1. INSTRUCTED BY LORI LEVY, GENERAL COUNSEL & ABBY LEE, ASSOCIATE COUNSEL SEPTEMBER 18, 2013 Model Brokerage Policies and Procedures

2. Outline History Requirements How to Use

3. History TREC Broker Responsibility Working Group TREC Rule 535.2(i) Senate Bill 747  Broker Responsibility Course

4. Requirements What? Who? Why?

5. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities.

6. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act.

7. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker.

8. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker. 4. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the change, notice of any change to the Act, Rules, or commission promulgated contract forms.

9. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker. 4. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the change, notice of any change to the Act, Rules, or commission promulgated contract forms. 5. In addition to completing statutory minimum continuing education requirements, each sponsored salesperson receives such additional educational instruction the broker may deem necessary to obtain and maintain on a current basis competency in the scope of the sponsored salesperson’s practice subject to the Act.

10. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker. 4. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the change, notice of any change to the Act, Rules, or commission promulgated contract forms. 5. In addition to completing statutory minimum continuing education requirements, each sponsored salesperson receives such additional educational instruction the broker may deem necessary to obtain and maintain on a current basis competency in the scope of the sponsored salesperson’s practice subject to the Act. 6. Each sponsored salesperson complies with the commission’s advertising rules.

11. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker. 4. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the change, notice of any change to the Act, Rules, or commission promulgated contract forms. 5. In addition to completing statutory minimum continuing education requirements, each sponsored salesperson receives such additional educational instruction the broker may deem necessary to obtain and maintain on a current basis competency in the scope of the sponsored salesperson’s practice subject to the Act. 6. Each sponsored salesperson complies with the commission’s advertising rules. 7. All trust accounts, including but not limited to property management trust accounts, and other funds received from consumers are handled by the broker with appropriate controls.

12. Requirements According to TREC Rule 535.2(i), a broker shall maintain on a current basis written policies and procedures to ensure that: 1. Each sponsored salesperson is advised of the scope of the salesperson's authorized activities subject to the Act and is competent to conduct such activities. 2. Each sponsored salesperson maintains his or her license in active status at all times while he or she are engaging in activities subject to the Act. 3. Any and all compensation paid to a sponsored salesperson for acts or services subject to the Act is paid by, through, or with the written consent of the sponsoring broker. 4. Each sponsored salesperson is provided on a timely basis, prior to the effective date of the change, notice of any change to the Act, Rules, or commission promulgated contract forms. 5. In addition to completing statutory minimum continuing education requirements, each sponsored salesperson receives such additional educational instruction the broker may deem necessary to obtain and maintain on a current basis competency in the scope of the sponsored salesperson’s practice subject to the Act. 6. Each sponsored salesperson complies with the commission’s advertising rules. 7. All trust accounts, including but not limited to property management trust accounts, and other funds received from consumers are handled by the broker with appropriate controls. 8. Records are properly maintained pursuant to TREC rules.

13. Question I don’t sponsor any salespersons. Do I still need to have written policies and procedures? Yes. TREC requires that a broker, regardless if the broker sponsors any salespersons, must have written policies and procedures. However, if the broker does not sponsor salespersons, information addressing all eight categories under 535.2(i) may not, ultimately, need to be included in the policies and procedures.

14. Question My brokerage firm primarily does residential leasing and property management. Do I, as broker, need specific written policies and procedures related to property management? No. The eight categories under TREC Rule 535.2(i) apply to all Texas brokers, regardless if the broker does residential sales, commercial sales, or residential or commercial leasing and property management. Therefore, a broker engaging in property management or leasing would not need an alternative or supplement to the Texas Association of REALTORS® Model Brokerage Policies and Procedures manual to comply with the TREC rule.

15. Question Once I purchase the manual, do I need to alert TREC that I am in compliance? No. TREC does not require brokers to notify the Commission that the broker is in compliance with 535.2(i).

16. Outline History Requirements How to Use

17. Questions Where can I order the TAR Model Brokerage Policies and Procedures? Visit www.TexasRealtors.com/BrokerManual www.TexasRealtors.com/BrokerManual How much does the TAR Model Brokerage Policies and Procedures cost? $79.99 plus tax until October 15 th, $99.99 plus tax thereafter. Do I get an update when the law changes? Yes. These updates are free of charge.

18. Question I am a salesperson, but I wanted to purchase the TAR Model Brokerage Policies and Procedures. I did and I printed out a copy. I noticed that my copy has my broker’s information printed across the top of each page. Am I allowed to purchase the manual? Yes. Any TAR member is welcome to purchase the model manual. Keep in mind, however, that TREC only requires broker to have the written policies and procedures. The information you find printed across the top is for TAR purposes only.

19. Question I just created and registered a new brokerage firm, and purchased my copy of the TAR Model Brokerage Policies and Procedures manual yesterday. When I printed the document, however, I noticed it printed my old brokerage information across the top of each page. Can I get another copy of the manual with the current brokerage information printed across the top? Yes. The brokerage name will change on the document when TAR’s membership records are updated with the new name. You may want to confirm with TAR that we have received your updated information. Once TAR’s membership records are updated, you may go back to the webpage where you downloaded the document and re-download the document. There will be no additional charge for doing so.

20. Question Can I obtain a receipt for my purchase of the manual? Yes. Contact the Texas Association of REALTORS® at 512.480.8200. Can I obtain a copy of the Model Brokerage Policies and Procedures manual in Microsoft Word format? No. TAR only offers this document in PDF format. Will I get a printed copy of the manual? No. The manual only comes in electronic format, which you may print if you desire a hard copy.

21. How to Use Page i: PREFACE The objective of Texas Association of REALTORS ® Model Brokerage Policies and Procedures is to provide Texas Brokers with written policies and procedures as required by the Texas Real Estate Commission (TREC). Each chapter will contain policies comprising the general principles which will guide a Broker in his or her management of daily affairs. Each chapter will also contain procedures, or methods, to further comply with those policies. Much of the policies and procedures contained within are derived from TREC rules—rules which must be complied with by Texas real estate licensees. Some of the policies or procedures, however, are derived from other sources, such as state and federal laws, and the National Association of REALTORS ® (NAR) Code of Ethics. The inclusion of certain provisions of the NAR Code of Ethics in these materials is not intended to heighten the duty of care for a Texas real estate licensee. Unlike Texas real estate licensees who are not REALTORS ®, members of the Texas Association of REALTORS ® (TAR) hold themselves to the ethical ideals set forth in the NAR Code of Ethics. It is not the intention of the Texas Association of REALTORS ® that these materials be all-encompassing. Brokers should take care to ensure that all relevant rules or laws affecting real estate or their business are complied with by all Sales Associates and non-licensed employees of the Broker. A Broker may attach additional policies or procedures, as long as those policies or procedures are not in conflict with the minimum standards of TREC or legal requirements. Additionally, all REALTORS ® must comply with all Articles and Standards of Practice under the NAR Code of Ethics.

22. How to Use Page i: PREFACE The objective of Texas Association of REALTORS ® Model Brokerage Policies and Procedures is to provide Texas Brokers with written policies and procedures as required by the Texas Real Estate Commission (TREC). Each chapter will contain policies comprising the general principles which will guide a Broker in his or her management of daily affairs. Each chapter will also contain procedures, or methods, to further comply with those policies. Much of the policies and procedures contained within are derived from TREC rules—rules which must be complied with by Texas real estate licensees. Some of the policies or procedures, however, are derived from other sources, such as state and federal laws, and the National Association of REALTORS ® (NAR) Code of Ethics. The inclusion of certain provisions of the NAR Code of Ethics in these materials is not intended to heighten the duty of care for a Texas real estate licensee. Unlike Texas real estate licensees who are not REALTORS ®, members of the Texas Association of REALTORS ® (TAR) hold themselves to the ethical ideals set forth in the NAR Code of Ethics. It is not the intention of the Texas Association of REALTORS ® that these materials be all-encompassing. Brokers should take care to ensure that all relevant rules or laws affecting real estate or their business are complied with by all Sales Associates and non-licensed employees of the Broker. A Broker may attach additional policies or procedures, as long as those policies or procedures are not in conflict with the minimum standards of TREC or legal requirements. Additionally, all REALTORS ® must comply with all Articles and Standards of Practice under the NAR Code of Ethics.

23. How to Use Page i: PREFACE The objective of Texas Association of REALTORS ® Model Brokerage Policies and Procedures is to provide Texas Brokers with written policies and procedures as required by the Texas Real Estate Commission (TREC). Each chapter will contain policies comprising the general principles which will guide a Broker in his or her management of daily affairs. Each chapter will also contain procedures, or methods, to further comply with those policies. Much of the policies and procedures contained within are derived from TREC rules—rules which must be complied with by Texas real estate licensees. Some of the policies or procedures, however, are derived from other sources, such as state and federal laws, and the National Association of REALTORS ® (NAR) Code of Ethics. The inclusion of certain provisions of the NAR Code of Ethics in these materials is not intended to heighten the duty of care for a Texas real estate licensee. Unlike Texas real estate licensees who are not REALTORS ®, members of the Texas Association of REALTORS ® (TAR) hold themselves to the ethical ideals set forth in the NAR Code of Ethics. It is not the intention of the Texas Association of REALTORS ® that these materials be all-encompassing. Brokers should take care to ensure that all relevant rules or laws affecting real estate or their business are complied with by all Sales Associates and non-licensed employees of the Broker. A Broker may attach additional policies or procedures, as long as those policies or procedures are not in conflict with the minimum standards of TREC or legal requirements. Additionally, all REALTORS ® must comply with all Articles and Standards of Practice under the NAR Code of Ethics.

24. How to Use Page ii: DISCLAIMER AND LIMITATION OF USE These materials are sold or furnished with the understanding that the authors and publishers are not engaged in the rendering of legal, employment, accounting, tax, business formation, real estate registration, risk management, or other professional advice through these materials. Questions relevant to the specific professional needs of the user should be addressed to licensed professionals competent in the area in which the need or question arises. The Texas Association of REALTORS ® specifically disclaims any liability, loss, or risk, personal or otherwise, incurred as a consequence, directly or indirectly, of the use and application of any of the materials. These materials give an overview of certain professional issues. None of the materials provided should be considered to be the last word governing any particular situation. The materials are intended to be general in nature. Furthermore, these materials do not act as a substitute for errors- and-omissions insurance. The Texas Association of REALTORS ® strongly encourages members to maintain E & O insurance. You should obtain the advice of competent legal, employment, accounting, tax, business formation, real estate registration, risk management, and other professionals before you take any action or make any decision concerning any issue addressed by the model brokerage policies and procedures. Any printed or electronic material including but not limited to forms, policies, appendices, exhibits, or reference materials are merely models or samples. You may need to consider facts outside the model that are unique to your business, professional or personal circumstances before you adopt or modify any model policy or procedure, negotiate or execute any form or other document. Please seek the advice of competent counsel before negotiating or executing any such document.

25. How to Use Table of Contents 1. Advertising and Marketing 2. Work Agreements and Compensation 3. Establishing Competency 4. Records Management 5. Trust Accounts 6. Fiduciary Duty of Agents

26. How to Use Page vii: NOTICE TO SALES ASSOCIATES Any of a Sales Associate's actions that violate the provisions of this policies and procedures manual are unauthorized and outside the authority of the Sponsoring Broker – Sales Associate relationship. All expense or loss arising out of a Sales Associate’s acts shall be born solely by the Sales Associate. All expense or loss suffered by Sponsoring Broker as a result of a Sales Associate’s acts shall be reimbursed by the Sales Associate. Any waiver of this provision by the Sponsoring Broker with respect to any actions will not be construed as a waiver with respect to any other action.

27. How to Use Be sure to attach additional relevant documents where necessary. Page 2: 1.1.5. TRADEMARKS AND LOGOS This brokerage has purchased or otherwise has the right to use the following marks, logos, slogans or other intellectual property: REALTOR ® ; Intellectual property authorized for Broker’s use by a local affiliate of the Texas Association of REALTORS ® as detailed on an attachment to this manual; Intellectual property authorized for Broker’s use by a franchisor as detailed on an attachment to this manual; Other intellectual property authorized for Broker’s use as detailed on an attachment to this manual. No mark, logo, slogan or other intellectual property or practice other than as described above may be displayed or otherwise used without the written consent of Sponsoring Broker. Page 14: 4.1.3. DISASTER PLAN COMPLIANCE Sponsoring Broker will maintain all Records in accordance with a written disaster recovery plan that has been approved by Sponsoring Broker.

28. How to Use Be sure to use new form Brokerage Policies and Procedures Acknowledgment and Agreement (TAR form 2303).

29. Questions Questions?  TREC Requirement?  How to Use or Purchase?  Technology Issues?  Content?  Advertising and Marketing  Work Agreements and Compensation  Establishing Competency  Records Management  Trust Accounts  Fiduciary Duty of Agents

30. Model Brokerage Policies and Procedures Don’t wait! Order your copy today!  To order your copy of the Texas Association of REALTORS® Model Brokerage Policies and Procedures, visit www.TexasRealtors.com/BrokerManual www.TexasRealtors.com/BrokerManual  The Model Brokerage Policies and Procedures is being offered at a special introductory price of $79.99 until October 15 th. Thereafter, the price is $99.99.  A purchase of one copy entitles you to free updates. Questions we didn’t answer? Call the Texas Association of REALTORS ® at 512.480.8200.