Chapter 7 - Subchapter M Flashcards
Sec. 1101.601.
Real Estate Recovery Trust Account says that the commission will maintain a real estate recovery trust account to reimburse aggrieved persons who suffer actual damages caused by an act described by Section 1101.602 committed by a license holder, a certificate holder, or a person who does not hold a license or certificate and who is an employee or agent of a license or certificate holder.
The license or certificate holder must have held the license or certificate at the time the act was committed.
Sec. 1101.602.
Entitlement to Reimbursement states that an aggrieved person is entitled to reimbursement from the trust account if a license or certificate holder engages in conduct described by TRELA as a harmful act.
Some examples of “harmful acts” might be failing to disclose a known latent defect, failing to disclose if the agent is a principal in the transaction and is a licensee, and commingling money from a trust account.
Sec. 1101.603.
Payments into Trust Account describes how the account will be funded.
⦁ In addition to other fees required by this chapter, an applicant for an original license must pay a fee of $10.
⦁ In addition to other fees required by this chapter, an applicant for an original certificate of registration or renewal certificate must pay a fee of $50.
⦁ The commission will deposit to the credit of the trust account the fees collected as described above and an administrative penalty collected under Subchapter O for a violation by a person licensed as a broker or salesperson.
⦁ An administrative penalty collected under Subchapter O for a violation by a person who isn’t licensed under this chapter or Chapter 1102 will be deposited to the credit of the trust account or the real estate inspection recovery fund, as determined by the commission.
Sec. 1101.604.
Management of Trust Account describes how the funds must be handled.
⦁ The commission will hold money credited to the trust account in trust to carry out the purpose of the trust account.
⦁ Money credited to the trust account may be invested in the same manner as money of the Employees Retirement System of Texas, except that an investment may not be made that would impair the liquidity necessary to make payments from the trust account as required by this subchapter.
⦁ Interest from the investments must be deposited to the credit of the trust account.
⦁ If the balance in the trust account on December 31 of a year is more than the greater of $3.5 million or the total amount of claims paid from the trust account during the preceding four fiscal years, the commission will transfer the excess amount of money in the trust account to the credit of the general revenue fund.
Sec. 1101.605.
Deadline for Action, Notice to Commission states that an action for a judgment that may result in an order for payment from the trust account may not be brought after the second anniversary of the date the cause of action accrues.
When an aggrieved person brings an action for a judgment that may result in an order for payment from the trust account, the license or certificate holder against whom the action is brought must notify the commission in writing of the action.
Sec. 1101.606.
Claim for Payment from Trust Account details the rules for claims against the account.
⦁ Except as described below, an aggrieved person who obtains a court judgment against a license or certificate holder for a harmful act may, after final judgment is entered, execution returned nulla bona, and a judgment lien perfected, file a verified claim in the court that entered the judgment.
⦁ After the 20th day after the date the aggrieved person gives written notice of the claim to the commission and judgment debtor, the person may apply to the court that entered the judgment for an order for payment from the trust account of the amount unpaid on the judgment. The court will proceed promptly on the application.
⦁ If an aggrieved person is precluded by action of a bankruptcy court from executing a judgment or perfecting a judgment lien, the person must verify to the commission that the person has made a good faith effort to protect the judgment from being discharged in bankruptcy. For example, if the aggrieved person must petition the court to prevent that person’s claim from being dismissed in the bankruptcy action.
⦁ The commission by rule may prescribe the actions necessary for an aggrieved person to demonstrate that the person has made a good faith effort to protect a judgment from being discharged in bankruptcy.
Sec. 1101.607.
Issues at Hearing describes what the aggrieved must present at the hearing.
At the hearing on the application for payment from the trust account, the aggrieved person must show that the judgment is based on facts allowing recovery under this subchapter and that the person isn’t:
⦁ the spouse of the judgment debtor or the personal representative of the spouse.
⦁ a license or certificate holder who is seeking to recover compensation, including a commission, in the real estate transaction that is the subject of the application for payment.
Did you know a trust account cannot be used to satisfy a commission dispute? The reason this rule is in place is because the trust account is reserved for clients who have been aggrieved.
⦁ That, according to the best information available, the judgment debtor does not have sufficient attachable assets in this or another state to satisfy the judgment.
⦁ The amount that may be realized from the sale of assets liable to be sold or applied to satisfy the judgment.
⦁ The balance remaining due on the judgment after application of the amount of any sale of assets.
Sec. 1101.608.
Commission Response says that on receipt of notice under Section 1101.606 and the scheduling of a hearing, the commission may notify the attorney general of the commission’s desire to enter an appearance, file a response, appear at the hearing, defend the action, or take any other action the commission considers appropriate.
The commission and the attorney general may act as stated above only to protect the trust account from spurious or unjust claims or ensure compliance with the requirements for recovery under this subchapter.
The commission may relitigate in the hearing any material and relevant issue that was determined in the action that resulted in the judgment in favor of the aggrieved person.
Sec. 1101.609.
Court Order for Payment states that the court will order the commission to pay from the trust account the amount the court finds payable on the claim under this subchapter if at a hearing the court is satisfied of the truth of each matter the aggrieved person is required to show and that the aggrieved person has satisfied each requirement of Sections 1101.606 and 1101.607.
Sec. 1101.610
Payment Limits, Attorney’s Fees describes the limits on payments from the account.
⦁ Payments from the trust account for claims, including attorney’s fees, interest, and court costs, arising out of a single transaction may not exceed a total of $50,000, regardless of the number of claimants.
⦁ Payments from the trust account for claims based on judgments against a single licensee or certificate holder may not exceed a total of $100,000 until the licensee or certificate holder has reimbursed the trust account for all amounts paid.
⦁ If the court finds that the total amount of claims against a license or certificate holder exceeds the limitations in this section, the court will proportionately reduce the amount payable on each claim.
⦁ A person receiving payment from the trust account is entitled to receive reasonable attorney’s fees in the amount determined by the court, subject to the limitations prescribed by this section.
Sec. 1101.611.
Application of Judgment Recovery states that an aggrieved person who receives a recovery on a judgment against a single defendant before receiving a payment from the trust account must apply the recovery first to actual damages.
Sec. 1101.612.
Subrogation states the following:
⦁ The commission is subrogated to all rights of a judgment creditor to the extent of an amount paid from the trust account, and the judgment creditor will assign to the commission all right, title, and interest in the judgment up to that amount.
⦁ The commission has priority for repayment from any subsequent recovery on the judgment.
⦁ The commission must deposit any amount recovered on the judgment to the credit of the trust account.
Sec. 1101.613.
Effect on Disciplinary Proceedings states that this subchapter does not limit the commission’s authority to take disciplinary action against a license or certificate holder for a violation of this chapter or a commission rule.
A license or certificate holder’s repayment of all amounts owed to the trust account does not affect another disciplinary proceeding brought under this chapter.
Sec. 1101.614.
Waiver of Rights states that an aggrieved person who does not comply with this subchapter waives the person’s rights under this subchapter.
Sec. 1101.615.
Notice to Consumers and Service Recipients describes the rules for giving notice.
Each license and certificate holder must provide notice to consumers and service recipients of the availability of payment from the trust account for aggrieved persons in one or more of these forms:
⦁ In conjunction with the notice required by Section 1101.202
⦁ On a written contract for the license or certificate holder’s services
⦁ On a brochure that the license or certificate holder distributes
⦁ On a sign prominently displayed in the license or certificate holder’s place of business
⦁ In a bill or receipt for the license or certificate holder’s services
⦁ In a prominent display on the internet website of a person regulated under this chapter
The notice must include the commission’s name, mailing address, and telephone number and any other information required by commission rule.
