By Pickett                                      H.B. No. 2428

      75R6253 PB-D                           

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the regulation of certain residential real estate

 1-3     managers; providing penalties.

 1-4           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-5           SECTION 1.  Section 3, The Real Estate License Act (Article

 1-6     6573a, Vernon's Texas Civil Statutes), is amended to read as

 1-7     follows:

 1-8           Sec. 3.  EXEMPTIONS.  The provisions of this Act shall not

 1-9     apply to any of the following persons and transactions, and each

1-10     and all of the following persons and transactions are hereby

1-11     exempted from the provisions of this Act:

1-12                 (1)  an attorney at law licensed in this state or in

1-13     any other state;

1-14                 (2)  an attorney in fact under a duly executed power of

1-15     attorney authorizing the consummation of a real estate transaction;

1-16                 (3)  a public official in the conduct of [his] official

1-17     duties;

1-18                 (4)  a person calling the sale of real estate by

1-19     auction under the authority of a license issued by this state

1-20     provided the person does not perform any other act of a real estate

1-21     broker or salesman as defined by this Act;

1-22                 (5)  a person acting under a court order or under the

1-23     authority of a will or a written trust instrument;

1-24                 (6)  a salesperson employed by an owner in the sale of

 2-1     structures and land on which said structures are situated, provided

 2-2     such structures are erected by the owner in the due course of the

 2-3     owner's [his] business;

 2-4                 (7)   an on-site manager of an apartment complex,

 2-5     except as provided by Section 25 of this Act;

 2-6                 (8)  transactions involving the sale, lease, or

 2-7     transfer of any mineral or mining interest in real property;

 2-8                 (9)  an owner or the owner's [his] employees in renting

 2-9     or leasing the owner's [his] own real estate whether improved or

2-10     unimproved;

2-11                 (10)  transactions involving the sale, lease, or

2-12     transfer of cemetery lots;  or

2-13                 (11)  transactions involving the renting, leasing, or

2-14     management of hotels or motels.

2-15           SECTION 2.  Section 5(q), The Real Estate License Act

2-16     (Article 6573a, Vernon's Texas Civil Statutes), is amended to read

2-17     as follows:

2-18           (q)  The commission by rule shall establish methods by which

2-19     consumers and service recipients are notified of the name, mailing

2-20     address, and telephone number of the commission for the purpose of

2-21     directing complaints to the commission. The commission may provide

2-22     for that notification to be provided with the notification required

2-23     by Section 8(r) [8(q)] of this Act or:

2-24                 (1)  on each registration form, application, or written

2-25     contract for services of an individual or entity regulated under

2-26     this Act;

2-27                 (2)  on a sign prominently displayed in the place of

 3-1     business of each individual or entity regulated under this Act;  or

 3-2                 (3)  in a bill for service provided by an individual or

 3-3     entity regulated under this Act.

 3-4           SECTION 3.  Section 8, The Real Estate License Act (Article

 3-5     6573a, Vernon's Texas Civil Statutes), is amended to read as

 3-6     follows:

 3-7           Sec. 8.  REAL ESTATE RECOVERY FUND.  (a)  In this section,

 3-8     "license holder" means a real estate broker, a real estate

 3-9     salesman, and a residential real estate manager licensed under this

3-10     Act.

3-11           (b)  The commission shall establish a real estate recovery

3-12     fund which shall be set apart and maintained by the commission as

3-13     provided in this section.  The fund shall be used in the manner

3-14     provided in this section for reimbursing aggrieved persons who

3-15     suffer actual damages by reason of certain acts committed by a

3-16     license holder [duly licensed real estate broker or salesman,] or

3-17     by an unlicensed employee or agent of a license holder [broker or

3-18     salesman], provided the person [broker or salesman] was licensed by

3-19     the State of Texas at the time the act was committed and provided

3-20     recovery is ordered by a court of competent jurisdiction against

3-21     the person [broker or salesman].  The use of the fund is limited to

3-22     an act that constitutes a violation of Section 15(a)(3) or (6) or

3-23     25 of this Act.

3-24           (c) [(b)]  On application for an original license pursuant to

3-25     this Act, the applicant shall pay, in addition to his original

3-26     license application fee, a fee of $10 which shall be deposited in

3-27     the real estate recovery fund.

 4-1           (d) [(c)]  If on December 31 of any year the balance

 4-2     remaining in the real estate recovery fund is less than $1 million,

 4-3     each license holder [real estate broker and each real estate

 4-4     salesman], on the next renewal of his license, shall pay, in

 4-5     addition to his license renewal fee, a fee of $10, which shall be

 4-6     deposited in the real estate recovery fund, or a pro rata share of

 4-7     the amount necessary to bring the fund to $1.7 million, whichever

 4-8     is less. If on December 31 of any year the balance remaining in the

 4-9     real estate recovery fund is more than $3.5 million or more than

4-10     the total amount of claims paid from the fund during the previous

4-11     four fiscal years, whichever is greater, the amount of money in

4-12     excess of the greater amount shall be transferred to the general

4-13     revenue fund.

4-14           (e) [(d)]  No action for a judgment which subsequently

4-15     results in an order for collection from the real estate recovery

4-16     fund shall be started later than two years from the accrual of the

4-17     cause of action.  When an aggrieved person commences action for a

4-18     judgment which may result in collection from the real estate

4-19     recovery fund, the affected license holder [real estate broker or

4-20     real estate salesman] shall notify the commission in writing to

4-21     this effect at the time of the commencement of the action.

4-22           (f) [(e)]  When an aggrieved person recovers a valid judgment

4-23     in a court of competent jurisdiction against a license holder [real

4-24     estate broker or real estate salesman], on the grounds described in

4-25     Subsection (b) [(a)] of this section that occurred on or after May

4-26     19,  1975, the aggrieved person may, after final judgment has been

4-27     entered, execution returned nulla bona, and a judgment lien

 5-1     perfected, file a verified claim in the court in which the judgment

 5-2     was entered and, on 20 days' written notice to the commission, and

 5-3     to the judgment debtor, may apply to the court for an order

 5-4     directing payment out of the real estate recovery fund of the

 5-5     amount unpaid on the judgment, subject to the limitations stated in

 5-6     Subsection (o) [(n)] of this section.

 5-7           (g) [(f)]  The court shall proceed on the application

 5-8     forthwith.  On the hearing on the application, the aggrieved person

 5-9     is required to show that:

5-10                 (1)  the judgment is based on facts allowing recovery

5-11     under Subsection (b) [(a)] of this section;

5-12                 (2)  he is not a spouse of the debtor, or the personal

5-13     representative of the spouse;

5-14                 (3)  [and] he is not a real estate broker or salesman,

5-15     as defined by this Act, who is seeking to recover a real estate

5-16     commission in the transaction or transactions for which the

5-17     application for payment is made;

5-18                 (4) [(3)]  he has obtained a judgment under Subsection

5-19     (f) [(e)] of this section that is not subject to a stay or

5-20     discharge in bankruptcy, stating the amount of the judgment and the

5-21     amount owing on the judgment at the date of the application;

5-22                 (5) [(4)]  based on the best available information, the

5-23     judgment debtor lacks sufficient attachable assets in this state or

5-24     any other state to satisfy the judgment; and

5-25                 (6) [(5)]  the amount that may be realized from the

5-26     sale of real or personal property or other assets liable to be sold

5-27     or applied in  satisfaction of the judgment and the balance

 6-1     remaining due on the judgment after application of the amount that

 6-2     may be realized.

 6-3           (h) [(g)]  A recovery on the judgment against a single

 6-4     defendant made before payment from the recovery fund must be

 6-5     applied by the creditor first to actual damages.

 6-6           (i) [(h)]  The court shall make an order directed to the

 6-7     commission requiring payment from the real estate recovery fund of

 6-8     whatever sum it finds to be payable on the claim, pursuant to and

 6-9     in accordance with the limitations contained in this section, if

6-10     the court is satisfied, on the hearing, of the truth of all matters

6-11     required to be shown by the aggrieved person by Subsection (g)

6-12     [(f)] of this section and that the aggrieved person has satisfied

6-13     all of the requirements of Subsections [(e) and] (f) and (g) of

6-14     this section.  The commission may relitigate any issue material and

6-15     relevant in the hearing on the application that was determined in

6-16     the underlying action on which the judgment in favor of the

6-17     applicant was based.  If the court finds that the aggregate amount

6-18     of claims against a license holder [real estate broker or salesman]

6-19     exceeds the limitations contained in this section, the court shall

6-20     reduce proportionately the amount it finds payable on the claim.

6-21           (j) [(i)]  A license granted under the provisions of this Act

6-22     may be revoked by the commission on proof that the commission has

6-23     made a payment from the real estate recovery fund of any amount

6-24     toward satisfaction of a judgment against a license holder

6-25     [licensed real estate broker or salesman].  The commission may

6-26     probate an order revoking a license.  A person whose license is

6-27     revoked under this subsection is not [No broker or salesman is]

 7-1     eligible to  receive a new license until he has repaid in full,

 7-2     plus interest at the current legal rate, the amount paid from the

 7-3     real estate recovery fund on his account.

 7-4           (k) [(j)]  The sums received by the real estate commission

 7-5     for deposit in the real estate recovery fund shall be held by the

 7-6     commission in trust for carrying out the purposes of the real

 7-7     estate recovery fund.  These funds may be invested and reinvested

 7-8     in the same manner as funds of the Texas State Employees Retirement

 7-9     System, and the interest from these investments shall be deposited

7-10     to the credit of the real estate recovery fund, provided, however,

7-11     that no investments shall be made which will impair the necessary

7-12     liquidity required to satisfy judgment payments awarded pursuant to

7-13     this section.

7-14           (l) [(k)]  When the real estate commission receives notice of

7-15     entry of a final judgment and a hearing is scheduled under

7-16     Subsection (i) [(h)] of this section, the commission may notify the

7-17     Attorney General of Texas of its desire to enter an appearance,

7-18     file a response, appear at the court hearing, defend the action, or

7-19     take whatever other action it deems appropriate.  In taking such

7-20     action the real estate commission and the attorney general shall

7-21     act only to protect the fund from spurious or unjust claims or to

7-22     insure compliance with the requirements for recovery under this

7-23     section.

7-24           (m) [(l)]  When, on the order of the court, the commission

7-25     has paid from the real estate recovery fund any sum to the judgment

7-26     creditor, the commission shall be subrogated to all of the rights

7-27     of the judgment creditor to the extent of the amount paid.  The

 8-1     judgment creditor shall assign all his right, title, and interest

 8-2     in the judgment up to the amount paid by the commission which

 8-3     amount shall have priority for repayment in the event of any

 8-4     subsequent recovery on the judgment.  Any amount and interest

 8-5     recovered by the commission on the judgment shall be deposited to

 8-6     the fund.

 8-7           (n) [(m)]  The failure of an aggrieved person to comply with

 8-8     the provisions of this section relating to the real estate recovery

 8-9     fund shall constitute a waiver of any rights under this section.

8-10           (o) [(n)]  Notwithstanding any other provision, payments from

8-11     the real estate recovery fund are subject to the following

8-12     conditions and limitations:

8-13                 (1)  payments may be made only pursuant to an order of

8-14     a court of competent jurisdiction, as provided in Subsection (f)

8-15     [(e)] of this section, and in the manner prescribed by this

8-16     section;

8-17                 (2)  payments for claims, including attorneys' fees,

8-18     interest, and court costs, arising out of the same transaction

8-19     shall be limited in the aggregate to $50,000 regardless of the

8-20     number of claimants;  and

8-21                 (3)  payments for claims based on judgments against any

8-22     one license holder [licensed real estate broker or salesman] may

8-23     not exceed in the aggregate $100,000 until the fund has been

8-24     reimbursed by the licensee for all amounts paid.

8-25           (p) [(o)]  Nothing contained in this section shall limit the

8-26     authority of the commission to take disciplinary action against a

8-27     license  holder [licensee] for a violation of this Act or the rules

 9-1     and regulations of the commission;  nor shall the repayment in full

 9-2     of all obligations to the real estate recovery fund by a licensee

 9-3     nullify or modify the effect of any other disciplinary proceeding

 9-4     brought pursuant to this Act.

 9-5           (q) [(p)]  Any person receiving payment out of the real

 9-6     estate recovery fund under this section is [pursuant to Section 8

 9-7     of this Act  shall be] entitled to receive reasonable attorney fees

 9-8     as determined by the court, subject to the limitations stated in

 9-9     Subsection (o) [(n)] of this section.

9-10           (r)  Each license holder [(q) A broker or salesman licensed

9-11     under this Act] shall notify consumers and service recipients of

9-12     the availability of the real estate recovery fund established under

9-13     this section for reimbursing certain aggrieved persons.  The notice

9-14     must include the name, mailing address, and telephone number of the

9-15     commission and any other information required by commission rule.

9-16     The notification may be provided with the notice required by

9-17     Section 5(q) of this Act or:

9-18                 (1)  on a written contract for the services of a

9-19     broker, [or] salesman, or residential real estate manager;

9-20                 (2)  on a brochure distributed by a broker, [or]

9-21     salesman, or residential real estate manager;

9-22                 (3)  on a sign prominently displayed in the place of

9-23     business of a [salesman or] broker, salesman, or residential real

9-24     estate manager; or

9-25                 (4)  in a bill or receipt for service provided by a

9-26     broker, [or] salesman, or residential real estate manager.

9-27           SECTION 4.  The Real Estate License Act (Article 6573a,

 10-1    Vernon's Texas Civil Statutes) is amended by adding Section 25  to

 10-2    read as follows:

 10-3          Sec. 25.  RESIDENTIAL REAL ESTATE MANAGERS.  (a)  In this

 10-4    section:

 10-5                (1)  "Dwelling unit" means a room or rooms suitable for

 10-6    occupancy as a residence containing kitchen and bathroom

 10-7    facilities.

 10-8                (2)  "Multi-unit single family dwelling" means a

 10-9    building or buildings containing more than three dwelling units all

10-10    of which are rented primarily for nontransient use, with rental

10-11    paid at intervals of one week or longer.  The term does not include

10-12    a residential condominium.

10-13                (3)  "Residential real estate manager" means a person,

10-14    other than the owner of the property or a person exempt under

10-15    Section 3 of this Act,  who, for consideration, manages a

10-16    multi-unit single family dwelling.

10-17          (b)  A person may not act as a residential real estate

10-18    manager in this state unless the person holds a license issued

10-19    under this section and complies with the continuing education

10-20    requirements required under this section.

10-21          (c)  An applicant for a license under this section shall file

10-22    an application for a license with the commission on forms

10-23    prescribed by the commission.

10-24          (d)  The commission shall issue a residential real estate

10-25    manager license to an applicant who possesses the required

10-26    qualifications and pays the fee required by Subsection (i) of this

10-27    section.

 11-1          (e)  A license issued under this section expires on the first

 11-2    anniversary of the date on which the license is issued.  A license

 11-3    holder may renew the license by paying the required renewal fee to

 11-4    the commission and providing proof to the commission that the

 11-5    license holder has attended a minimum of 15 classroom hours of

 11-6    continuing education courses approved by the commission during the

 11-7    term of the current license.  The 15 hours of instruction must be

 11-8    devoted to property issues related to leasing and discrimination in

 11-9    leasing.   The commission, by rule, may substitute relevant

11-10    educational experience or correspondence courses approved by the

11-11    commission for classroom instruction.  The commission may approve

11-12    supervised video instruction to count as classroom hours of

11-13    mandatory continuing education.

11-14          (f)  If a person's license has been expired for 90 days or

11-15    less, the person may renew the license by paying to the commission

11-16    the required renewal fee and a fee that is one-half of the

11-17    application fee for the license.  If a person's license has been

11-18    expired for longer than 90 days but less than one year, the person

11-19    may renew the license by paying to the commission all unpaid

11-20    renewal fees and a fee that is equal to the application  fee for

11-21    the license.  If a person's license has been expired for one year

11-22    or longer, the person may not renew the license.  The person may

11-23    obtain a new license by complying with the requirements and

11-24    procedures for obtaining an original license.

11-25          (g)  At least 30 days before the expiration of a person's

11-26    license, the commission shall send written notice of the impending

11-27    license expiration to the person at the person's last known address

 12-1    according to the records of the commission.

 12-2          (h)  Each residential real estate manager shall post in a

 12-3    conspicuous place accessible to residents and  prospective

 12-4    residents:

 12-5                (1)  the manager's license;

 12-6                (2)  a statement that the manager holds a license

 12-7    issued by the commission under this section; and

 12-8                (3)  the name, mailing address, and telephone number of

 12-9    the commission as provided by Section 5(q) of this Act.

12-10          (i)  The commission shall charge and collect reasonable and

12-11    necessary fees to recover the cost of administering this section

12-12    as follows:

12-13                (1)  a fee not to exceed $50 for the filing of an

12-14    original application for a license as a residential real estate

12-15    manager; and

12-16                (2)  a fee not to exceed $50 for the annual license

12-17    renewal of a residential real estate manager.

12-18          (j)  The commission may adopt rules as necessary to implement

12-19    the licensing program established under this  section.

12-20          (k)  Under the commission's authority under Section 411.122,

12-21    Government Code, the commission is entitled to obtain from the

12-22    Department of Public Safety criminal record history information

12-23    maintained by that department regarding a person who is an

12-24    applicant for a license under this section or a license holder

12-25    under this section.

12-26          (l)  A violation of this section or a rule adopted under this

12-27    section by a residential real estate manager constitutes grounds

 13-1    for the suspension or revocation of the person's license and for

 13-2    the assessment of an administrative penalty under Section 19A of

 13-3    this Act.

 13-4          (m)  The commission may investigate the actions of a licensed

 13-5    residential real estate manager and may, after notice and hearing

 13-6    in accordance with Section 17 of this Act, reprimand, place on

 13-7    probation, suspend, or revoke a license for a violation of this

 13-8    section or a rule of the commission.  If the commission revokes a

 13-9    license of a person, the person may not apply to the commission for

13-10    a new license for one year after the revocation.

13-11          (n)  A person commits an offense if the person acts as a

13-12    residential real estate manager in this state  without a license

13-13    issued under this section.  An offense under this subsection is a

13-14    Class B misdemeanor.

13-15          SECTION 5.  This Act takes effect September 1, 1997, except

13-16    that the change in law made by Sections 25(b) and (n), The Real

13-17    Estate License Act (Article 6573a, Vernon's Texas Civil Statutes),

13-18    as added by this Act, takes effect July 1, 1998.

13-19          SECTION 6.  The importance of this legislation and the

13-20    crowded condition of the calendars in both houses create an

13-21    emergency and an imperative public necessity that the

13-22    constitutional rule requiring bills to be read on three several

13-23    days in each house be suspended, and this rule is hereby suspended.