Legal Q & A

Counting "contract days," what to do with offers drafted on expired forms, and other answers to your legal questions.

by Dennis R. Schmidt   Whether you know it or not, you have three attorneys on retainer. Okay, maybe that’s not the exact word for it, but as a REALTOR® in Texas, you have some outstanding legal resources at your disposal. Recently, TAR began including a Legal Hotline question of the week in the association’s electronic newsletter, Inside Track. If you don’t already receive Inside Track, you can subscribe in the News and Pubs section of TexasRealtors.com.

Texas REALTORS® also can access the Legal FAQs (frequently asked questions) section of TexasRealtors.com. There, you will find more than 300 questions and answers to some of the most common agent and broker queries.

Additional Web resources for Texas REALTORS® include three TAR reference books: Legal Article Book, a compilation of legal articles and important cases; REALTOR® Reference Manual, which contains samples of current forms, rules, statutes, the Code of Ethics, and other useful information; and Internet Policy Manual, a tool to help brokers and managers get a handle on policy considerations related to the Internet.

You can also purchase hard copies of these materials by calling 800/873-9155.

The questions answered in this article give you a sample of the kind of material you will find in the Legal FAQs and Legal Hotline question of the week.

Q   Are the days referred to in the Texas Real Estate Commission contracts calendar days or business days, and how do I calculate the time for performance under the TREC contracts?

A   The days referred to in the TREC contracts are calendar days. Since most of the days for performance are preceded by the word "within," the last day for performance would be calculated by starting with the first day after the beginning day (often the effective date of the contract) and counting the number of days specified to reach the last day for performance. Remember that time is not "of the essence" in most TREC contract provisions. However, the time for the buyer to exercise his right to terminate under paragraph 23 must be strictly complied with.

Q   Do the seller’s disclosure notice requirements apply to relocation companies or to the owner of a duplex?

A   A relocation company that has title to the property is not exempt from the notice requirements. Listing agents should suggest the relocation company fill out the notice and attach the notice that they received from their employee along with any inspection reports they have concerning the property.

Although the seller’s disclosure notice requirements of Section 5.008 of the Texas Property Code only apply to sellers of residential property comprising "not more than one dwelling unit," the owner of a duplex would be well-advised to provide the notice for each side of the duplex. Any seller should review the seller’s disclosure notice and consider the advantages of pre-offer disclosure of information about the condition of the property. The seller’s disclosure notice can be a significant risk-reduction tool.

Q   The buyer’s right to terminate the contract under paragraph 23 has expired. The buyer’s inspector has found serious foundation problems and possible mold because of a prior roof leak. Is there any way that the buyer can terminate the contract?

A   If the buyer’s lender requires that these problems be repaired as a condition of making the loan and the seller is not willing to do the repairs, then the buyer would be able to get out of the contract because he could not get the loan provided for in the contract. Paragraph 7E also provides that if the cost of lender-required repairs and treatments exceeds 5% of the sales price, the buyer may terminate the contract.

Q   May an unlicensed person make calls to determine whether a person is interested in buying or selling property or has property they wish to sell, and then make an appointment for a licensed agent to talk to the prospect?

A   No. Often referred to as telemarketing, any such activities conducted in Texas must be conducted by a licensed real estate broker or salesperson. This question was the subject of an Attorney General John Hill opinion (H-1271) that declared that a license was required for this activity. The definitions of a real estate broker in Section 2 of the Real Estate License Act and TREC Rule 535.1(c) make it clear that all solicitation work must be conducted by licensees.

Q   The buyer wants to make the contract contingent on the sale of other property. Must the broker use the addendum, or can the broker insert language in special provisions that, arguably, is more beneficial to the buyer?

A   When a buyer wishes to make a contract contingent on the sale of other property, the broker is required under TREC rules to provide the addendum to the buyer. Brokers are not permitted to disregard the addendum and insert alternative contingency language in special provisions. If a buyer does not want to use the addendum to make the contract contingent on the sale of another property, the buyer should consult with his attorney for the purpose of drafting appropriate language to reflect the buyer’s intent. TREC has disciplined brokers for such violations.

Q   After completing his inspections, the buyer sent to the seller a TREC Amendment form that provided that the seller would do several repairs to the property. The seller responded by sending to the buyer his own TREC Amendment form that provided that the seller would do one repair item, that the sales price would be raised by $2,000, and that if the buyer did not sign this amendment within 24 hours, the contract would terminate. Can the seller require that the buyer accept his amendment to the contract or terminate the contract if buyer doesn’t accept the amendment?

A   No. Either the buyer or the seller can propose an amendment to their contract at any time. Merely proposing an amendment to a contract does not give the other party a right to terminate an existing contract. Unless both parties agree to all terms of a proposed amendment, their contract rights and obligations remain as provided in the existing contract.

This type of post-contract negotiation should not be confused with the offer, rejection of offer, and counteroffer rules that govern negotiating contracts prior to the contract becoming a binding contract in the first place. Once a contract is fully executed and binding on the parties, the rejection of a proposal to amend the contract or a counterproposal to amend the contract does not change the terms of the original contract. Only after the parties agree to all the terms of any amendment proposal and sign the amendment form signifying their agreement is the contract changed to include the amended provisions. Without a fully executed amendment, the original contract remains in effect as written.

Q   I received an offer on one of my listings. The offer was drafted on an expired form. Do I present the offer to the seller or require the other broker to resubmit?

A   Present the offer to the seller. Inform the seller that the offer is on an expired form. If the seller intends to counter the offer, suggest that the seller do so by drafting the counter offer on a current form. Subsequently, inform the other broker that the form was expired and that the other broker is obligated to use a current form. If the seller wants to accept the offer on the older form and not move the sale to a current form, suggest that the seller seek the advice of counsel before doing so.

Dennis R. Schmidt is associate counsel for TAR.

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