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TREC Adopts New Advertising Rules

Section 1101.652(b)(23) of The License Act prohibits a licensee from publishing an advertisement “that misleads or is likely to deceive the public, tends to create a misleading impression, or fails to identify the person causing the advertisement to be published as a licensed broker or agent.” This provision can be broken down into two component parts: It prohibits misleading advertising and it requires licensees to identify themselves in advertising as a broker or agent.

New 22 TAC §535.154 further clarifies the statute in a variety of ways. While much of the new rule is a restatement of the previous rule, several changes were made to address ambiguities and to update various subsections. This article highlights some of the new aspects of the rule as well as some of the provisions that were carried forward from the previous rule. First, the definition of “advertisement” was updated to encompass a broader variety of electronic communications including social networking websites such as Twitter or Facebook. The rule was also amended to clarify that real estate information, including a listing, which is available to the public on a licensee’s website and is behind a firewall or similar filtering software that requires a password or registration to access the information, is not considered an “advertisement” for purposes of the Act and Rules.

The new rule requires brokers and salespersons to clearly and conspicuously include the broker’s name in all advertising, and permits the use of a broker’s assumed name if it has been filed with the commission. A broker must notify the commission within 30 days of starting or stopping the use of an assumed name. Although the rule does not specifically define “clear and conspicuous” the commission adopted a safe harbor policy at the February 14 meeting which provides that the commission considers the broker’s name to be clear and conspicuous if it is no less than half the font size of the largest telephone number or other contact information in the advertisement. What are the advertising implications when a team or group of licensees in a brokerage firm work together and wish to advertise under a team name? First, the broker must register the team name as the broker’s “assumed name” with the commission. If the team name does not include the name of a salesperson, the team can advertise using that name. The broker’s name does not need to be included in the advertisement, since the assumed name belongs to the broker. In addition, the advertisement must include the additional designation of “agent”, “broker,” or trade association name. The “agent” designation is not required after each licensee’s name if the advertisement includes more than one name. As always, the sponsoring broker remains responsible for a team’s advertising.

If the team name includes the name of a salesperson, the existing rules against implying that the salesperson is responsible for the operations of a brokerage are implicated. The commission has determined that using names such as the “Sally Salesperson Team” or the “Sam Salesperson Group” do not imply that the salesperson is responsible for operation of a brokerage so long as the advertisement also includes the name or another assumed name of the broker. However, some names such as “Sally Salesperson and Associates” or “Sam Salesperson and Company” do imply that the salesperson is responsible for the operation of a brokerage, even when the broker’s name is included in the advertising. Thus, including the broker’s name in the advertising does not cure the potential for misleading the public, and so the use of such names is not allowed.

If the salesperson’s name is part of the name of a corporation or limited liability company registered with the Secretary of State and licensed as a broker, the corporation or LLC may use the salesperson’s name in advertising, but the name of the designated agent must also be included since the designated agent is the person responsible for the entity’s actions. An unlicensed person’s name may be used in advertising only if the name is properly filed as a business, trade or assumed name of a broker with the commission and the advertisement does not suggest that the unlicensed person is authorized to engage in real estate brokerage. A licensee is prohibited from using a copyrighted trade name unless the licensee has the authority to use the name. The best example of this rule is cases in which licensees uses the term “Realtor®” or “Realtist” in advertising. A licensee may use such terms if the licensee is in fact a member of the trade association but may not use them if the licensee is not a member.

The special requirements for road signs were carried forward relatively unchanged. The rule requires road signs to include the designation “agent” or “broker” (or presumably trade association name if a member) in a clear and conspicuous manner; however the font size requirement was removed from the rule. The safe harbor policy would likewise apply to the agent designation in road signs. The subsection regarding the clear and conspicuous designation as a broker or agent does not apply to yard signs or to directional signs as long as the signs otherwise comply with other requirements in §535.154.

Much of subsection (d) is new and clarifies a “laundry list” of types of advertising that are considered deceptive and misleading, except that (4) was in the existing rule, and others are simply adding to the rules some policies the commission has previously adopted. Subsection (n) is new and prohibits licensees from advertising information regarding service providers that ranks the providers unless the ranking is based on disclosed objective criteria; subsection (o) prohibits licensees from advertising that a licensee offers, sponsors, or conducts commission approved courses unless the licensee is approved to offer the courses; the remaining subsections restate existing advertising rules in §535.154.

Any questions regarding this or any other TREC regulations or guidelines should be directed to TREC at 512- 459-6544.

Source: March 2011 issue of TRECAdvisor published by the Texas Real Estate Commission

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