1.1 TREC Structure, Powers & Rulemaking Authority

1.1 TREC Structure, Powers & Rulemaking Authority

Exam Focus: The Texas Real Estate Commission (TREC) is the primary regulatory agency governing real estate practice across Texas. On the broker examination, questions heavily test the exact composition of the Commission, the statutory origin of its authority under the Texas Real Estate License Act (TRELA), the procedures governing consumer complaint investigations, the role of the State Office of Administrative Hearings (SOAH), and the strict statutory boundaries that limit TREC's jurisdiction.

1. Statutory Foundation & Legislative Intent

The regulation of real estate brokerage in Texas is rooted in state statute and administrative law:

• The Texas Real Estate License Act (TRELA): Originally passed by the Texas Legislature in 1939 as the Real Estate Dealer's License Act, the statute was comprehensively modernized and codified into the Texas Occupations Code as Chapter 1101 in 2001. Related provisions governing professional real estate inspectors are codified in Chapter 1102.
• Creation of TREC (1949): In 1949, the Texas Legislature created the Texas Real Estate Commission (TREC) as an independent state agency to administer, interpret, and enforce TRELA.
• Statutory Purpose: The sole statutory mission of TRELA and TREC is consumer protection. TREC exists to protect the general public from fraud, dishonesty, misrepresentation, and incompetence in real estate transactions. TREC is not created to protect license holders, promote real estate business interests, or shield brokers from competition.

┌─────────────────────────────────────────────────────────────────────────┐
│                     TEXAS LEGISLATURE (Statutes)                        │
│        Texas Occupations Code Chapter 1101 (TRELA) & Chapter 1102       │
└────────────────────────────────────┬────────────────────────────────────┘
                                     │ Grants Authority
                                     ▼
┌─────────────────────────────────────────────────────────────────────────┐
│               TEXAS REAL ESTATE COMMISSION (TREC Agency)                │
│       9-Member Commission + Executive Director & Administrative Staff    │
└────────────────────────────────────┬────────────────────────────────────┘
                                     │ Promulgates Rules
                                     ▼
┌─────────────────────────────────────────────────────────────────────────┐
│            TEXAS ADMINISTRATIVE CODE (22 TAC Chapters 531–543)           │
│         Administrative Rules with the Full Force and Effect of Law      │
└─────────────────────────────────────────────────────────────────────────┘

2. Commission Composition & Governance

The governing board of TREC consists of 9 commission members appointed by the Governor of Texas with the advice and consent of two-thirds of the Texas Senate.

Membership Breakdown

1. 6 Broker Members: Must be licensed Texas real estate brokers who have been actively engaged in the real estate brokerage business as their primary occupation for at least 5 consecutive years immediately preceding their appointment.
2. 3 Public Members: Must be members of the general public who are not licensed real estate brokers or sales agents and who have no financial interest (direct or indirect) in real estate brokerage or related commercial activities (and whose spouses also have no such financial interest).

Terms of Office & Leadership

• 6-Year Staggered Terms: Members serve 6-year terms. The terms are staggered so that the terms of exactly 3 members expire on January 31 of each odd-numbered year (e.g., 2027, 2029, 2031).
• Presiding Officer (Chair): The Governor designates one of the broker members to serve as the Presiding Officer (Chair) of the Commission at the Governor's pleasure.
• Assistant Presiding Officer & Secretary: The Commission elects a Vice Chair (Assistant Presiding Officer) and a Secretary from among its 9 members at its first regular meeting following February 1 of each odd-numbered year.
• Executive Director: The 9 Commissioners appoint an Executive Director (an unclassified full-time state employee) to oversee day-to-day administrative operations, manage staff, review licensing applications, and direct investigations.

Exam Tip: Memorize the split: 6 brokers (5+ years active experience) + 3 public members = 9 total members. The Governor designates the Chair, but the Commission elects the Vice Chair and Secretary.

3. Powers and Rulemaking Authority

Under TRELA Subchapter C (§§ 1101.101–1101.112) and Subchapter D (§§ 1101.151–1101.161), the Legislature delegates substantial administrative, regulatory, and investigative powers to TREC.

Administrative Rulemaking (22 TAC)

TREC is empowered to adopt and enforce administrative rules necessary to implement and administer TRELA. These rules are published under Title 22, Part 23 of the Texas Administrative Code (22 TAC):

• Chapter 531: Canons of Professional Ethics and Conduct (Fidelity, Integrity, Competency, Consumer Information, Discriminatory Practices, Information About Brokerage Services).
• Chapter 535: General Provisions and Rules Relating to the Provisions of the Texas Real Estate License Act (Licensing, Broker Responsibility, Advertising, Fees, Place of Business).
• Chapter 537: Professional Agreements and Standard Contracts (Promulgated Standard Contract Forms).
• Chapters 539–543: Education Providers, Residential Service Companies, and Timeshares.

Rules promulgated by TREC have the full force and effect of law. A violation of a TREC administrative rule carries the exact same disciplinary weight as a direct statutory violation of TRELA.

Specific Statutory Powers and Duties

• Licensing Administration: Issue, renew, suspend, probated-suspend, or revoke real estate sales agent and broker licenses, business entity licenses, and inspector licenses.
• Standardized Contracts: Promulgate mandatory real estate contract forms, addenda, and notices prepared and recommended by the Texas Real Estate Broker-Lawyer Committee (TRELA Subchapter F).
• Education Standards: Approve and accredit qualifying and continuing education (CE) providers, instructors, and curricula.
• Subpoena Powers (§ 1101.204): TREC has statutory authority to issue subpoenas for the attendance of witnesses and the production of books, accounts, records, correspondence, and other documents relevant to an investigation. If a witness or license holder fails or refuses to comply with a TREC subpoena, TREC may file suit in a Travis County District Court to compel compliance through court order under penalty of contempt.
• Citations and Advisory Letters: Issue advisory letters pointing out minor technical defects or issue formal citations with preset administrative penalties for specific minor infractions (e.g., failure to provide Information About Brokerage Services [IABS] or display consumer notices).

4. Complaint Investigations & SOAH Enforcement Pathway

TREC enforces compliance with TRELA through administrative investigations and formal disciplinary proceedings.

Filing and Investigating Consumer Complaints

• Written, Signed Requirement: TREC will investigate the actions of a license holder upon receipt of a signed, written complaint accompanied by reasonable evidence that establishes reasonable cause for an investigation. TREC will not investigate anonymous complaints, oral complaints, or frivolous grievances.
• Own Motion Investigations: TREC may also initiate an investigation on its own motion (e.g., following an audit, news report, or referral from another regulatory body).
• Statute of Limitations (4-Year Rule): Under Texas Occupations Code § 1101.204(h), TREC cannot conduct an investigation or initiate disciplinary proceedings regarding a complaint filed later than the 4th anniversary (4 years) of the date of the incident that gave rise to the complaint.
• Priority Matrix: TREC categorizes and prioritizes complaint investigations based on the risk of harm to the public (e.g., theft of trust funds and mortgage fraud receive top priority over minor advertising defects).

Contested Case Hearings & The SOAH Process

When TREC staff determines that disciplinary action (such as license suspension, revocation, or an administrative penalty) is warranted, the license holder is entitled to due process:

1. Notice of Violation: TREC issues a formal notice detailing the alleged violations and recommended penalties.
2. Right to a Hearing: The license holder has 30 days from receipt of the notice to accept the determination or submit a written request for a formal hearing.
3. Referral to SOAH: If contested, the hearing is conducted by an independent Administrative Law Judge (ALJ) from the State Office of Administrative Hearings (SOAH), an independent executive agency outside of TREC.
4. Proposal for Decision (PFD): The ALJ conducts a formal evidentiary hearing under the Texas Administrative Procedure Act (APA, Government Code Chapter 2001) and issues a Proposal for Decision (PFD) containing findings of fact and conclusions of law.
5. Final Order by TREC: The PFD is submitted to the Commission. TREC makes the final determination and enters a Final Order. Under § 1101.503, TREC may modify or overturn an ALJ's findings of fact only if TREC determines that the ALJ did not properly apply or interpret applicable law or agency rules.
6. Judicial Appeal: If the licensee wishes to appeal the Final Order, they must file a motion for rehearing with TREC within 25 days. If denied, the licensee may file a petition for judicial review in a Travis County District Court within 30 days.

5. Explicit Statutory Limitations on Commission Authority

Understanding what TREC cannot do is just as critical for the broker examination as understanding what it can do. TRELA explicitly limits TREC's authority in several key operational areas:

1. No Authority Over Commission & Fee Disputes

• TREC has zero statutory jurisdiction over monetary disputes between license holders, commission splits between cooperating brokers, or disputes between brokers and sponsored sales agents.
• Commission disputes are private contract disputes. They must be resolved through civil litigation in a court of competent jurisdiction or through binding arbitration (e.g., through local REALTOR® associations for association members).
• TREC will immediately dismiss any complaint that solely requests TREC to order a broker to pay a commission or fee.

2. Prohibition on Rate Setting (Antitrust Compliance)

• Under federal antitrust statutes (The Sherman Antitrust Act of 1890 and The Clayton Act of 1914) and the Texas Free Enterprise and Antitrust Act of 1983, real estate commission rates and fee structures must be strictly negotiable between the broker and the client.
• TREC is strictly prohibited from setting, establishing, fixing, or suggesting standard commission rates, fee schedules, or standard split percentages.
• Any collective agreement between competing brokers to fix commission rates or boycott discount brokers is an illegal felony violation of antitrust law.

3. No Commercial Recommendations or Firm Endorsements

• TREC does not recommend, rank, rate, or endorse specific brokers, sales agents, brokerage companies, lenders, inspectors, or title companies.
• TREC maintains a neutral public registry of active and inactive licensees, disciplinary histories, and educational providers.

6. Summary Comparison: TREC Powers vs. Limitations