Under which circumstance is a licensee exempt from using TREC-promulgated contract forms?

A licensee is exempt from using TREC-promulgated contract forms when they are a principal and not acting as an agent. This exemption is grounded in the understanding that when a licensee is representing themselves in a transaction – as the buyer or seller – they are not engaged in the practice of real estate on behalf of another party. Therefore, they do not have the same legal obligations and requirements to adhere to the TREC-promulgated forms intended for agents representing others.

In this context, the TREC (Texas Real Estate Commission) forms are designed to standardize the contracts used by agents to ensure that the interests of clients are adequately represented. However, when a licensee operates as a principal, they are essentially negotiating their own terms, thereby allowing them the flexibility to draft or negotiate contracts as they see fit, separate from agency regulations.

This circumstance contrasts with situations where the licensee is acting as an agent for either the buyer or the seller. In such cases, the use of TREC-promulgated forms is mandatory to protect clients and ensure compliance with state regulations. The licensee’s role—whether as an agent or a principal—plays a crucial factor in determining the necessity of using standardized contract forms in Texas real estate transactions.