Legal Update- 1

in what case must seller disclose the mud?

Chapter 49 of the Texas Water Code says IF a person is selling a property that is in a district created under the Texas Water Code or by an act of the legislature to provide certain utilities such as water, sanitary sewer, drainage and flood control and any of these services or facilities have been financed with bonds that are payable by the persons who live in the district, THEN the seller must give notice to the buyer of those potential fees for owning this property.

The act is intended to protect investors facing foreclosure.

False

Under the PTFA, no purchaser may terminate a lease in order to occupy the property.

False

t/F TREC now has the option to dismiss a complaint that's inappropriate or lacks merit.

False. They are now required to dismiss.

All TREC-regulated licenses now have a Texas residency requirement.

False. They have to have geographic competency.

The FEMA website offers ______ maps to help visitors find information on flood insurance.

Flood Insurance Rate Maps (FIRM)

When is MUD disclosure required and when can buyer terminate?

Furthermore, the law says the notice must be given to the buyer prior to the buyer entering into a contract OR as an addendum to the contract at the time the contract is negotiated. If the notice is not timely provided, the buyer can terminate the contract at any time.

HB 1342

HB 1342 Relating to a person's eligibility for an occupational license; providing an administrative penalty. Effective September 1, 2019 This bill limits the ability of a licensing authority (like TREC) to suspend or revoke a license, disqualify a person from receiving a license, or deny a person the opportunity to take a licensing exam because of a conviction of a criminal offense that does not directly relate to the duties and responsibilities. The bill adds or modifies considerations that a licensing authority has to take into account when deciding whether to revoke, suspend, or deny, like whether any elements of the crime correlate to the duties and responsibilities of the occupation and whether there is evidence of a person's compliance with any conditions of community supervision or parole. A licensing authority can't deny a person a license or the opportunity to take the exam because of a prior conviction of a criminal offense, unless the licensing authority: (i) provides notice; and (ii) allows the person at least 30 days to submit any relevant information.

HB 3609

HB 3609 Relating to the filing of an assumed name certificate by certain business entities. Effective September 1, 2019. Certain business entities, like corporations, LLPs, and LLCs are now only required to file an assumed name certificate with the Secretary of State, instead of both the Secretary of State and the county clerk.

The house that Mattia is buying lies outside Special Flood Hazard Areas. What's true about this situation?

He's likely eligible for a Preferred Risk Policy.

Municipal Utility Districts

If a property is located within a Municipal Utility District (MUD), the seller is required by the Texas Water Code, as well as the TREC contracts, to provide to a buyer prior to the buyer entering into a sales contract a notice regarding the MUD in which the property is located. The notice provides information regarding the tax rate, bonded indebtedness, and standby fee, if any, of the MUD. Municipal Utility District notices are found in Chapter 49 of the Texas Water Code.

Can a homeowners' association require a copy of a consumer report?

If the rental property is subject to mandatory membership in a homeowners' association, under Texas law, the association cannot require a property owner, their agent, or an applicant or tenant, to provide a copy of the applicant's or tenant's consumer or credit report. Note, however, that this prohibition does not apply to condominium associations.

Key Points- Contract Issues

- Changes to the Notice of Buyer's Termination of Contract include options to terminate based on a lender's appraisal and when title or survey objections aren't timely cured. - A new notice (Notice of Seller's Termination of Contract) was adopted for sellers to use to give notice of termination under rights granted under the mandatory contract forms or addenda. - The Third Party Financing Addendum now includes a time frame for buyer to give seller notice and evidence of the lender's determination regarding the loan due to property condition. - Paragraph 2 of the One to Four Family Residential Contract (Resale) talks about IMPROVEMENTS (2B) PERMANENTLY INSTALLED and BUILT IN ITEMS and ACCESSORIES (2C). These things should remain with the property. - The legal tests of a fixture (real property) versus personal property are annexation, adaptation, and agreement (the TRIPLE A method). - Before listing a property, the agent should ask the seller if they intend to leave certain items or if they will be removing them. If removing them, the agent should list those items on 2D EXCLUSIONS. - When EXCLUSIONS exist, there are three times they need to be included in the transaction: on the listing agreement, in the MLS, and on the contract. - A best practice is to replace or remove an item a seller plans to take with them before the house is shown to prospective buyers so a buyer does not assume the item(s) will stay. - An agent can use the TREC Non-Realty Items Addendum to clarify that an item the buyer wants will stay with the property. - The agent should ask the sellers if they will be leaving their home technology devices. Items to consider include smart doorbells, keyless entry, garage openers, alarms, camera systems, thermostats, speakers (Alexa, Google Home etc.), appliances, robot vacuums, etc. - Remember that smart home devices collect data, so your seller clients should set them to factory settings prior to moving out. - Work to alleviate any misunderstandings, putting everyone on notice regarding what needs to stay for functionality. - Always ask buyers what they plan to do with, add to, have at, bring to, or run out of the property. If it's revealed later that they can't follow their plans, they can terminate the contract, per Paragraph 6. - That blank in Paragraph 6 gives the buyer opportunity to object if the client wants to add a structure or pool, have an exotic pet or raise chickens, bring their RV or big truck to the property, run a day care, beauty shop or group home, and that use or activity would be prohibited. - Buyers have a right to object if it turns out they can't use the property as they want. And sellers may opt to cure the objection. Timeframes apply to both. - If objections aren't cured, the buyer has five days after the 15-day Cure Period to give written notice to the seller to either terminate the contract or waive the objections. - Four elements must be satisfied for final acceptance to take place: The final contract must be in writing; the buyer and seller must sign the final contract; acceptance must be unequivocal; and the last party to accept must communicate acceptance back to the other party or the other party's agent, if applicable. - The Effective Date on the contract is the date of final acceptance of all parties, when all four elements are satisfied. Whichever broker touches the contract after acceptance and notification should fill in the date. - When you get the contract back and if the Effective Date has been left blank - fill it in using the date you were given notice it was accepted. Notify everyone you have done so and the date inserted. Timelines are counted in CALENDAR days. - In the One to Four Contract, Paragraph 23, the termination option, states that the buyer agrees to pay the seller a fee, to be delivered within 3 calendar days after the effective date, to have the unrestricted right to terminate within the time frame agreed in the second blank by giving notice before 5pm on the last day. - If the buyer delivers the option money and then terminates within the timeframe set out in Paragraph 23, the seller keeps the option money but returns the buyer's earnest money. - Deliver the option fee directly to the seller or the listing broker and get a receipt. You may also use an electronic delivery method. - Option money must be deposited into a trust account or delivered to an authorized escrow agent before the close of business of the second working day after the broker receives the money. - The option period may be extended by using the Amendment to Contract form. Another option fee will be required.

key points summary of info covered TREC rule updates

- Chapter 1101 (TOC) gives TREC authority to administer Chapters 1101-1102, adopt and enforce rules necessary to administer those chapters, and establish standards of conduct and ethics for all persons licensed under Chapters 1101-1102. - TREC is required to dismiss a complaint if it determines the complaint is inappropriate or without merit. - The Texas residency requirement for all licenses regulated by TREC no longer applies. Instead, license holders must have geographic competency. - Instead of determining if an applicant's moral character complies with licensing requirements, TREC now will determine if an applicant is fit to engage in the occupations that TREC regulates. - TREC may deny a renewal in the event that the license holder is in violation of a TREC order. - Branch offices are no longer required to be licensed. - A section was added to §535.148 Receiving an Undisclosed Commission or Rebate in order to define settlement providers to greatly parallel the definition in the Real Estate Settlement Procedures Act (RESPA) for consistency with the federal law. - Amendments prohibit license holders from selling referrals or recommending settlement providers to their clients based solely on money or other valuable consideration received in order to ensure that license holders are upholding their fiduciary duty by putting their clients' interest above their own financial gain. - Amendments clarify that the inspector does not have to deliver the inspection report until after receipt of payment for the report and reduces the delivery time after payment from three days to two. - Delegated supervisors are required to take a six-hour broker responsibility course as part of their required continuing education for each renewal. - Signs giving directions to property for sale or lease are not considered an advertisement if they only contain directional arrows and the listing broker's logo or name. - HB 1342 limits the ability of a licensing authority (like TREC) to suspend or revoke a license, disqualify a person from receiving a license, or deny a person the opportunity to take a licensing exam because of a conviction of a criminal offense that does not directly relate to the duties and responsibilities. - HB 1342 adds or modifies considerations that a licensing authority has to take into account when deciding whether to revoke, suspend, or deny, like whether any elements of the crime correlate to the duties and responsibilities of the occupation and whether there is evidence of a person's compliance with any conditions of community supervision or parole. - A licensing authority can't deny a person a license or the opportunity to take the exam because of a prior conviction of a criminal offense, unless the licensing authority: (i) provides notice; and (ii) allows the person at least 30 days to submit any relevant information. - SB 37 removes student loan default or breach of a student loan repayment or scholarship contract as grounds to deny a license or license renewal or to take other disciplinary action against several different types of license holders, including real estate license holders. - SB 1200 allows a military spouse to use an out-of-state license to engage in a business or occupation in Texas, as long as the spouse is in good standing in the other jurisdiction and the licensing requirements are substantially similar. - For the purpose of determining a person's fitness for a license, the licensing authority can't consider an arrest that did not result in a conviction or placement on deferred adjudication community supervision, per SB 1217. - Certain business entities, like corporations, LLPs, and LLCs, are now only required to file an assumed name certificate with the Secretary of State. - Licensees are permitted to attend a meeting of an advisory committee or the Commission where a specific issue of concern or rule is being discussed and provide input. - Licensees may attend a Commission meeting and give their thoughts on a new idea during the public comment on non-agenda items. The Commission can decide to send this idea to an advisory committee for exploration or put it on a future agenda for discussion and possible action. - Licensees may offer written comments to the Commission within 30 days after a rule is proposed but before it is adopted by emailing the general counsel.

Consumer Report Compliance Lyle uses consumer reports and credit reports to screen prospective tenants. With which of these must he comply?

- Fair Credit REporting act - Fed trade commission rules - texas business and commerce code

SB 1200

SB 1200 Relating to the authority of certain military spouses to engage in a business or occupation in this state. Effective September 1, 2019...... Upon notice to and confirmation from the relevant Texas licensing authority, this bill allows a military spouse to use an out-of-state license to engage in a business or occupation in Texas, as long as the spouse is in good standing in the other jurisdiction and the licensing requirements are substantially similar. The military spouse can only engage in the business or occupation for the period during which their spouse is stationed in Texas, but not to exceed three years.

SB 1217

SB 1217 Relating to the consideration of certain arrests in determining an applicant's eligibility for an occupational license. Effective June 14, 2019 For the purpose of determining a person's fitness for a license, the licensing authority can't consider an arrest that did not result in a conviction or placement on deferred adjudication community supervision.

SB 1995

SB 1995 Relating to the review of certain occupational licensing rules by the office of the governor. Effective September 1, 2019 A state agency that issues a license has to submit any proposed rule change affecting market competition to the governor's office for review and approval before the rule is adopted or implemented.

SB 37

SB 37 Relating to a prohibition on the use of student loan default or breach of a student loan repayment or scholarship contract as a ground for refusal to grant or renew an occupational license or other disciplinary action in relation to an occupational license. Effective June 7, 2019 SB 37 removes student loan default or breach of a student loan repayment or scholarship contract as grounds to deny a license or license renewal or to take other disciplinary action against several different types of license holders, including real estate license holders.

T/F The PTFA applies in the case of any foreclosure on a federally related mortgage loan or on any residence.

TRUE

What's the purpose of hydrostatic testing? Select the best answer.

Testing pressure vessels for strength and leaks

TOC Chapter 1101

Texas Occupations Code

§535.101 Fees

The amendment reduces the fee paid by a broker or sales agent from $20 to $10 each time a sales agent establishes or changes sponsorship. This was effective March 1, 2019.

§535.2 Broker Responsibility

The amendment requires a broker to designate anyone who leads, supervises, directs, or manages a team in the brokerage to be a delegated supervisor. This will require that person to take a six-hour broker responsibility course as part of their required continuing education for each renewal. The timeframe when a license holder must be delegated as a supervisor was shortened from six months to three consecutive months. The term "work files" was deleted and replace with more specific items. The rule was clarified to require the broker to ensure that a sponsored sales agent has geographic competence in the market area being served. A broker must require that a sales agent receive coaching and assistance from an experienced license holder competent for that activity, when a sales agent performs a real estate brokerage activity for the first time. In recognition of digital communications, the time frames for responding to clients, agents, other brokers, and the Commission were reduced to two and three days respectively.

§535.141 Initiation of Investigation; Order Requirements

The amendments change the caption of the rule to clarify that this section also includes order requirements and clarify how the agency prioritizes complaint investigations as required in Tex. Occ. Code §1101.204. This was effective May 27, 2019.

535.222 Inspection Report rule chages:

The amendments clarify that the inspector does not have to deliver the inspection report until after receipt of payment for the report and reduces the delivery time after payment from three days to two. This went into effect on Sept. 1, 2019.

§533.8 Motions for Rehearing, Failure to Attend Hearing and Default

The amendments clarify the methods for filing a motion for rehearing with the Commission by adding the email address and facsimile number to which a motion for rehearing may be sent. This was effective May 27, 2019.

What Must an Adverse Action Notice Include?

The name, address, and phone number of the consumer reporting agency that supplied the report (including a toll-free telephone number of the agency, if applicable); A statement that the company that supplied the report did not make the decision to take the unfavorable action and can't give specific reasons for it; and A notice of the person's right to dispute the accuracy or completeness of any information the consumer reporting company furnished, and to get a free report from the company if the person asks for it within 60 days.

§535.142 Consumer Complaint Process

The new rule sets out the existing processes authorized in statute and followed by the Commission when processing and investigating consumer complaints.

§535.155 Advertisements

The proposed amendments to §535.155 clarify that a sign giving directions to property for sale or lease is not considered an advertisement if it only contains the directional arrows or the directional arrows and the listing broker's logo or name only. In addition, the word "realty" was removed from the prohibited terms set out in subsection (d)(5) to allow this word to be used at the beginning or middle of a team name.

T/F Branch offices are no longer required to be licensed.

True

Key Points Related to water Issues.

- No property is completely without flood risk. - The FEMA website allows you to search by property address to discover the property's zone, which indicates its risk of either riparian or coastal flooding. - The FEMA website helps visitors find specific FIRM maps (Flood Insurance Rate Maps). - While not all properties require flood insurance, your clients and customers may want to consider adding it to their policy. - Properties outside of the Special Flood Hazard Area can still flood and are often eligible for Preferred Risk Policies. - If a property is located within a Municipal Utility District (MUD), the seller is required by the Texas Water Code, as well as the TREC contracts, to provide to a buyer prior to the buyer entering into a sales contract a notice regarding the MUD in which the property is located. - No binding contract exists if a required MUD notice is not acknowledged by the buyer at or prior to executing the contract. - If a seller furnishes the required MUD notice after the contract is executed but at or prior to closing and the purchaser elects to close anyway, the law considers the buyer to have waived all rights to terminate the contract and recover damages or other remedies. - A hydrostatic test is a way in which pressure vessels such as pipelines, plumbing, gas cylinders, boilers and fuel tanks can be tested for strength and leaks. - Plumbers use hydrostatic testing to check for water or sewer leaks and to check water pressure. - TREC provides a promulgated form: TREC 48-0 Addendum for Authorizing Hydrostatic Testing.

Seller Disclosures Key Points

- The Legislature made changes to the law regulating the Seller's Disclosure Notice regarding flooding, including whether the seller's property is located wholly or partly in a 500-year floodplain and whether the seller has ever filed a claim for flood damage. - Exercise caution for your brokerage and your sellers when selecting which seller's disclosure notice to provide for the seller to fill out. - The TREC Seller's Disclosure Notice is the minimum required by law and mirrors the provision in the Property Code. Other types of seller's disclosure notices exist. - When using a seller's disclosure notice that requires other forms to be attached, be certain that the seller understands the risks involved if they fail to disclose all the information required by the additional document, and actually attach the additional document. - A seller is in violation of the Deceptive Trade Practices Act if the seller withholds material information concerning the property in an effort to induce the buyer to buy the house. - Disclosing defects of a property is required in all real estate transactions. Doing so using the Seller's Disclosure Notice, however, is only required when transferring residential real property with only one dwelling unit. - Several exceptions exist regarding the use of the Seller's Disclosure Notice, including sales pursuant to a court order, bankruptcy, or foreclosure; transfers between spouses as part of a divorce or legal separation; and new construction of one dwelling unit. - Neither Texas Property Code §5.008 nor TREC's approved Seller's Disclosure Notice require sellers to include recent inspection reports with their property disclosures. - Some trade organizations have their own seller's disclosure notices with added provisions intended to reduce risk for a seller, including a directive to list any written inspection reports received within the past four years and to attach copies. - Property Code §5.008 requires that the notice be completed to the best of the seller's belief and knowledge as of the date the notice signed by the seller. - Sellers should update any disclosure once an inspection is received in order to ensure that any future buyer is made aware of newly revealed conditions. - TREC's Canons of Professional Ethics and Conduct require licensees "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 wise, by acts of commission or omission."

Key Points Unauthorized practice of law.

- Under Sec. 1101.654 of the Texas Occupations Code, a license holder can be suspended or a license revoked for the unauthorized practice of law. - Sec. 1101.654 of the Texas Occupations Code describes the practice of law as drafting "an instrument that transfers or otherwise affects an interest in real property," or advising someone regarding "the validity or legal sufficiency of an instrument or the validity of title to real property." - Licensees may complete a contract form that has been adopted by the Commission for the type of transaction for which the form is used; prepared by an attorney licensed in Texas and approved by the attorney for the type of transaction for which the form is used; or prepared by the property owner or by an attorney and required by the property owner. - TREC Rule §537.11. Subsection (a) sets out the requirement that the license holder use forms adopted by the Commission if there is one for that type of transaction. - A licensee may not practice law, give legal advice, give opinions about property titles, add their own language to an approved form when an addendum would serve the same purpose, and discourage any principal to a real estate transaction from employing a lawyer, among other things. - A licensee may disclose facts that may affect a transaction, fill in the blanks on an authorized form, explain alternative choices that appear on an instrument, and add factual statements or strike though texts on an approved contract form but only as a principal directs in writing. - Since 2006, a lease-purchase agreement has been included in the definition of executory contract in Sub chapter D, Chapter 5 of the Texas Property Code, which contains strong consumer protection provisions that impose many restrictions and severe penalties on a seller if any of the provisions are violated. - Many attorneys believe that the risks associated with a lease-purchase agreement or contract for deed are too significant and should not be used for the sale of residential property. - Advise clients or customers who desire to enter into a lease-purchase agreement or contract for deed arrangement to seek the advice of an experienced real estate attorney. - Only the broker can be the intermediary and only the broker can make appointments. - Texas promulgated contract forms actually define "As-Is" in paragraph 7.D. ""As Is" means the present condition of the Property with any and all defects and without warranty except for the warranties of title and the warranties in this contract." - It is the unauthorized practice of law if a license holder changes any contract language in the promulgated forms.

TOC- 1101 gives trec authority to

- administer chapters 1101-1102 - adopt and enforce rules necessary to adminster those chapters and - establish standards of conduct and ethics for all persons licnesed under chapters 1101-1102

The 6 bills

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Unit 3- Seller Disclosures

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As a result of the agency's Sunset review, the 86th Texas Legislature amended Chapter 1101 in 2019 by enacting SB 624 that included changes to:

1- Require TREC to dismiss a complaint if it determines the complaint is inappropriate or without merit; 2- Require TREC to protect the identity of a complainant, to the extent possible, by excluding the complainant's identifying information from the notice sent to the respondent; 3- Remove the Texas residency requirement for all licenses regulated by TREC and instead require license holders to have geographic competency; 4- Remove TREC's authority to license instructors but maintain TREC's authority over the education and experience requirements to act as an instructor for TREC approved courses, and requires providers to ensure any instructors they use meet the TREC requirements; 5- Require TREC to determine if an applicant is fit to engage in the occupations regulated by TREC in lieu of determining if an applicant's moral character complies with licensing requirements; 6- Authorize TREC to deny a renewal in the event that the license holder is in violation of a TREC order; 7- Eliminate licensure of branch offices.

Exceptions for when a tenant is allowed to occupy a foreclosed property:

1- The first exception is if the purchaser will occupy the property as a primary residence. 2- second exception is if there is no lease or the lease is terminable at will. In those situations, the purchaser must provide to the tenant notice to vacate the property at least 90 days in advance.

When Is a Seller's Disclosure Notice NOT Required?

1- pursuant to a court order or foreclosure sale; 2- by a trustee in bankruptcy; 3- to a mortgagee by a mortgagor or successor in interest, or to a beneficiary of a deed of trust by a trustor or successor in interest; 4- by a mortgagee or a beneficiary under a deed of trust who has acquired the real property at a sale conducted pursuant to a power of sale under a deed of trust or a sale pursuant to a court ordered foreclosure or has acquired the real property by a deed in lieu of foreclosure; 5- by a fiduciary in the course of the administration of a decedent's estate, guardianship, conservatorship, or trust; 6- from one co-owner to one or more other co-owners; 7- made to a spouse or to a person or persons in the lineal line of consanguinity (kinship) of one or more of the transferors; 8- between spouses resulting from a decree of dissolution of marriage or a decree of legal separation or from a property settlement agreement incidental to such a decree; 9- to or from any governmental entity; 10- of a new residence of not more than one dwelling unit which has not previously been occupied for residential purposes; or 11- of real property where the value of any dwelling does not exceed five percent of the value of the property.

A federal law that expired in December 2014 was restored in June 2018. The Protecting Tenants at Foreclosure Act (PTFA) is intended to shield tenants from eviction because of foreclosure on the property they occupy. The PTFA applies in the case of any foreclosure on a federally related mortgage loan or on any dwelling or residential real property. Under the PTFA, any immediate successor in interest (i.e. the purchaser) will assume the interest subject to the rights of a bona fide tenant. A bona fide tenant means:

1- the tenant is not the mortgagor, or the child, spouse, or parent of the mortgagor; 2- the lease or tenancy is the result of an arm's length transaction; 3- and rent is not substantially less than fair-market rent for the property (or that the rent is reduced or subsidized).

A lawsuit under the Fair Housing Act has a two-year statute of limitation.

A lawsuit under the Fair Housing Act has a two-year statute of limitation.

How would you search the FEMA website to discover a property's flood zone?

By its street address

If the consumer report on which the adverse action was based contained a credit score, the landlord must also provide a rental applicant or tenant a written disclosure of any credit score used by the landlord in taking any adverse action based on information in a consumer report, as well as the following information:

the range of possible credit scores; key factors that adversely affected the credit score; the date the credit score was created; and the name of the person or entity that provided the credit score.

For a claim under the FCRA, the statute of limitations is the earlier of

two years after the consumer discovers a violation, or five years after a violation occurs.