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New Agency Disclosure Law

A Texas Agency Disclosure statute was enacted to modify the Texas Real Estate Commission (TREC) rules that describe the policies and procedures for the implementation of the Real Estate License Act as set forth in Texas Occupations Code §§1101.001 et. al.

Required Disclosure at First Meeting

A licensed realtor has specific disclosure requirements under OCC §1101.558. At the first substantive communication for a proposed real estate transaction for a specific piece of property, the real estate license holder is required to provide a written notice in 10-point font that:

  1. describes the ways in which a broker can represent a party to a real estate transaction, including as an intermediary;
  2. describes the basic duties and obligations a broker has to a party to a real estate transaction that the broker represents; and
  3. provides the name, license number, and contact information for the license holder and the license holder's supervisor and broker, if applicable. [OCC §1101.558 (b-1).]

Disclosure to Third Party

The statute, OCC §1101.558 (c), further provides for required disclosures to persons who are not represented by the real estate license holder. In the instance where a real estate license holder already represents a party to a real estate transaction and they communicate to another party about the same real estate property, the license holder is required to disclose such representation, at first contact. This disclosure does not need to be in writing, but the prudent action would be to either give the other party a written disclosure. This should be done at the time of the meeting, but if that is not possible, then to follow-up later with a letter reminding the party that you disclosed the relationship at the time of the meeting.

While the first contact meeting is not required to be in writing, if that first contact or any subsequent meeting is a substantive discussion regarding a real estate transaction, then a written disclosure is required.

The "substantive dialogue" writing is required to be in at least 10-point type and must read as described in the statute. It would be wise, just to have the entire disclosure printed on a document that they can be handed to buyers, sellers, and other parties to the transaction, whether the broker represents them or not. The exact wording of the disclosure can be found at TX OCC §1101.558(d).

Exceptions to Disclosure

The statute provides for a number of situations for which disclosure is not required, these include:

  1. If the proposed transaction is not for a sale, but for a lease that is for less than one year;
  2. If the meeting with a third party takes place with that parties real estate license holder representative; or
  3. The communication is at an open house for any prospective buyer or tenant and the communication is about that property.

When Acting as Intermediary

The law also establishes a concept of "intermediary" between parties in a transaction. [§1101.559 .] Apparently, the change was made in an attempt to avoid the conflict of responsibilities inherent in a dual agency situation.

The statute still limits the ability of a broker to disclose information when the broker is acting as an intermediary. The intermediary must act fairly so as to not favor one party over the other. An intermediary may, however, appoint an associated licensee to communicate with one party and another licensee to communicate with the other party. [§1101.560 .]

A broker can act as an intermediary between parties if the required disclosures are made and if written consent from each party is obtained. This written consent needs to state the source of expected compensation to the broker. A written listing agreement is sufficient to establish consent provided that the agreement contains in conspicuous bold or underlined print prohibited conduct as described in §1101.651(d).

Liability for Misrepresentation or Concealment

The statute also adds §1101.805 to the Real Estate License Act. The section is intended to protect a licensee from liability for a misrepresentation or a concealment of a material fact made by a party in a real estate transaction. The statute provides that the licensee is not liable unless the licensee knew of the falsity of the misrepresentation or concealment and failed to disclose that knowledge. The statute also protects a party or a licensee in a similar manner from a misrepresentation or a concealment of a material fact made by a subagent.


The statute more clearly describes when disclosures are to be made and what information is required to be in the disclosure. Verifying that the broker has the wording as described by the statute on forms ahead of any meeting regarding a specific real estate transaction will go a long way to ensure the required disclosures are being made.

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