Texas Contract Law

Which of the following committees is responsible for drafting and revising contract forms?

Broker-Lawyer Committee. The Broker-Lawyer Committee drafts and revises contract forms for use by real estate licensees. The purpose is to expedite real estate transactions and reduce controversies while protecting the interests of the parties involved.

Who appoints the TREC commissioners?

Governor. The commissioners are appointed by the governor with the advice and consent of the senate.

Under DTPA, to get triple damages, a plaintiff must prove

that the defendant knew the misleading statement was false If a defendant used a misleading statement without knowing it was false, then triple damages may not be awarded.

A licensee is NOT required to disclose in a written seller's disclosure notice

that the seller's son had AIDS and died.

When is the owner required to provide a disclosure regarding a death?

If a previous occupant died falling down a broken staircase. As is stated in Section 5.008 of the Texas Property Code, "A seller or seller's agent shall have no duty to make a disclosure or release information related to whether a death by natural causes, suicide, or accident unrelated to the condition of the property occurred on the property."

Which of the following concerns led to the Texas Real Estate License Act prohibiting licensees from practicing law?

Licensees giving counsel regarding the validity of an instrument that addresses real property rights

As compared to any other type of civil action, in a Deceptive Trade Practices Act (DTPA) action, a plaintiff

May be awarded treble damages. Treble damages and mental anguish are available in the DTPA action. Court costs and attorney's fees may also be added.

A man dies and his property transfers to his heirs through probate. Who is required to provide the seller's disclosure notice?

No one. The notice is not required for transactions by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust.

Which of the following forms is approved by TREC for a written seller's disclosure notice?

OP-H Texas Real Estate Commission (TREC) Form OP-H, Seller's Disclosure of Property Condition, contains the language required by the Property Code.

A licensee is purchasing property for himself. A TREC-promulgated contract is appropriate for this purchase, but the licensee decides to be creative and draft his own contract from what he has learned in his real estate classes. Which of the following is most likely to be TRUE?

The licensee has the right to draft his own contract. TREC-promulgated forms are not required in transactions in which the licensee is functioning solely as a principal, not as an agent.

What law requires owners to provide a written seller's disclosure notice?

Texas Property Code. Section 5.008 of the Texas Property Code requires "a seller of residential property comprising not more than one dwelling unit located in this state to give to the purchaser of the property" a written notice of the property's condition.

What effect do the rules made by the commission have on licensees?

The rules have full force and effect of law. The commission has rule-making authority, and the rules of the commission have the full force and effect of law.

Which of the following is TRUE?

The rules of the Texas Real Estate Commission have the full force and effect of law. The commission has rule-making authority, and the rules of the commission have the full force and effect of law.

A seller wants to close using a contract for deed. Which of the following is MOST correct?

This type of contract must be drafted by an attorney. The contract for deed must be drawn up by an attorney licensed to practice law in Texas.

Which of the following is an exception to using a TREC-promulgated contract form?

Transactions in which a United States government agency requires a different form to be used. When a United States government agency requires a specific form to be used, a TREC-promulgated form does not need to be used.

What is the primary difference between a lawsuit brought under the Deceptive Trade Practices Act (DTPA) and any other type of civil action?

Treble damages are available under the DTPA. Treble damages and mental anguish are available in the DTPA action. Court costs and attorney's fees may also be added.

Which of the following is TRUE about the seller's disclosure notice?

The notice must be completed to the best of the seller's belief and knowledge. As is stated in Section 5.008 of the Texas Property Code, "The notice shall be completed to the best of seller's belief and knowledge as of the date the notice is completed and signed by the seller."

Who appoints the lawyers to the Broker-Lawyer Committee?

President of the state bar. According to Section 1101.252, the six lawyers on the Broker-Lawyer Committee are appointed by the president of the state bar.

How many commissioners are on the Texas Real Estate Commission?

9 member commission appointed by the governor with the advice and consent of the senate for overlapping six-year terms.

Which of the following is NOT required to provide a written seller's disclosure notice?

A beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a power of sale

According to the Texas Real Estate License Act, which of the following requires that a licensee be a practicing attorney?

Advising a person regarding the validity of title to real property TRELA Section 1101.654 states that "the commission shall suspend or revoke the license or certificate of registration of a license or certificate holder who is not a licensed attorney in this state and who, for consideration, a reward, or in a pecuniary benefit, present or anticipated, direct or indirect, or in connection with the person's employment, agency, or fiduciary relationship as a license or certificate holder...advises a person regarding the validity or legal sufficiency of an instrument or the validity of title to real property."

What type of committee is the Broker-Lawyer Committee?

Advisory. One of the advisory committees that exists under the statutes of the TRELA is the Broker-Lawyer Committee.

Why would a seller want to fill out a seller's disclosure notice?

All of these. 1. To inform a potential buyer 2. To limit their future liability 3. To comply with state statute

A licensee who completes a contract for the sale of real property is not engaged in the unauthorized practice of law if the licensee uses a form that is

All of these. Notwithstanding any other law, a license or certificate holder who completes a contract form for the sale, exchange, option, or lease of an interest in real property incidental to acting as a broker is not engaged in the unauthorized or illegal practice of law in this state if the form was (1) adopted by the commission for the type of transaction for which the form is used; (2) prepared by an attorney licensed in this state and approved by the attorney for the type of transaction for which the form is used; or (3) prepared by the property owner or by an attorney and required by the property owner.

What is one of the purposes of the Texas Real Estate License Act?

All of these: b. Regulation of residential service companies c. Regulation of licensed real estate inspectors d. Regulation of licensed real estate brokerage practitioners

Real estate brokers who are members of the Broker-Lawyer Committee become members by being

Appointed by the Texas Real Estate Commission. The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers); six lawyers, appointed by the president of the State Bar of Texas; and one public member, appointed by the governor. They serve staggered six-year terms.

If an agent is preparing an offer for a buyer but has not been able to get a completed seller's disclosure from the listing agent, the buyer

Can make an offer and ask the seller to provide the notice within a certain number of days. The risk for the sellers is that even if they deliver the disclosure within the proper time frame, the buyer can terminate the contract, for any reason, within seven days and receive the earnest money back.

A seller under a standard purchase agreement promulgated by the Texas Real Estate Commission (TREC) did not provide a seller's disclosure notice when required by the Texas Property Code (TPC). The buyer

Could terminate the contract. When the seller fails to provide and the buyer of a previously occupied single-family residence fails to receive the seller disclosure as required by Section 5.008 of the Texas Property Code, the contract may be terminated at the sole option of the buyer and is therefore voidable at the option of the buyer.

A seller's disclosure notice is NOT required in the sale of real property

Pursuant to a court order. The notice is not required for transactions pursuant to a court order or foreclosure sale.

Seller is required to provdie a disclosure of a property condition to the buyer for the following:

1. Licensee's 10 year old single-family home 2. A $50,000 home on land valued at $500,000

Mandatoy TREC forms

1. One to four Family Residential Contract 2. Farm and Ranch Contract 3. Loan Assumption Addendum

Seller is NOT required to provdie a disclosure of a property condition to the buyer for the following:

1. Sale by court order 2. New single-family residence 3. Sale to or from government agencies 4. From one co-owner to another

How many members are on the Broker-Lawyer Committee?

13 The committee is composed of six Real Estate Commission appointees (who are licensed real estate brokers); six lawyers, appointed by the president of the State Bar of Texas; and one public member, appointed by the governor. They serve staggered six-year terms.

If a buyer receives TREC OP-H, and the Seller's Disclosure of Property Condition after the sales contract has been signed by all parties, how many days does the buyer have to terminate the contract?

7 According to the Texas Property Code Section 5.008 and the TREC-promulgated sales contract, the buyer has seven days to terminate the contract after receiving the form.

Which of the following is a TREC-promulgated form?

Addendum for Sale of Other Property by Buyer. The Addendum for Sale of Other Property by Buyer is a TREC-promulgated addendum; the other choices are either TREC approved forms or TAR forms.

An agent represents a buyer. Which of the following forms of advice can the agent give to an unrepresented buyer?

Advice on having the abstract examined by an attorney

Which groups provide forms that can be used by sellers to make the required property disclosure?

All of these. All the information required by the property disclosure can be found on forms provided by the Texas Association of REALTORS®, the Texas Real Estate Commission, and individual broker firms.

If no standard form has been promulgated by the Texas Real Estate Commission, a real estate broker or salesperson may do any of the following EXCEPT

Draft an instrument that transfers an interest in real property. When conducting transactions for which no standard contract form has been promulgated by the Commission, licensees may use a form prepared by an attorney-at-law licensed by Texas and approved by the attorney for the particular kind of transactions involved or prepared by the Texas Real Estate Broker-Lawyer Committee and made available for trial use by licensees with the consent of the Commission. Drafting a form would constitute the unauthorized practice of law.

What does the Broker-Lawyer Committee do?

Drafts contracts. The Broker-Lawyer Committee develops forms and recommends their adoption, but it is the TREC that promulgates the forms for mandatory use.

Texas Real Estate Commission (TREC) Form OP-H, Seller's Disclosure of Property Condition

Is an approved form for voluntary use. The TREC seller's disclosure is an optional form, not a promulgated form. The disclosure is required of the seller, but the Property Code does not dictate which form the seller needs to use.

A real estate broker, acting only as a principal to a transaction (i.e., as a buyer or seller),

Is exempt from mandatory use of a TREC-promulgated form. Transactions in which the licensee is functioning solely as a principal, not as an agent, are exempt from mandatory use of TREC-promulgated forms.

One co-owner conveys interest to another co-owner. What does Section 5.008 of the Texas Property Code say about this situation?

Is it does not require the selling co-owner to provide a written notice of the property's condition. The seller' disclosure of property condition required by Section 5.008 of the property code exempts a co-owner selling to a co-owner.

A buyer wants the seller to leave several items of personal property. The agent uses a Bill of Sale for this transaction. Which of the following is TRUE regarding the agent's actions?

Is the agent may use the form. Although TREC has approved a Non-Realty Items Addendum, it is an optional form. Licensees are not required to use optional forms.

A property sells for $25,000, and the dwelling built thereon is only valued at $1,000. What does Section 5.008 of the Texas Property Code say about this situation?

It does not require the seller to provide a written notice of the property's condition. The notice is not required for transactions of real property where the value of any dwelling does not exceed 5% of the value of the property.

When should a buyer review the written seller's disclosure notice?

Prior to writing an offer. Buyers need to review the seller's disclosure notice before making an offer. This allows buyers to know that they are making an offer on the property "in its present condition" and negotiate appropriately.

Which of the following is a TREC-promulgated contract?

Residential Condominium Contract. The Residential Condominium Contract is one of six TREC-promulgated contracts.

What is the make-up of the Broker-Lawyer Committee?

Six brokers, six lawyers, and one member of the general public

A new home builder wants to use her own contract. What are the agent's legal options?

The agent can use the contract because it is an exception. According to Section 537.11(a)(3), transactions for which a contract form has been prepared by a principal to the transaction are an exception to the rule that TREC-promulgated forms must be used.

How many promulgated contracts does TREC issue?

The answer is six. TREC promulgates the following six contracts: Unimproved Property Contract; One-to-Four-Family Residential Contract (Resale); New Home Contract (Incomplete Construction); New Home Contract (Complete Construction); Farm & Ranch Contract; and Residential Condominium Contract.

Which of the following real estate-related entities has rule-making authority in the state of Texas?

The commission. The commission has rule-making authority, and the rules of the commission have the full force and effect of law.

Which of the following statements is FALSE regarding use of reproduced forms approved or promulgated by TREC?

The form may be reproduced on any size paper at least as large as the size used by TREC. 22 TAC Section 537.11(o) of the TREC rules addresses the ways in which licensees may use reproductions of the TREC forms. Forms must be reproduced on the same size paper used by TREC.

A seller of residential property in Texas must give to the buyer of the property notice of the property's condition. Which of the following is TRUE?

The seller could use any form as long as it is in writing. Sellers of residential property comprising not more than one dwelling unit located in Texas are to give to the purchaser of the property a written notice of the property's condition as prescribed by the Property Code. The TREC seller's disclosure is an optional form, not a promulgated form. The disclosure is required of the seller, but the Property Code does not dictate which form the seller needs to use.

The seller's spouse had an HIV infection. Under the Texas Property Code, what is the sellers' duty to disclose the illness?

The seller has no duty to disclose the illness.

What is the possible result for an owner not providing a seller's disclosure notice when required by the Texas Property Code (TPC), according to the standard purchase agreement promulgated by the Texas Real Estate Commission (TREC)?

The seller would be in violation of failing to disclose, and the buyer could terminate the contract. When the seller fails to provide and the buyer of a previously occupied single-family residence fails to receive the seller disclosure as required by Section 5.008 of the Texas Property Code, the contract may be terminated at the sole option of the buyer and is therefore voidable at the option of the buyer.

An owner of a property is selling the land to another. The land has a house on it, but the house is insignificant to the buyer. Which of the following is TRUE?

The seller's disclosure notice is required unless the value of any dwelling does not exceed 5% of the value of the property. The notice is not required for transactions of real property where the value of any dwelling does not exceed 5% of the value of the property.

Which of the following is an exception to the TREC rules on contract use?

When the buyer requires another form to be used. According to Section 537.11(a)(3), transactions for which a contract form has been prepared by a principal to the transaction are an exception to the rule that TREC-promulgated forms must be used.

Which of the following is an exception to using TREC-promulgated contract forms?

when the licensee is acting as a principal and not as an agent. One of the exceptions for when a licensee must use a TREC-promulgated contract form is in transactions in which the licensee is functioning solely as a principal, not as an agent.