less than 18 inches or the access opening is less than 24 inches wide and 18 inches high;
      2. provide an exhaustive list of indicators of possible adverse performance; or
      3. inspect retaining walls not related to foundation performance.
2. Grading and drainage.
   1. The inspector shall report as Deficient:
      1. drainage around the foundation that is not performing;
      2. deficiencies in grade levels around the foundation; and
      3. deficiencies in installed gutter and downspout systems.
   2. The inspector is not required to:
      1. inspect flatwork or detention/retention ponds (except as related to slope and drainage);
      2. determine area hydrology or the presence of underground water; or
      3. determine the efficiency or performance of underground or surface drainage systems.
3. Roof covering materials.
   1. The inspector shall:
      1. inspect the roof covering materials from the surface of the roof;
      2. report:
         1. type of roof coverings;
         2. vantage point from where the roof was inspected;
         3. evidence of water penetration; and
         4. evidence of previous repairs to the roof covering material, flashing details, skylights and other roof penetrations; and
      3. report as Deficient deficiencies in:
         1. fasteners;
         2. adhesion;
         3. roof covering materials;
         4. flashing details;
         5. skylights; and
         6. other roof penetrations.
   2. The inspector is not required to:
      1. inspect the roof from the roof level if, in the inspector's reasonable judgment:
         1. the inspector cannot safely reach or stay on the roof; or
         2. significant damage to the roof covering materials may result from walking on the roof;
      2. determine:
         1. the remaining life expectancy of the roof covering; or
         2. the number of layers of roof covering material;
      3. identify latent hail damage;
      4. exhaustively examine all fasteners and adhesion; or
      5. provide an exhaustive list of locations of deficiencies and water penetrations.
4. Roof structures and attics.
   1. The inspector shall:
      1. report:
         1. the vantage point from which the attic space was inspected;
         2. approximate average depth of attic insulation; and
         3. evidence of water penetration; and
      2. report as Deficient:
         1. attic space ventilation that is not performing;
         2. deflections or depressions in the roof surface as related to adverse performance of the framing and decking; and
         3. missing insulation; and
         4. deficiencies in:
            1. installed framing members and decking;
            2. attic access ladders and access openings; and
            3. attic ventilators.
   2. The inspector is not required to:
      1. enter attics or unfinished spaces where openings are less than 22 inches by 30 inches or headroom is less than 30 inches;
      2. operate powered ventilators; or
      3. provide an exhaustive list of locations of deficiencies and water penetrations.
5. Interior walls, ceilings, floors, and doors.
   1. The inspector shall:
      1. report evidence of water penetration; and
      2. report as Deficient:
         1. deficiencies in the condition and performance of doors and hardware;
         2. deficiencies related to structural performance or water penetration; and
         3. the absence of or deficiencies in fire separation between the garage and the living space and between the garage and its attic.
   2. The inspector is not required to:
      1. report cosmetic damage or the condition of floor, wall, or ceiling coverings; paints, stains, or other surface coatings; cabinets; or countertops; or
      2. provide an exhaustive list of locations of deficiencies and water penetrations.
6. Exterior walls, doors, and windows.
   1. The inspector shall:
      1. report evidence of water penetration; and
      2. report as Deficient:
         1. the absence of performing emergency escape and rescue openings in all sleeping rooms;
         2. an attached garage doorway that is not equipped with self-closing or automatic closing devices;
         3. a door between the residence and an attached garage that is:
            1. a solid wood door less than 1-3/8 inches thick;
            2. a solid honeycomb core steel door less than 1-3/8 inches thick; or
            3. not a 20-minute fire-rated door;
         4. missing or damaged screens;
         5. deficiencies related to structural performance or water penetration; and
         6. deficiencies in:
            1. weather stripping, gaskets or other air barrier materials;
            2. claddings;
            3. water resistant materials and coatings;
            4. flashing details and terminations;
            5. the condition and performance of exterior doors, garage doors and hardware; and
            6. the condition and performance of windows and components.
   2. The inspector is not required to:
      1. report the condition of awnings, blinds, shutters, security devices, or other non-structural systems;
      2. determine the cosmetic condition of paints, stains, or other surface coatings;
      3. operate a lock if the key is not available; or
      4. provide an exhaustive list of locations of deficiencies and water penetrations.
7. Exterior and interior glazing.
   1. The inspector shall report as Deficient:
      1. insulated windows that are obviously fogged or display other evidence of broken seals;
      2. deficiencies in glazing, weather stripping and glazing compound in windows and doors;
      3. the absence of safety glass in hazardous locations; and
      4. the absence of fall protection at windows that are located less than 24 inches from the finished floor and greater than 72 inches from the finished grade.
   2. The inspector is not required to:
      1. exhaustively inspect insulated windows for evidence of broken seals;
      2. exhaustively inspect glazing for identifying labels; or
      3. identify specific locations of damage.
8. Interior and exterior stairways.
   1. The inspector shall report as Deficient:
      1. spacing between intermediate balusters, spindles, or rails for steps, stairways, guards, and railings that permit passage of an object greater than 4 inches in diameter, except that on the open side of the staircase treads, spheres less than 4-3/8 inches in diameter may pass through the guard rail balusters or spindles; and
      2. deficiencies in steps, stairways, landings, guardrails, and handrails.
   2. The inspector is not required to exhaustively measure every stairway component.
9. Fireplaces and chimneys.
   1. The inspector shall report as Deficient:
      1. built-up creosote in accessible areas of the firebox and flue;
      2. the presence of combustible materials in near proximity to the firebox opening;
      3. the absence of fireblocking at the attic penetration of the chimney flue, where accessible; and
      4. deficiencies in the:
         1. damper;
         2. lintel, hearth, hearth extension, and firebox;
         3. gas fixture installed in the fireplace not associated with the gas distribution system;
         4. circulating fan;
         5. combustion air vents; and
         6. chimney structure, termination, coping, crown, caps, and spark arrestor.
   2. The inspector is not required to:
      1. verify the integrity of the flue;
      2. perform a chimney smoke test; or
      3. determine the adequacy of the draft.
10. Porches, Balconies, Decks, and Carports.
    1. The inspector shall:
       1. inspect:
          1. attached balconies, carports, and porches; and
          2. abutting porches, decks, and balconies that are used for ingress and egress; and
       2. report as Deficient:
          1. on decks 30 inches or higher above the adjacent grade, spacings between intermediate balusters, spindles, or rails that permit passage of an object greater than four inches in diameter; and
          2. deficiencies in accessible components.
    2. The inspector is not required to:
       1. exhaustively measure every porch, balcony, deck, or attached carport components; or
       2. enter any area where headroom is less than 18 inches or the access opening is less than 24 inches wide and 18 inches high.

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§535.229 Standards of Practice: Minimum Inspection Requirements for Electrical Systems

1. Service entrance and panels.
   1. The inspector shall report as Deficient:
      1. a drop, weatherhead or mast that is not securely fastened to the building;
      2. the absence of or deficiencies in the grounding electrode system;
      3. missing or damaged dead fronts or covers plates;
      4. conductors not protected from the edges of electrical cabinets, gutters, or cutout boxes;
      5. electrical cabinets and panel boards not appropriate for their location; such as a clothes closet, bathrooms or where they are exposed to physical damage;
      6. electrical cabinets and panel boards that are not accessible or do not have a minimum of 36-inches of clearance in front of them;
      7. deficiencies in:
         1. electrical cabinets, gutters, cutout boxes, and panel boards;
         2. the insulation of the service entrance conductors, drip loop, separation of conductors at weatherheads, and clearances;
         3. the compatibility of overcurrent devices and conductors;
         4. the overcurrent device and circuit for labeled and listed 250 volt appliances;
         5. bonding and grounding;
         6. conductors; and
         7. the operation of installed ground-fault or arc-fault circuit interrupter devices; and
      8. the absence of:
         1. trip ties on 250 volt overcurrent devices or multi-wire branch circuit;
         2. appropriate connections;
         3. anti-oxidants on aluminum conductor terminations; and
         4. main disconnecting means.
   2. The inspector is not required to:
      1. determine present or future sufficiency of service capacity amperage, voltage, or the capacity of the electrical system;
      2. conduct voltage drop calculations;
      3. determine the accuracy of overcurrent device labeling;
      4. remove covers where hazardous as judged by the inspector;
      5. verify the effectiveness of overcurrent devices; or
      6. operate overcurrent devices.
2. Branch circuits, connected devices, and fixtures.
   1. The inspector shall:
      1. manually test the installed and accessible smoke and carbon monoxide alarms;
      2. report the type of branch circuit conductors; and
      3. report as Deficient:
         1. the absence of ground-fault circuit interrupter protection in all:
            1. bathroom receptacles;
            2. garage and accessory building receptacles;
            3. outdoor receptacles;
            4. crawl space receptacles and lighting outlets;
            5. basement receptacles;
            6. receptacles that serve kitchen countertops;
            7. receptacles that are located within six feet of the outside edge of a sink, shower, or bathtub;
            8. laundry area receptacles;
            9. indoor damp and wet location receptacles;
            10. kitchen dishwasher receptacle; and
            11. electrically heated floors;
         2. the absence of arc-fault protection in the following locations:
            1. kitchens;
            2. family rooms;
            3. dining rooms;
            4. living rooms;
            5. parlors;
            6. libraries;
            7. dens;
            8. bedrooms;
            9. sunrooms;
            10. recreation rooms;
            11. closets;
            12. hallways; and
            13. laundry area;
         3. the failure of operation of ground-fault circuit interrupter protection devices;
         4. missing or damaged receptacle, switch or junction box covers;
         5. the absence of:
            1. equipment disconnects; and
            2. appropriate connections, such as copper/aluminum approved devices, if branch circuit aluminum conductors are discovered in the main or sub-panel based on a random sampling of accessible receptacles and switches;
         6. receptacles less than five and a half feet above the floor that are not tamper resistant;
         7. deficiencies in 125 volt receptacles by determining the:
            1. presence of power;
            2. correct polarity; and
            3. presence of grounding;
         8. deficiencies in 250 volt receptacles by determining the presence of power;
         9. deficiencies in
            1. switches;
            2. bonding or grounding;
            3. wiring, wiring terminations, junction boxes, devices, and fixtures, including improper location;
            4. doorbell and chime components; and
            5. smoke and carbon monoxide alarms;
         10. improper use of extension cords;
         11. deficiencies in or absences of conduit, where applicable;
         12. the absence of smoke alarms:
             1. in each sleeping room;
             2. outside each separate sleeping area in the immediate vicinity of the sleeping rooms; and
             3. in the living space of each story of the dwelling; and
         13. the absence of carbon monoxide alarms outside each separate sleeping area in the immediate vicinity of the sleeping rooms when either of the following conditions exist:
             1. fuel fired appliance are installed in the dwelling; or
             2. an attached garage with an opening into the dwelling unit.
   2. The inspector is not required to:
      1. inspect low voltage wiring;
      2. disassemble mechanical appliances;
      3. verify the effectiveness of smoke alarms;
      4. verify interconnectivity of smoke alarms;
      5. activate smoke or carbon monoxide alarms that are or may be monitored or require the use of codes;
      6. verify that smoke alarms are suitable for the hearing-impaired;
      7. remove the covers of junction, fixture, receptacle or switch boxes unless specifically required by these standards; or
      8. test arc-fault circuit interrupter devices when the property is occupied or damage to personal property may result, in the inspector's reasonable judgment.

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§535.230 Standards of Practice: Minimum Inspection Requirements for Heating, Ventilation, and Air Conditioning Systems

1. Heating equipment.
   1. General requirements. The inspector shall:
      1. report:
         1. the type of heating systems; and
         2. the energy sources; and
      2. report as Deficient:
         1. inoperative units;
         2. deficiencies in the thermostats;
         3. inappropriate location;
         4. the lack of protection from physical damage;
         5. burners, burner ignition devices or heating elements, switches, and thermostats that are not a minimum of 18 inches above the lowest garage floor elevation, unless the unit is listed for garage floor installation;
         6. the absence of an opening that would allow access to equipment for inspection, service, repair or replacement without removing permanent construction or building finish;
         7. when applicable; a floored passageway and service platform that would allow access for equipment inspection, service, repair or replacement; and
         8. deficiencies in mounting and performance of window and wall units.
   2. Requirements for electric units. The inspector shall report deficiencies in:
      1. performance of heat pumps;
      2. performance of heating elements; and
      3. condition of conductors; and
   3. Requirements for gas units. The inspector shall report as Deficient:
      1. gas leaks in the heating equipment not associated with the gas distribution system;
      2. flame impingement, uplifting flame, improper flame color, or excessive scale buildup; and
      3. deficiencies in:
         1. combustion, and dilution air; and
         2. the vent pipe, draft hood, draft, proximity to combustibles, and vent termination point and clearances.
2. Cooling equipment.
   1. Requirements for cooling units other than evaporative coolers.
      1. the inspector shall:
         1. report the type of systems;
         2. measure and report the temperature difference between the supply air and the returned air or report industry-accepted method used to determine performance; and
         3. generally report extraneous factors or conditions, present on the day of the inspection, that would adversely impact the temperature differential of an otherwise performing unit; and
      2. the inspector shall report as Deficient:
         1. inoperative units;
         2. deficiencies in the performance of the cooling system that:
            1. fails to achieve a 15 degrees Fahrenheit to 22 degrees Fahrenheit temperature differential; or
            2. fails to cool adequately as determined by other industry-accepted methods;
         3. the absence of an opening that would allow access to equipment for inspection, service, repair or replacement without removing permanent construction or building finish;
         4. when applicable; a floored passageway and service platform that would allow access for equipment inspection, service, repair or replacement;
         5. noticeable vibration of blowers or fans;
         6. water in the auxiliary/secondary drain pan;
         7. a primary drain pipe that discharges in a sewer vent;
         8. missing or deficient refrigerant pipe insulation;
         9. dirty coils, where accessible;
         10. condensing units lacking adequate clearances or air circulation or that has deficiencies in the fins, location, levelness, or elevation above grade surfaces; and
         11. deficiencies in:
             1. the condensate drain and auxiliary/secondary pan and drain system;
             2. mounting and performance of window or wall units; and
             3. thermostats.
   2. Requirements for evaporative coolers.
      1. the inspector shall report:
         1. type of systems; and
         2. the type of water supply line; and
      2. the inspector shall report as Deficient:
         1. inoperative units;
         2. inadequate access and clearances;
         3. deficiencies in performance or mounting;
         4. missing or damaged components;
         5. the presence of active water leaks; and
         6. the absence of backflow prevention.
3. Duct systems, chases, and vents.
   1. the inspector shall report as Deficient:
      1. damaged duct systems or improper material;
      2. damaged or missing duct insulation;
      3. the absence of air flow at accessible supply registers;
      4. the presence of gas piping and sewer vents concealed in ducts, plenums and chases;
      5. ducts or plenums in contact with earth; and
      6. deficiencies in:
         1. filters;
         2. grills or registers; and
         3. the location of return air openings.
4. For heating, ventilation, and air conditioning systems inspected under this section, the inspector is not required to perform the following actions:
   1. program digital thermostats or controls;
   2. inspect:
      1. for pressure of the system refrigerant, type of refrigerant, or refrigerant leaks;
      2. winterized or decommissioned equipment; or
      3. duct fans, humidifiers, dehumidifiers, air purifiers, motorized dampers, electronic air filters, multi-stage controllers, sequencers, heat reclaimers, wood burning stoves, boilers, oil-fired units, supplemental heating appliances, de-icing provisions, or reversing valves;
   3. operate:
      1. setback features on thermostats or controls;
      2. radiant heaters, steam heat systems, or unvented gas-fired heating appliances; or
      3. cooling or heating systems when weather conditions or other circumstances may cause equipment damage, including:
         1. cooling equipment when the outdoor temperature is less than 60 degrees Fahrenheit; and
         2. heat pumps, in the heat pump mode, when the outdoor temperature is above 70 degrees Fahrenheit;
   4. verify:
      1. compatibility of components;
      2. tonnage and manufacturer match of indoor coils and outside coils or condensing units;
      3. the accuracy of thermostats; or
      4. the integrity of the heat exchanger; or
   5. determine:
      1. sizing, efficiency, or adequacy of the system;
      2. balanced air flow of the conditioned air to the various parts of the building; or
      3. types of materials contained in insulation.

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§535.231 Standards of Practice: Minimum Inspection Requirements for Plumbing Systems

1. Plumbing systems.
   1. The inspector shall:
      1. report:
         1. location of water meter;
         2. location of homeowners main water supply shutoff valve; and
         3. static water pressure;
         4. visible material used for water supply lines and drain lines;
      2. report as Deficient:
         1. the presence of active leaks;
         2. water pressure exceeding 80 PSI;
         3. the lack of a pressure reducing valve when the water pressure exceeds 80 PSI;
         4. the lack of a visible expansion tank when a pressure reducing valve, check valve, or backflow preventer is in place at the water supply line/system;
         5. the absence of:
            1. fixture shutoff valves;
            2. dielectric unions, when applicable;
            3. back-flow devices, anti-siphon devices, or air gaps at the flow end of fixtures; and
         6. deficiencies in:
            1. water supply pipes and waste pipes;
            2. the installation and termination of the vent system;
            3. the performance of fixtures and faucets not connected to an appliance;
            4. water supply, as determined by viewing functional flow in two fixtures operated simultaneously;
            5. fixture drain performance;
            6. orientation of hot and cold faucets;
            7. installed mechanical drain stops;
            8. commodes, fixtures, showers, tubs, and enclosures; and
            9. the condition of the gas distribution system.
   2. The inspector is not required to:
      1. operate any main, branch, or shut-off valves;
      2. operate or inspect sump pumps or waste ejector pumps;
      3. verify the performance of:
         1. the bathtub overflow;
         2. clothes washing machine drains or hose bibbs; or
         3. floor drains;
      4. inspect:
         1. any system that has been winterized, shut down or otherwise secured;
         2. circulating pumps, free-standing appliances, solar water heating systems, water-conditioning equipment, filter systems, water mains, private water supply systems, water wells, pressure tanks, sprinkler systems, swimming pools, or fire sprinkler systems;
         3. inaccessible gas supply system components for leaks;
         4. for sewer clean-outs; or
         5. for the presence or performance of private sewage disposal systems; or
      5. determine:
         1. quality, potability, or volume of the water supply; or
         2. effectiveness of backflow or anti-siphon devices.
2. Water heaters.
   1. General Requirements.
      1. The inspector shall:
         1. report:
            1. the energy source;
            2. the capacity of the units;
         2. report as Deficient:
            1. inoperative units;
            2. leaking or corroded fittings or tanks;
            3. damaged or missing components;
            4. the absence of a cold water shutoff valve;
            5. if applicable, the absence of a pan or a pan drain system that does not terminate over a waste receptor or to the exterior of the building above the ground surface;
            6. inappropriate locations;
            7. the lack of protection from physical damage;
            8. burners, burner ignition devices or heating elements, switches, or thermostats that are not a minimum of 18 inches above the lowest garage floor elevation, unless the unit is listed for garage floor installation;
            9. the absence of an opening that would allow access to equipment for inspection, service, repair or replacement without removing permanent construction or building finish;
            10. when applicable; a floored passageway and service platform that would allow access for equipment inspection, service, repair or replacement;
            11. the absence of or visible deficiencies in the temperature and pressure relief valve and discharge piping; and
            12. a temperature and pressure relief valve that failed to operate, when tested manually.
      2. The inspector is not required to:
         1. verify the effectiveness of the temperature and pressure relief valve, discharge piping, or pan drain pipes;
         2. operate the temperature and pressure relief valve if the operation of the valve may, in the inspector's reasonable judgment, cause damage to persons or property; or
         3. determine the efficiency or adequacy of the unit.
   2. Requirements for electric units. The inspector shall report as Deficient deficiencies in:
      1. performance of heating elements; and
      2. condition of conductors; and
   3. Requirements for gas units. The inspector shall report as Deficient:
      1. gas leaks in water heater not associated with the gas distribution system;
      2. flame impingement, uplifting flame, improper flame color, or excessive scale build-up; and
      3. deficiencies in:
         1. combustion and dilution air; and
         2. vent pipe, draft hood, draft, proximity to combustibles, and vent termination point and clearances.
3. Hydro-massage therapy equipment.
   1. The inspector shall report as Deficient:
      1. inoperative units;
      2. the presence of active leaks;
      3. deficiencies in components and performance;
      4. missing and damaged components;
      5. the absence of an opening that would allow access to equipment for inspection, service, repair or replacement without removing permanent construction or building finish; and
      6. the absence or failure of operation of ground-fault circuit interrupter protection devices.
   2. The inspector is not required to determine the adequacy of self-draining features of circulation systems.
4. Gas distribution systems.
   1. The inspector shall:
      1. report:
         1. location of gas meter; and
         2. visible material used for gas distribution system;
      2. report as Deficient:
         1. noticeable gas leaks;
         2. the absence of a gas shutoff valve within six feet of the appliance;
         3. the absence of a gas appliance connector or one that exceeds six feet in length;
         4. gas appliance connectors that are concealed within or extended through walls, floors, partitions, ceilings or appliance housings;
         5. deficiencies in:
            1. gas shutoff valves;
            2. access to a gas shutoff valves that prohibits full operation;
            3. gas appliance connector materials; and
            4. the condition and type of gas distribution lines and fittings;
         6. lack of visible bonding on gas distribution system, including corrugated stainless steel tubing (CSST); and
         7. lack of visible sediment traps.
   2. Specific limitation for gas lines. The inspector is not required to:
      1. inspect sacrificial anode bonding or for its existence;
      2. pressurize or test gas system, drip legs or shutoff valves;
      3. operate gas line shutoff valves; or
      4. light or ignite pilot flames.

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§535.232 Standards of Practice: Minimum Inspection Requirements for Appliances

1. Dishwashers. The inspector shall report as Deficient:
   1. inoperative units;
   2. deficiencies in performance or mounting;
   3. rusted, missing or damaged components;
   4. the presence of visible active water leaks; and
   5. the absence of visible backflow prevention.
2. Food waste disposers. The inspector shall report as Deficient:
   1. inoperative units;
   2. deficiencies in performance or mounting;
   3. missing or damaged components; and
   4. the presence of visible active water leaks.
3. Range hoods and exhaust systems. The inspector shall report as Deficient:
   1. inoperative units;
   2. deficiencies in performance or mounting;
   3. missing or damaged components;
   4. ducts that do not terminate outside the building, if the unit is not of a re-circulating type or configuration; and
   5. improper duct material.
4. Electric or gas ranges, cooktops, and ovens. The inspector shall report as Deficient:
   1. inoperative units;
   2. missing or damaged components;
   3. combustible material within thirty inches above the cook top burners;
   4. absence of an anti-tip device, if applicable;
   5. gas leaks in the gas range, cooktops and ovens not associated with the gas distribution system; and
   6. deficiencies in:
      1. thermostat accuracy (within 25 degrees Fahrenheit at a setting of 350 degrees Fahrenheit); and
      2. mounting and performance.
5. Microwave ovens. The inspector shall inspect built-in units and report as Deficient:
   1. inoperative units;
   2. deficiencies in performance or mounting; and
   3. missing or damaged components.
6. Mechanical exhaust systems and bathroom heaters. The inspector shall report as Deficient:
   1. the lack of mechanical ventilation in a bathroom if no operable window is present;
   2. inoperative units;
   3. deficiencies in performance or mounting;
   4. missing or damaged components;
   5. ducts that do not terminate outside the building; and
   6. a gas heater that is not vented to the exterior of the building unless the unit is listed as an unvented type.
7. Garage door operators. The inspector shall report as Deficient:
   1. inoperative units;
   2. deficiencies in performance or mounting;
   3. missing or damaged components;
   4. installed photoelectric sensors located more than six inches above the garage floor;
   5. deficiencies in performance or absence of auto reversing mechanisms and manual detachment device; and
   6. door locks or side ropes that have not been removed or disabled.
8. Dryer exhaust systems. The inspector shall report as Deficient:
   1. missing or damaged components;
   2. the absence of a dryer exhaust system when provisions are present for a dryer;
   3. ducts that do not terminate to the outside of the building;
   4. screened terminations; and
   5. ducts that are not made of metal with a smooth interior finish.
9. General provisions. The inspector is not required to:
   1. operate or determine the condition of other auxiliary components of inspected items;
   2. test for microwave oven radiation leaks;
   3. inspect self-cleaning functions;
   4. disassemble appliances;
   5. determine the adequacy of venting systems;
   6. determine proper routing and lengths of duct systems;
   7. operate or determine the condition of clothes washer, clothes dryer, or refrigerator; or
   8. operate or determine the condition of other built in appliances, except as provided for under §535.233(h), of this title.

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§535.233 Standards of Practice: Minimum Inspection Requirements for Optional Systems

1. An inspector is not required to inspect the components or systems described under this section.
2. If an inspector agrees to inspect a component or system described under this section, the general provisions under §535.227 of this title and the provisions and requirements of this section applicable to that component or system apply.
3. Landscape irrigation (sprinkler) systems.
   1. The inspector shall:
      1. manually operate all zones or stations on the system through the controller;
      2. report as Deficient:
         1. the absence of a rain or moisture sensor,
         2. inoperative zone valves;
         3. surface water leaks;
         4. the absence of a backflow prevention device;
         5. the absence of shutoff valves between the water meter and backflow device;
         6. deficiencies in the performance and mounting of the controller;
         7. missing or damaged components; and
         8. deficiencies in the performance of the water emission devices; such as, sprayer heads, rotary sprinkler heads, bubblers or drip lines.
   2. The inspector is not required to inspect:
      1. for effective coverage of the irrigation system;
      2. the automatic function of the controller;
      3. the effectiveness of the sensors; such as, rain, moisture, wind, flow or freeze sensors;
      4. sizing and effectiveness of backflow prevention device; or
      5. report on the performance of an underground zone.
4. Swimming pools, spas, hot tubs, and equipment.
   1. The inspector shall:
      1. report the type of construction;
      2. report as Deficient:
         1. the presence of a single blockable main drain (potential entrapment hazard);
         2. a pump motor, blower, or other electrical equipment that lacks bonding;
         3. the absence of or deficiencies in safety barriers;
         4. water leaks in above-ground pipes and equipment;
         5. the absence or failure in performance of ground-fault circuit interrupter protection devices; and
         6. deficiencies in:
            1. surfaces;
            2. tiles, coping, and decks;
            3. slides, steps, diving boards, handrails, and other equipment;
            4. drains, skimmers, and valves;
            5. filters, gauges, pumps, motors, controls, and sweeps;
            6. lighting fixtures; and
            7. the pool heater that these standards of practice require to be reported for the heating system.
   2. The inspector is not required to:
      1. disassemble filters or dismantle or otherwise open any components or lines;
      2. operate valves;
      3. uncover or excavate any lines or concealed components of the system;
      4. fill the pool, spa, or hot tub with water;
      5. inspect any system that has been winterized, shut down, or otherwise secured;
      6. determine the presence of sub-surface water tables;
      7. determine the effectiveness of entrapment covers;
      8. determine the presence of pool shell or sub-surface leaks; or
      9. inspect ancillary equipment such as computer controls, covers, chlorinators or other chemical dispensers, or water ionization devices or conditioners other than required by this section.
5. Outbuildings.
   1. The inspector shall report as Deficient the absence or failure in performance of ground-fault circuit interrupter protection devices in grade-level portions of unfinished accessory buildings used for storage or work areas, boathouses, and boat hoists; and
   2. The inspector shall report as Deficient deficiencies in the structural, electrical, plumbing, heating, ventilation, and cooling systems that these standards of practice require to be reported for the principal building.
6. Private water wells.
   1. The inspector shall:
      1. operate at least two fixtures simultaneously;
      2. recommend or arrange to have performed coliform testing;
      3. report:
         1. the type of pump and storage equipment;
         2. the proximity of any known septic system; and
      4. report as Deficient deficiencies in:
         1. water pressure and flow and performance of pressure switches;
         2. the condition of accessible equipment and components; and
         3. the well head, including improper site drainage and clearances.
   2. The inspector is not required to:
      1. open, uncover, or remove the pump, heads, screens, lines, or other components of the system;
      2. determine the reliability of the water supply or source; or
      3. locate or verify underground water leaks.
7. Private sewage disposal systems.
   1. The inspector shall:
      1. report:
         1. the type of system;
         2. the location of the drain or distribution field; and
         3. the proximity of any known water wells, underground cisterns, water supply lines, bodies of water, sharp slopes or breaks, easement lines, property lines, soil absorption systems, swimming pools, or sprinkler systems; and
      2. report as Deficient:
         1. visual or olfactory evidence of effluent seepage or flow at the surface of the ground;
         2. inoperative aerators or dosing pumps; and
         3. deficiencies in:
            1. accessible components;
            2. functional flow;
            3. site drainage and clearances around or adjacent to the system; and
            4. the aerobic discharge system.
   2. The inspector is not required to:
      1. excavate or uncover the system or its components;
      2. determine the size, adequacy, or efficiency of the system; or
      3. determine the type of construction used.
8. Other built-in appliances. The inspector shall report deficiencies in condition or operation of other built-in appliances not listed under §535.232 of this title.

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§535.240 Proration of Payments from the Real Estate Inspection Recovery Fund

In the event of multiple and valid pending claims against a license holder or certificate holder in excess of the limitations in §1102.359, the claims are prorated as follows.
1. Actual damages shall be allocated first. If the total of the eligible actual damages of all claims exceeds the maximum that may be paid from the Real Estate Inspection Recovery Fund, the actual damages are prorated, and no interest, attorney fees, or court costs are paid.
2. If, after allocating the actual damages as provided by paragraph (1) of this section, the limitations in §1102.359 of Chapter 1102, interest on actual damages (pre-judgment and post-judgment) are allocated second. If the total of the interest on eligible actual damages of all claims exceeds the amount remaining to be paid from the Real Estate Inspection Recovery Fund, the interest on eligible actual damages are prorated, and no other interest, attorney fees, or court costs are paid.
3. If, after allocating the actual damages and interest thereon as provided by paragraph (1) and (2) of this section, the limitations in §1102.359 of Chapter 1102, are not reached, other interest, attorney fees, and court costs are allocated third. If the total of the other interest, attorney fees, and court costs of all claims exceeds the amount remaining to be paid from the Real Estate Inspection Recovery Fund, the other interest, attorney fees, and court costs are prorated.

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Subchapter S Residential Rental Locators

§535.300 Advertising by Residential Rental Locators

1. This section is intended to establish standards relating to permissible forms of advertising by a person licensed as a real estate broker or sales agent and functioning as a residential rental locator ("locator"). For the purposes of this section, the term "residential rental locator" has the meaning provided by §1101.002(6) of the Act. For the purposes of this section, the term "advertisement" has the same meaning provided by §535.155 of this chapter.
2. If a locator advertises more than one apartment unit in the same advertisement and lists amenities or features generally without providing the features or amenities available at a specific rent for a specific unit, the advertisement must include a statement having a meaning substantially equivalent to one of the following.
   1. "Not all units have the advertised features or amenities."
   2. "The rent is $_____ or more, depending on the features of the unit."
   3. "The rent quoted is the minimum for a unit which may not have all the features advertised."
3. Advertisements in a printed publication comply with subsection (b) of this section if the publication in which an advertisement appears contains this notice at the beginning of the section in which the advertisement appears: Notice: Residential rental locators may advertise apartment units in general terms, and all units may not have the same features. The amount of rent quoted in an advertisement may be the starting rent for a basic unit or for a unit which does not have all advertised features.
4. An advertisement by a locator of an apartment unit by general terms is misleading unless at the time the advertisement is placed at least one unit meeting the description of the unit contained in the advertisement is available through the locator at the lowest rent stated in the advertisement within either a time stated in the advertisement or not later than the 30th day after the date the advertisement is submitted for publication if no time is stated. Before offering a unit for rent or lease, the locator must also obtain the consent of the unit's owner or of the owner's authorized agent.
5. Advertising by locators must comply with §1101.652(b)(23) of the Act and §535.154 and §535.155 of this chapter.
6. Failure to comply with this section is grounds for the Commission to reprimand a license holder, to suspend or revoke a license, to take other disciplinary action, and to impose an administrative penalty in accordance with §1101.701 of the Act.

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Subchapter T Easement or Right-of-way Agents

§535.400 Registration of Easement or Right-of-Way Agents

1. Application.
   1. A person who intends to be registered by the Commission as an easement or right-of-way agent must:
      1. file an application for the registration through the online process approved by the Commission or on the form prescribed by the Commission for that purpose; and
      2. submit the required fee under §535.404 of this subchapter (relating to Fees).
   2. The Commission will reject an application submitted without a sufficient filing fee.
   3. The Commission may request additional information be provided to the Commission relating to an application.
2. To be eligible for registration, an applicant must:
   1. meet the following requirements at the time of the application:
      1. be 18 years of age;
      2. be a citizen of the United States or a lawfully admitted alien;
   2. comply with the fingerprinting and education requirements of the Act;
   3. meet the honesty, trustworthiness, and integrity requirements under the Act; and
   4. if the applicant is a business entity, designate one of its managing officers who is registered under this title as agent for the business entity.
3. Texas residents who enter military service and resume their Texas residence immediately upon separation from the military are not considered to have lost their Texas residence unless they have affirmatively established legal residence elsewhere.
4. The fact that an individual has had disabilities of minority removed does not affect the requirement that an applicant be 18 years of age to be eligible for a license.
5. The Commission will assign a registration number to each certificate holder and provide each certificate holder with a certificate of registration. Each registration issued by the Commission is valid until the last day of the month two years after the date the registration was issued.
6. Termination of application. An application is terminated and is subject to no further evaluation or processing if the applicant fails to satisfy the requirements of subsection (b) of this section within one year from the date the application is filed.
7. The Commission may disapprove an application for registration with written notice to the applicant if the applicant has been convicted of a criminal offense which is grounds for disapproval of an application under §541.1 of this title (relating to Criminal Offense Guidelines) or the applicant has engaged in conduct prohibited by the Act. Provided a timely written request for a hearing is made by the applicant in accordance with the Act, an applicant whose application for registration has been disapproved is entitled to a hearing. The hearing on the application will be conducted in accordance with §1101.364 of the Act and Chapter 533 of this title (relating to Practice and Procedure).
8. If the Commission determines that issuance of a probationary certificate is appropriate, the order entered by the Commission with regard to the application must set forth the terms and conditions for the probationary certificate. Terms for a probationary certificate may include any of the following:
   1. that the probationary certificate holder comply with the Act and with the rules of the Commission;
   2. that the probationary certificate holder fully cooperate with the Commission in the investigation of any complaint filed against the certificate holder;
   3. that the probationary certificate holder attend a prescribed number of classroom hours in specific areas of study during the probationary period;
   4. that the probationary certificate holder limit acts as an easement or right-of-way agent as prescribed in the order;
   5. that the probationary certificate holder report regularly to the Commission on any matter which is the basis of the probationary certificate;
   6. that the probationary certificate holder comply with any other terms contained in the order which have been found to be reasonable and appropriate by the Commission after consideration of the circumstances involved in the particular application; or
   7. that the probationary certificate holder comply with any other terms contained in an order from any other court or administrative agency under which the probationary certificate holder is bound.
9. Unless the order granting a probationary certificate specifies otherwise, a probationary certificate holder may renew the certificate after the probationary period by satisfying the requirements under §535.403 of this subchapter (relating to Renewal of Registration).
10. Each certificate holder shall display the certificate of registration issued by the Commission in a prominent location in the certificate holder's place of business, as required by §1101.507 of the Act. If the certificate holder maintains more than one place of business, the certificate holder shall display either the certificate or a copy of the certificate in each place of business.
11. Each certificate holder shall provide a mailing address, phone number, and email address used in business, if available, to the Commission and shall report all subsequent changes not later than the 10th day after the date of a change of any of the listed contact information. If a certificate holder fails to update the contact information, the last known contact information provided to the Commission is the certificate holder's contact information.

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§535.401 Required Notices

1. The Commission adopts by reference TREC No. ERW 4-1, Notice Regarding Easements and Rights-of-Way, which is published by and available from the Commission, P.O. Box 12188, Austin, Texas 78711-2188.
2. Each certificate holder shall, before a party in a transaction other than the party the certificate holder represents is obligated to sell, buy, lease, or transfer a right-of-way or easement, provide to the party a copy of TREC No. ERW 4-1 completed by the certificate holder.
3. Each certificate holder shall provide the consumer notice adopted under §531.18 of this title (relating to Consumer Information) in the manner described by that section.

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§535.402 Complaints, Disciplinary Action and Appeals

1. The investigation of complaints and disciplinary action by the Commission against certificate holder will be conducted in accordance with the Act and §535.141 of this chapter (relating to Initiation of Investigation; Order Requirements). In addition to the grounds for revoking or suspending a registration listed in the Act, the Commission may revoke or suspend the registration of a certificate holder on the following grounds:
   1. procuring or attempting to procure a registration by fraud, misrepresentation or deceit, or by making a material misstatement of fact in an application;
   2. failing or refusing on demand to produce a document, book, or record in the certificate holder's possession concerning an easement or right-of-way transaction involving the certificate holder for examination by the Commission or its authorized agent; and
   3. failing to provide information requested by the Commission or its authorized agent in the course of an investigation of a complaint by the 14th day after the date of the request.
2. Appeals from disciplinary orders against a certificate holder are governed by §1101.658 of the Act and by Chapter 533 of this title (relating to Practice and Procedure).

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§535.403 Renewal of Registration

1. Renewal application.
   1. A registration expires on the date shown on the face of the registration issued to the certificate holder.
   2. If a certificate holder intends to renew an unexpired registration, the certificate holder must, on or before the expiration date of the current registration:
      1. file a renewal application through the online process on the Commission's website or on the applicable form approved by the Commission;
      2. submit the appropriate fee required by §535.404 of this subchapter (relating to Fees); and
      3. comply with the fingerprinting and education requirements under the Act.
2. Failure to provide information requested by the Commission in connection with a renewal application is grounds for disciplinary action under §1101.653 of the Act.
3. A registrant who fails to timely renew must apply for and receive a new registration in order to act as an easement or right-of-way agent.
4. The Commission will deliver a registration renewal notice to a certificate holder three months before the expiration of the certificate holder's current registration. Failure to receive the certificate renewal notice does not relieve a certificate holder of the obligation to renew a certificate.
5. The Commission is not required to notify a business entity such as a corporation, limited liability company, or partnership that has failed to designate an officer, manager, or general partner who meets the requirements of §1101.502 of the Act. The Commission may not renew a registration issued to a business entity that has not designated an officer, manager, or general partner who meets the requirements of the Act.
6. If the registration expires on a Saturday, Sunday or any other day on which the Commission is not open for business, a renewal application is considered to be timely filed when the application is received or postmarked no later than the first business day after the expiration date of the registration.
7. Denial of Renewal. The Commission may deny an application for renewal of a registration if the certificate holder is in violation of the terms of a Commission order.

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§535.404 Fees

The Commission shall charge and collect the following fees:
1. a fee of $200 for the application or renewal of a registration for a two-year period; and
2. a fee of $50 for deposit into the Real Estate Recovery Trust Account upon the filing of an original or renewal application for a certificate of registration.

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§535.405 Employee of Owner or Purchaser

1. An easement or right-of-way registration is not required for an individual employed by an owner or purchaser for the purpose of selling, buying, leasing or transferring an easement or right-of-way for the owner. A person is considered to be an owner if it holds an interest in or wishes to acquire an easement or right-of-way or has an equitable title or right acquired by contract with the record title holder.
2. An easement or right-of-way agent employed by an owner or purchaser means a person employed and directly compensated by an owner or purchaser. An independent contractor is not an employee.
3. Withholding income taxes and Federal Insurance Contributions Act (F.I.C.A.) taxes from wages paid to another person is considered evidence of employment.
4. An employee of a business easement or right-of-way certificate holder is required to have an individual easement or right-of-way registration to sell, buy, lease, or transfer an easement or right-of-way.

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§535.406 Continuing Education Requirements

To renew a certificate under this subchapter, a certificate holder must have completed 16 hours of approved continuing education prior to renewal as required by §1101.509, Texas Occupations Code.

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Chapter 537 Professional Agreements and Standard Contracts

§537.1 Definitions

The following terms and phrases, when used in this chapter, have the following meanings:
1. Commission–The Texas Real Estate Commission.
2. Contract forms–Contracts and related addenda, including notices, amendments, and other documents, used in the sale, exchange, option, or lease of any interest in real property.
3. Informational item–A statement that completes a blank in a contract form, discloses factual information, or provides instructions.
4. License holder–A real estate broker or sales agent licensed under Chapter 1101, Texas Occupations Code.
5. Mandatory use–Unless an exception applies under subsection (a) of section 537.11 (relating to Use of Standard Contract Forms; Unauthorized Practice of Law), use of the contract form is required by a license holder.
6. Voluntary use–A license holder may, but is not required to, use the contract form.

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§537.11 Use of Standard Contract Forms; Unauthorized Practice of Law

1. When negotiating contracts binding the sale, exchange, option, or lease of any interest in real property, a license holder shall use only those contract forms approved for mandatory use by the Commission for that type of transaction with the following exceptions:
   1. transactions in which the license holder is functioning solely as a principal, not as an agent;
   2. transactions in which an agency of the United States government requires a different form to be used;
   3. transactions for which a contract form has been prepared by the property owner or prepared by an attorney and required by a property owner; or
   4. transactions for which no contract form has been approved for mandatory use by the Commission, and the license holder uses a form:
      1. prepared by an attorney licensed by this state, or a trade association in consultation with an attorney licensed by this state that contains:
         1. the name of the attorney or trade association who prepared the form;
         2. the name of the broker or trade association for whom the form was prepared;
         3. a statement indicating the type of transaction for which the attorney or trade association has approved the use of the form;
         4. any restrictions on the use of the form; and
         5. if applicable, an explanation of how the form changes the rights, obligations, or remedies of a party under a contract form approved for mandatory use by the Commission and a statement that license holders may not practice law or give legal advice; or
      2. prepared by the Texas Real Estate Broker-Lawyer Committee and approved by the Commission for voluntary use by license holders.
2. A license holder may not:
   1. practice law;
   2. directly or indirectly offer, give or attempt to give legal advice;
   3. give advice or opinions as to the legal effect of any contract forms or other such instruments which may affect the title to real estate;
   4. give opinions concerning the status or validity of title to real estate;
   5. draft or recommend language to be included in a contract form defining or affecting the rights, obligations, or remedies of the principals of a real estate transaction, including escalation, appraisal, or contingency clauses;
   6. add informational items to a form approved by the Commission if the Commission has approved another form for mandatory use for that purpose;
   7. attempt to prevent or in any manner whatsoever discourage any principal to a real estate transaction from employing an attorney; or
   8. obtain legal advice from an attorney, directly or indirectly, for a principal in a real estate transaction in which the license holder is acting as an agent.
3. This section does not:
   1. limit a license holder's fiduciary obligation to disclose to the license holder's principals all pertinent facts that are within the knowledge of the license holder, including such facts which might affect the status of or title to real estate;
   2. prevent the license holder from explaining to the license holder's principals the meaning of informational items or choices in a contract form, as long as the license holder does not practice law or give legal advice;
   3. limit a license holder from employing and paying for the services of an attorney to represent only the license holder in a real estate transaction; or
   4. limit a license holder from reimbursing a principal for attorney's fees incurred.
4. It is not the practice of law for a license holder to:
   1. add informational items to a contract form authorized for use by this section; or
   2. if specifically instructed in writing by a principal, add language to or strike language from a contract form, as long as any change is made conspicuous, including underlining additions, striking through deletions, or employing some other method which clearly indicates the change being made.
5. When a transaction involves unusual matters that should be reviewed by an attorney before an instrument is executed, or if the instrument must be acknowledged and filed of record, the license holder shall advise the license holder's principals to consult an attorney before executing the instrument.
6. A license holder shall advise the license holder's principals that the instrument they are about to execute is binding on them.
7. Contract forms approved by the Commission are published by and available from the Commission at www.trec.texas.gov.
8. Contract forms approved by the Commission may be reproduced, including through use of a software application, provided that the text and format of the form, including the sizing, spacing, and pagination, is identical to the Commission's published version, except that:
   1. the business name or logo of a broker, trade association, or other organization may appear outside the form's border; and
   2. a form may be scaled to accommodate viewing on smaller screens, including mobile devices, as long as the final executed copy of the form otherwise complies with this subsection.

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§537.20 Standard Contract Form TREC No. 9-16, Unimproved Property Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 9-16 approved by the Commission in 2022 for mandatory use in the sale of unimproved property where the intended use is for one to four family residences.

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§537.21 Standard Contract Form TREC No. 10-6, Addendum for Sale of Other Property by Buyer

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 10-6 approved by the Commission in 2012 for mandatory use as an addendum concerning sale of other property by a buyer to be attached to promulgated forms of contracts.

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§537.22 Standard Contract Form TREC No. 11-7, Addendum for "Back-Up" Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 11-7 approved by the Commission in 2012 for mandatory use as an addendum to be attached to promulgated forms of contracts which are second or "back-up" contracts.

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§537.23 Standard Contract Form TREC No. 12-3, Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 12-3 approved by the Commission in 2012 for mandatory use as an addendum to be attached to promulgated forms of contracts where there is a Veterans Administration release of liability or restoration entitlement.

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§537.26 Standard Contract Form TREC No. 15-6, Seller's Temporary Residential Lease

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 15-6 approved by the Commission in 2022 for mandatory use as a residential lease when a seller temporarily occupies property after closing.

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§537.27 Standard Contract Form TREC No. 16-6, Buyer's Temporary Residential Lease

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 16-6 approved by the Commission in 2022 for mandatory use as a residential lease when a buyer temporarily occupies property before closing.

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§537.28 Standard Contract Form TREC No. 20-17, One to Four Family Residential Contract (Resale)

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 20-17 approved by the Commission in 2022 for mandatory use in the resale of residential real estate.

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§537.30 Standard Contract Form TREC No. 23-18, New Home Contract (Incomplete Construction)

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 23-18 approved by the Commission in 2022 for mandatory use in the sale of a new home where construction is incomplete.

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§537.31 Standard Contract Form TREC No. 24-18, New Home Contract (Completed Construction)

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 24-18 approved by the Commission in 2022 for mandatory use in the sale of a new home where construction is completed.

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§537.32 Standard Contract Form TREC No. 25-15, Farm and Ranch Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 25-15 approved by the Commission in 2022 for mandatory use in the sale of a farm or ranch.

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§537.33 Standard Contract Form TREC No. 26-8, Seller Financing Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 26-8 approved by the Commission in 2022 for mandatory use as an addendum concerning seller financing.

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§537.35 Standard Contract Form TREC No. 28-2, Environmental Assessment, Threatened of Endangered Species, and Wetlands Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 28-2 approved by the Commission in 2012 for mandatory use as an addendum to be attached to promulgated forms of contracts where reports are to be obtained relating to environmental assessments, threatened or endangered species, or wetlands.

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§537.37 Standard Contract Form TREC No. 30-16, Residential Condominium Contract (Resale)

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 30-16 approved by the Commission in 2022 for mandatory use in the resale of a residential condominium unit.

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§537.39 Standard Contract Form TREC No. 32-4, Condominium Resale Certificate

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 32-4 approved by the Commission in 2015 for voluntary use as a condominium resale certificate.

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§537.40 Standard Contract Form TREC No. 33-2, Addendum for Coastal Area Property

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 33-2 approved by the Commission in 2012 for mandatory use as an addendum to be added to promulgated forms of contracts in the sale of property adjoining and sharing a common boundary with the tidally influenced submerged lands of the state.

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§537.41 Standard Contract Form TREC No. 34-4, Addendum for Property Located Seaward of the Gulf Intercoastal Waterway

The Texas Real Estate Commission (Commission) adopts by reference standard contract form, TREC No. 34-4 approved by the Commission in 2012 for mandatory use as an addendum to be added to promulgated forms of contracts in the sale of property located seaward of the Gulf Intracoastal Waterway.

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§537.43 Standard Contract Form TREC No. 36-10, Addendum for Property Subject to Mandatory Membership in a Property Owners Association

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 36-10 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms in the sale of property subject to mandatory membership in an owners' association.

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§537.44 Standard Contract Form TREC No. 37-5, Subdivision Information, Including Resale Certificate for Property Subject to Mandatory Membership in a Property Owners' Association

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 37-5 approved by the Commission in 2014 for voluntary use as a resale certificate when the property is subject to mandatory membership in an owners' association.

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§537.45 Standard Contract Form TREC No. 38-7, Notice of Buyer's Termination of Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 38-7 approved by the Commission in 2021 for mandatory use as a buyer's notice of termination of contract.

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§537.46 Standard Contract Form TREC No. 39-9, Amendment to Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 39-9 approved by the Commission in 2022 for mandatory use as an amendment to promulgated forms of contracts.

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§537.47 Standard Contract Form TREC No. 40-10, Third Party Financing Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form, TREC No. 40-10 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms of contracts when there is a condition for third party financing.

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§537.48 Standard Contract Form TREC No. 41-3, Loan Assumption Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 41-3 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms of contracts when there is an assumption of a loan.

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§537.51 Standard Contract Form TREC No. 44-3, Addendum for Reservation of Oil, Gas, and Other Minerals

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 44-3 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms of contracts for the reservation of oil, gas, and other minerals.

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§537.52 Standard Contract Form TREC No. 45-2, Short Sale Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 45-2 approved by the Commission in 2021 for mandatory use as an addendum to be added to promulgated forms of contracts in the short sale of property.

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§537.54 Standard Contract Form TREC No. 47-0, Addendum for Property in a Propane Gas System Service Area

The Texas Real Estate Commission (Commission) adopts by reference standard contract Form TREC No. 47-0 approved by the Commission in 2014 for mandatory use when a property is located in a propane gas system service area.

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§537.55 Standard Contract Form TREC No. 48-1, Addendum for Authorizing Hydrostatic Testing

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 48-1 approved by the Commission in 2019 for mandatory use as an addendum to be added to promulgated forms if the parties agree to hydrostatic testing.

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§537.56 Standard Contract Form TREC No. 49-1, Addendum Concerning Right to Terminate Due to Lender's Appraisal

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 49-1 approved by the Commission in 2018 for mandatory use as an addendum to be added to promulgated forms concerning the right to terminate due to lender's appraisal.

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§537.57 Standard Contract Form TREC No. 50-0, Seller's Notice of Termination of Contract

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 50-0 approved by the Commission in 2018 for mandatory use as a seller's notice of termination of contract.

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§537.58 Standard Contract Form TREC No. 51-1, Addendum Regarding Residential Leases

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 51-1 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms of contracts as related to lease agreements.

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§537.59 Standard Contract Form TREC No. 52-1, Addendum Regarding Fixture Leases

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 52-1 approved by the Commission in 2022 for mandatory use as an addendum to be added to promulgated forms as related to fixture leases.

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§537.60 Standard Contract Form TREC No. 53-0, Addendum containing Notice of Obligation to Pay Improvement District Assessment

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 53-0 approved by the Commission in 2021 for voluntary use when the property is located in a public improvement district.

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§537.61 Standard Contract Form TREC No. 54-0, Landlord's Floodplain and Flood Notice

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 54-0 approved by the Commission in 2022 for voluntary use as an addendum to be added to a residential lease, including a promulgated temporary residential lease form, to fulfill the disclosure requirements of §92.0135, Texas Property Code.

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§537.62 Standard Contract Form TREC No. 55-0, Seller's Disclosure Notice

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 55-0 approved by the Commission in 2023 for voluntary use to fulfill the disclosure requirements of Texas Property Code §5.008.

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§537.63 Standard Contract Form TREC No. OP-L, Addendum for Seller's Disclosure of Information on Lead-Based Paint and Lead-Based Paint Hazards as Required by Federal Law

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. OP-L approved by the Commission in 2011 for voluntary use to comply with federal regulation to furnish a lead paint disclosure in properties constructed prior to 1978.

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§537.64 Standard Contract Form TREC No. OP-M, Non-Realty Items Addendum

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. OP-M approved by the Commission in 2011 for voluntary use when the parties need to convey items of personal property not already listed in Paragraph 2, Property, of the contracts.

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§537.65 Standard Contract Form TREC No. 57-0, Notice to Prospective Buyer

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 57-0 approved by the Commission in 2022 for voluntary use when the parties use a contract of sale that has not been approved for mandatory use by the Commission.

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§537.66 Standard Contract Form TREC No. 59-0, Notice to Purchaser of Special Taxing or Assessment District

The Texas Real Estate Commission (Commission) adopts by reference standard contract form TREC No. 59-0 approved by the Commission in 2024 for voluntary use to fulfill the disclosure requirements of Texas Water Code §49.452and §49.4521.

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Chapter 541 Rules Relating to the Provisions of Texas Occupations Code, Chapter 53

§541.1 Criminal Offense Guidelines

1. For the purposes of Chapter 53, Texas Occupations Code, the Texas Real Estate Commission (the Commission) considers that a deferred adjudication deemed a conviction under §53.021 or a conviction of the following criminal offenses directly relates to the duties and responsibilities of a real estate broker and real estate sales agent because committing these offenses tends to demonstrate a person's inability to represent the interest of another with honesty, trustworthiness, and integrity:
   1. offenses involving fraud or misrepresentation;
   2. offenses involving forgery, falsification of records, or perjury;
   3. offenses involving the offering, paying, or taking of bribes, kickbacks, or other illegal compensation;
   4. offenses against real or personal property belonging to another;
   5. offenses against the person;
   6. offenses against public administration;
   7. offenses involving the sale or other disposition of real or personal property belonging to another without authorization of law;
   8. offenses involving moral turpitude;
   9. offenses in violation of Chapter 21, Texas Penal Code (sexual offenses);
   10. offenses for which the person has been required to register as a sex offender under Chapter 62, Texas Code of Criminal Procedure;
   11. felonies involving the manufacture, delivery, or intent to deliver controlled substances;
   12. offenses of attempting or conspiring to commit any of the foregoing offenses;
   13. offenses involving aiding and abetting the commission of an offense listed in this section;
   14. repeated violations of one criminal statute or multiple violations of different criminal statutes; and
   15. felonies involving driving while intoxicated (DWI) or driving under the influence (DUI).
2. For the purposes of Chapter 53, Texas Occupations Code, the Commission considers that a deferred adjudication deemed a conviction under §53.021, or a conviction of the following criminal offenses, directly relate to the duties and responsibilities of a professional inspector, real estate inspector, apprentice inspector, and easement or right-of-way agent for the reason that the commission of the offenses tends to demonstrate the person's inability to represent the interest of another with honesty, trustworthiness, and integrity:
   1. offenses involving fraud or misrepresentation;
   2. offenses involving forgery, falsification of records, or perjury;
   3. offenses involving the offering, paying, or taking of bribes, kickbacks, or other illegal compensation;
   4. offenses against real or personal property belonging to another;
   5. offenses against the person;
   6. offenses against public administration;
   7. offenses involving the sale or other disposition of real or personal property belonging to another without authorization of law;
   8. offenses involving moral turpitude;
   9. offenses in violation of Chapter 21, Texas Penal Code (sexual offenses);
   10. offenses for which the person has been required to register as a sex offender under Chapter 62, Texas Code of Criminal Procedure;
   11. felonies involving the manufacture, delivery, or intent to deliver controlled substances;
   12. offenses of attempting or conspiring to commit any of the foregoing offenses;
   13. offenses involving aiding and abetting the commission of an offense listed in this section; and
   14. repeated violations of one criminal statute or multiple violations of different criminal statutes.
3. In determining whether a criminal offense not listed in subsections (a) and (b) of this section is directly related to an occupation regulated by the Commission, the Commission shall consider:
   1. the nature and seriousness of the crime;
   2. the relationship of the crime to the purposes for requiring a license to engage in the occupation;
   3. the extent to which a license might offer an opportunity to engage in further criminal activity of the same type as that in which the person previously had been involved;
   4. the relationship of the crime to the ability, capacity, or fitness required to perform the duties and discharge the responsibilities of the licensed occupation; and
   5. any correlation between the elements of the crime and the duties and responsibilities of the licensed occupation.
4. When determining a person's present fitness for a license, the Commission shall also consider:
   1. the extent and nature of the person's past criminal activity;
   2. the age of the person when the crime was committed;
   3. the amount of time that has elapsed since the person's last criminal activity;
   4. the conduct and work activity of the person before and after the criminal activity;
   5. evidence of the person's rehabilitation or rehabilitative effort while incarcerated or after release;
   6. evidence of the person's compliance with any conditions of community supervision, parole, or mandatory supervision; and
   7. other evidence of the person's present fitness, including letters of recommendation.
5. It is the applicant's or license holder's responsibility, to the extent possible, to obtain and provide the recommendations described in subsection (d)(7) of this section.
6. When determining a person's fitness to perform the duties and discharge the responsibilities of a licensed occupation regulated by the Commission, the Commission does not consider an arrest that did not result in a conviction or placement on deferred adjudication community supervision.

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§541.2 Criminal History Evaluation Letters/Determination of Fitness

Pursuant to Texas Occupations Code, Chapter 53, Subchapter D and §1101.353, a person may request that the Texas Real Estate Commission (the Commission) evaluate the person's eligibility for a specific occupational license regulated by the Commission by:
1. submitting a request on a form approved by the Commission for that purpose; and
2. paying the required fee.

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Chapter 543 Rules Relating to the Provisions of the Texas Timeshare Act

§543.1 Definitions

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise.
1. Commission–The Texas Real Estate Commission.
2. Texas Timeshare Act - Chapter 221, Texas Property Code

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§543.2 Registration

1. A developer who wishes to register a timeshare plan shall submit an application for registration using forms approved by the Commission. The Commission may not accept for filing an application submitted without a completed application form and the appropriate filing fee.
2. If the Commission determines that an application for registration of a timeshare plan satisfies all requirements for registration, the Commission shall promptly register the timeshare plan. The Commission shall notify the applicant in writing that the timeshare plan has been registered, specifying the anniversary date of the registration and shall assign a registration number to the timeshare plan.
3. If the Commission determines that an application for registration of a timeshare plan fails to satisfy any requirement for registration, the Commission shall promptly notify the applicant of any deficiency in writing. The Commission may require an applicant to revise and resubmit written documents filed with the application or to provide additional information if the Commission determines that the application is incomplete or inaccurate. Upon submission by an applicant of a response sufficient in the opinion of the Commission to cure any deficiency in the application, the Commission shall promptly register the timeshare plan and provide the applicant with the written notice required by these rules. An application will be terminated and the Commission shall take no further action if the applicant fails to submit a response to the Commission within three months after the Commission mails a request to the applicant for curative action.

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§543.3 Amendments

1. A person who wishes to amend the registration of a timeshare plan shall submit an application to amend the registration using forms approved by the Commission. A developer may file an application to amend a registration before the occurrence of the change. The Commission may not accept for filing an application submitted without a completed application form and the appropriate filing fee.
2. For the purposes of §221.023 and subsections (b)(26), (c)(9) and (d)(32) of §221.032 of the Texas Timeshare Act, a developer shall file amendments to the registration reporting to the Commission any material or materially adverse change in any document contained in a registration.
3. "Material" includes, but is not limited to:
   1. a change of developer;
   2. a change of exchange company or association with an additional exchange company;
   3. an increase in assessments of 15% or more;
   4. any substantial change in the accommodations that are part of the timeshare plan;
   5. an increase or decrease in the number of timeshare interests in the timeshare plan registered by the Commission;
   6. a change of escrow agent or type of escrow or other financial assurance;
   7. if applicable, an increase of more than 20% in an original alternative assurance as defined by §221.063(a) of the Texas Timeshare Act;
   8. a change to a substantive provision of the escrow agreement between the escrow agent and the developer;
   9. a change of management company; or
   10. a change to a substantive provision of the management agreement.
4. "Materially adverse" means any material change to the timeshare plan that substantially reduces the benefits or increases the costs to purchasers.
5. Material or materially adverse does not include the correction of any typographical or other nonsubstantive changes.
6. If the Commission determines that a registration, if amended in the manner indicated in an application to amend a registration, would continue to satisfy all requirements for registration, the Commission shall promptly notify the applicant in writing that the registration has been amended, specifying the effective date of the amendment.
7. If the Commission determines that a registration, if amended in the manner indicated in an application to amend a registration, would fail to satisfy a requirement for registration, the Commission shall promptly notify the applicant of any deficiency. The Commission may require the applicant to revise and resubmit written documents filed with the application or to provide additional information if the Commission determines that the application or written material filed with the application is incomplete or inaccurate. Upon submission by an applicant of a response sufficient in the opinion of the Commission to cure any deficiency in the application, the Commission shall promptly notify the applicant that the registration has been amended, specifying the effective date of the amendment.

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§543.4 Fees

1. An applicant for registration of a timeshare plan or an applicant for abbreviated registration of a timeshare plan shall pay a filing fee of $2.00 for each seven days of annual use availability in each accommodation that is a part of the timeshare plan, provided however, that the Commission shall charge and collect a minimum filing fee of $500.00 and that no registration filing fee shall exceed $3,500.00.
2. An applicant for amendment of the registration of a timeshare plan shall pay a minimum filing fee of $100.00, provided however, that the filing fee for an amendment that increases the number of timeshare interests to be sold from the number that existed or were proposed for sale in the original registration shall be $2.00 for each seven days of annual use availability in each timeshare unit that is being added to the timeshare plan and that no filing fee shall exceed $2,000.00.
3. An applicant for pre-sale authorization shall pay a filing fee of $100.00 in addition to the filing fee due under subsection (a) of this section.
4. A filing fee is not refundable once an application is accepted for filing by the Commission.
5. A developer of a registered timeshare plan shall pay a fee of $100 to renew a registration.
6. To reinstate an expired registration of the timeshare plan, a developer shall pay, in addition to the fee of $100 to renew a timeshare plan, an additional fee of $25 for each month the registration has been expired.

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§543.5 Forms

1. The Commission adopts by reference the following forms to be used in connection with the registration, amendment, or renewal of a timeshare plan:
   1. Application to Register a Timeshare Plan, Form TSR 1-6;
   2. Application to Amend a Timeshare Registration, Form TSR 2-6;
   3. Application for Abbreviated Registration of a Timeshare Plan, Form TSR 3-4;
   4. Application for Pre-sale Authorization, Form TSR 4-0;
   5. Escrow Surety Bond, Form TSR 5-1;
   6. Construction Surety Bond, Form TSR 6-1;
   7. Consent to Service of Process, Form TSR 7-0; and
   8. Application to Renew the Registration of a Timeshare Plan, Form TSR 8-2.
2. Forms approved or promulgated by the Commission must be submitted on copies obtained from the Commission, whether in printed format or electronically completed from the forms available on the Commission's website.
3. Forms adopted by reference in this section are published by and available from the Texas Real Estate Commission at P.O. Box 12188, Austin, Texas 78711-2188, or www.trec.texas.gov.

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§543.6 Violations

1. It is a material violation of the Texas Timeshare Act for a person to engage in any of the acts described in §221.071(a) of the Texas Timeshare Act.
2. It is a material violation of the Texas Timeshare Act for a developer to represent to a potential purchaser of a timeshare interest by advertising or any other means that a timeshare plan has been approved by the State of Texas or the Commission or to represent that the State of Texas or the Commission has passed upon the merits of a timeshare plan. It is not a material violation of the Texas Timeshare Act for a registrant to represent that a timeshare plan has been registered if the registrant discloses at the same time and in the same manner that the State of Texas and the Commission have not approved the timeshare plan or passed upon the merits of the timeshare plan.
3. It is a material violation of the Texas Timeshare Act for a developer to fail to file an application to amend a registration within one month of the occurrence of a material or materially adverse change in any document contained in the registration or to fail to submit a response together with any related material in a good faith effort to cure a deficient application to amend a registration within three months after the Commission has mailed to the applicant a request for curative action.
4. It is a material violation of the Texas Timeshare Act for a person to procure or attempt to procure a registration or amendment to a registration by fraud, misrepresentation, or deceit or by making a material misstatement of fact in an application filed with the Commission.
5. It is a material violation of the Texas Timeshare Act for a person to disregard or violate a rule of the Commission.
6. It is a material violation of the Texas Timeshare Act for a developer to fail to make good a check issued to the Commission one month after the Commission has mailed a request for payment by certified mail to the developer's last known mailing address as reflected by the Commission's records.
7. It is a material violation of the Texas Timeshare Act for a developer to fail, not later than the 14th day after the date of a request, to provide information or documents requested by the Commission or a Commission representative in the course of the investigation of a complaint.
8. It is a material violation of the Texas Timeshare Act for a developer to fail to properly file an assumed name as required by §221.037(b) of the Texas Timeshare Act or to fail to give the Commission timely written notice of the developer's use of an assumed name.

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§543.7 Complaints and Disciplinary Proceedings

1. Complaints regarding registered timeshare plans shall be in writing and signed by the person filing the complaint.
2. The Commission shall not investigate a complaint submitted more than four years after the date of the transaction that is the subject of the complaint.
3. Disciplinary proceedings, including appeals, shall be conducted in accordance with the provisions of §221.024 of the Texas Timeshare Act, Chapter 533 of this title and the Administrative Procedure Act, Chapter 2001, Government Code.

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§543.8 Contract Requirements

1. For purposes of §221.043(a) of the Texas Timeshare Act, "conspicuous manner" means that:
   1. The type of the upper and lower case letters used shall be two point sizes larger than the largest non-conspicuous type, exclusive of heading, on the page on which it appears but in at least 10-point type; or
   2. Where the use of 10-point type would be impractical or impossible, a different style of type or print may be used, so long as the print remains conspicuous under the circumstances.
2. For purposes of subsection (a) of this section, any conspicuous type utilized shall be separated on all sides from other type and print and may be utilized only where required by the Texas Timeshare Act or authorized by the Commission.

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§543.9 Disclosure Requirement

A developer may provide the disclosures required by §221.032 and §221.033 of the Texas Timeshare Act in an alternate format with the written agreement of the purchaser, provided the developer obtains a signed receipt evidencing that consent from the purchaser.

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§543.10 Exemptions

For purposes of §221.034(b) of the Texas Timeshare Act, the term "developer" shall include any entity in which the developer, or any affiliate of the developer, has at least a 25% interest.

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§543.11 Escrow Requirements

1. For purposes of §221.063(a) of the Texas Timeshare Act, the alternative financial assurance from another state or jurisdiction must be for the same timeshare plan as the timeshare plan being registered or registration being amended.
2. A timeshare developer shall, not later than the 10th day after the date of the change, provide the Commission with written notice of any increase or decrease in the original surety bond as provided for in §221.063(a) of the Texas Timeshare Act.

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§543.12 Maintenance of Registration

A developer shall give the Commission written notice of a change of the developer's mailing address not later than the 10th day after the date of the change.

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§543.13 Renewal of Registration

1. The registration of a timeshare plan expires on the last day of the month two years after the date the plan was registered.
2. A developer of a timeshare plan may renew the registration for a two-year period by completing an Application to Renew the Registration of a Timeshare Plan, Form TSR 8-2, and paying the appropriate filing fee.
3. Three months before the expiration of a registration, the Commission shall mail a renewal application form to the developer's last known mailing address as shown in the Commission's records.
4. An application to renew a timeshare plan is considered void and is subject to no further evaluation or processing when the developer fails to provide information or documentation within two months after the Commission makes written request for correct or additional information or documentation.
5. Denial of Renewal. The Commission may deny an application for renewal of a registration if the developer of a timeshare plan is in violation of the terms of a Commission order.

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§543.14 Assumed Names

A developer who uses an assumed name under §221.037(b) of the Texas Timeshare Act instead of using the full name of the developer shall notify the Commission in writing at least 10 days before using the assumed name.

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