Agency Law: TRELA, TREC, and Texas Intermediary Practice

Outline coverage: national area IV.E–G (agency) and area V (brokerage agreements, risk management); state areas III, Standards of Conduct (9 items), and IV, Agency/Brokerage (11 items) — half of the state portion.

Agency is where the national concept of "who owes duties to whom" collides with Texas's unique statutory scheme. Texas does not use ordinary "dual agency." It uses a licensing structure built on brokers who sponsor sales agents, a mandatory written disclosure (the IABS), and a substitute for dual agency called the intermediary. This chapter is dense with state-portion points; read it twice.

The rule: TRELA and TREC — the statute and the regulator

The Texas Real Estate License Act (TRELA) is codified in the Texas Occupations Code, Chapter 1101. It creates the Texas Real Estate Commission (TREC) and requires anyone who, for compensation, performs real-estate brokerage acts for another (listing, showing, negotiating, procuring buyers or sellers) to hold a license. TREC's detailed rules live in the Texas Administrative Code, Title 22, Part 23.

Two license levels matter:

• Broker — may operate independently, may sponsor sales agents, and is responsible for their brokerage activities.
• Sales agent — must at all times be sponsored by an active Texas broker to perform brokerage. A sales agent cannot operate independently, cannot be paid a commission directly by a client (only through the sponsoring broker), and acts in the name of and under the supervision of that broker.

Because the broker is the agent of the client (the brokerage firm holds the agency relationship), the sales agent's authority flows through the broker. A sponsored sales agent works the client's transaction, but legally it is the broker's agency.

The rule: the parties and the fiduciary duties

• Principal (client) — the person who hires and authorizes the broker; the broker represents the client and owes fiduciary duties.
• Agent — the broker (and, through the broker, the sponsored sales agent).
• Customer — a party the agent deals with but does not represent (for example, the buyer a seller's agent shows the home to). The agent owes a customer honesty and fairness, but not fiduciary loyalty.
• Subagent — an agent of the agent, who also represents the principal. This is a national-portion term; for Texas, SB 1968 repealed TRELA's definition of subagent effective January 1, 2026, and TREC's 2026–2027 Legal Update notes that the Act no longer refers to subagency.

The fiduciary duties an agent owes the principal are classically remembered as OLD CAR:

• Obedience — follow the client's lawful instructions.
• Loyalty — put the client's interests above the agent's own.
• Disclosure — tell the client all material facts affecting the transaction.
• Confidentiality — protect the client's confidential information (e.g., the lowest price a seller will accept) — this duty survives the end of the relationship.
• Accounting — account for all money and property (earnest money, documents).
• Reasonable care and diligence — act competently and skillfully.

To everyone in the transaction — client and customer alike — a license holder owes honesty, fairness, and disclosure of known material defects. You may keep a client's confidential negotiating position private; you may never misrepresent or conceal a known material defect in the property.

The rule: the IABS — Texas's mandatory disclosure

TRELA §1101.558 and TREC Rule 531.20 require license holders to provide the Information About Brokerage Services (IABS) notice. Since January 1, 2026 (SB 1968), the statute says the written notice, in at least 10-point type, must:

1. describe the ways a broker can represent a party, including as an intermediary;
2. describe the basic duties a broker owes a party the broker represents;
3. describe the basic obligations a broker has to a party the broker does not represent; and
4. give the name, license number, and contact information of the license holder and of the license holder's supervisor and broker, if applicable.

Key exam points:

• The IABS must be provided at the first substantive communication with a party about a proposed transaction involving specific real property.
• It is an informational notice, not a contract; providing it does not create an agency relationship or obligate anyone to use the broker.
• Brokers must also post a link to the IABS on their websites, per TREC rules.
• The statute lists exactly three situations where the notice is not required (§1101.558(c)): (1) a residential lease of less than one year when no sale is being considered; (2) a meeting with a party the license holder knows is represented by another license holder; and (3) a communication at a property held open for prospective buyers or tenants that concerns that property.
• Separately, a license holder who represents a party must disclose that representation, orally or in writing, at the first contact with another party or that party's license holder (§1101.558(b)).

Separately, TREC requires the Consumer Protection Notice to be displayed; do not confuse the two.

The rule: Texas does NOT allow "dual agency" — it uses the intermediary

This is the single most important Texas agency concept. In many states, one broker can represent both buyer and seller as a dual agent. Texas abolished common-law dual agency. Instead, when a single broker ends up representing both parties in the same transaction, the broker acts as an intermediary — but only with the written consent of both parties, obtained before the intermediary situation arises (typically in the listing agreement and buyer-representation agreement).

How the intermediary works:

• The broker (the business entity) is the intermediary. The intermediary must act fairly and impartially and may not favor one party over the other.
• Appointments (optional): the broker may, if authorized in writing, appoint one associated license holder to communicate with and advise the buyer and a different associated license holder to communicate with and advise the seller. These appointees may then give advice and opinions to their respective parties. If the broker does not make appointments, no one may give advice or opinions to either party — the intermediary and any assisting agents stay strictly neutral.
• The intermediary may not disclose confidential information — for example, that the seller will accept less than the asking price, or that the buyer will pay more — unless authorized in writing or required by law. It may not reveal any party's motivation for buying or selling.
• A single sales agent cannot represent both parties as their individual agent; the representation is held by the broker as intermediary, with any appointments made among different associated license holders.

Undisclosed dual agency — representing both sides without the required written consent and disclosure — is prohibited and is a common ground for TREC discipline. On the state portion, if a question describes one broker "acting as a dual agent," the Texas-correct framing is almost always intermediary with written consent.

The rule: agency relationships and how they end

• Seller's (listing) agent — represents the seller; created by a listing agreement.
• Buyer's agent — represents the buyer; created by a buyer-representation agreement, which since 2026 must be in writing before any showing of residential property (next section).
• General vs. special agent. A special agent is authorized for one task (a listing broker finding a buyer); a general agent handles a range of matters in one business (a property manager); a universal agent may act on all matters (a broad power of attorney).
• Agency is usually express (created by words — a listing or buyer agreement), but it can also be implied from conduct when a party reasonably believes the agent represents them. Agency ends by performance (closing), expiration, mutual agreement, revocation or renunciation (with possible liability for breaching the contract), or operation of law — death or incapacity of either party, destruction of the property, or bankruptcy.
• Commission is earned per the listing agreement; the classic common-law standard is producing a buyer who is ready, willing, and able on the seller's terms. Commissions are always negotiable and never set by law or by a trade association. A procuring cause dispute asks which agent's efforts actually produced the ready-willing-and-able buyer.

The rule: a written buyer agreement before any showing (SB 1968, effective January 1, 2026)

This is the biggest change to Texas agency practice in years, and it is new on the 2026 state outline. SB 1968 (89th Legislature) added two sections to TRELA.

§1101.563 — Written agreement required. A license holder who performs any act of real estate brokerage for a prospective buyer of residential real property — a single-family house; a duplex, triplex, or quadraplex; or a condominium or cooperative unit — must enter into a written agreement with the buyer before:

1. showing any residential real property to the buyer; or
2. if no property will be shown, presenting an offer on the buyer's behalf.

The agreement must state:

• the services the license holder will provide;
• the agreement's termination date;
• whether it is exclusive or non-exclusive;
• whether the license holder represents the buyer as the buyer's agent, or does not (when the only brokerage act is a showing under §1101.562); and
• the amount or rate of compensation the broker will receive and how it will be determined;

and it must disclose in conspicuous language that broker compensation is not set by law and is fully negotiable. Failing to enter into the required agreement is now a ground for discipline (§1101.652(b)(34)).

§1101.562 — Showings without representation. A broker may show property to a party without representing the party if the broker has not agreed (orally or in writing) to represent them, is not otherwise acting as their agent, gives no opinions or advice about the property or transactions generally, and performs no other brokerage act for them. The broker may still confirm the property's size, price, and terms. Before such a showing, the broker must disclose that it represents the owner (if it does) or give the IABS notice (if it does not). A written agreement used only for showings under this section may not be exclusive and may not run more than 14 days; if the buyer later wants more services, a separate agreement is required.

How it fits the contract. The new TREC contract form 20-19 carries the same idea into the sale itself: its Paragraph 12B says brokerage compensation is not set by law and is fully negotiable, that each party pays its own broker under separate written agreements, and it records any contribution a seller or buyer makes toward the other side's broker (Chapter 3).

Worked example — the Saturday showing

A buyer calls a sales agent on Friday: "Can you show me three houses tomorrow? I'm not ready to sign anything." Under §1101.563 the agent may not show those homes until a written agreement is signed. The agent has two lawful paths. (1) A buyer representation agreement stating services, termination date, exclusive or not, the compensation and how it is set, and the conspicuous "not set by law and fully negotiable" statement — after which the agent can advise the buyer. (2) A showing-only agreement under §1101.562 — non-exclusive, 14 days or less, stating that the agent does not represent the buyer — after which the agent may open the doors and confirm size, price, and terms, but may not advise the buyer or write an offer. If on Sunday the buyer wants help with an offer, the agent needs a new, separate agreement.

The rule: minimum services a broker must provide

The state outline lists "duties to client (including minimum services)." TRELA §1101.557(b) sets a floor for any broker who represents a party or lists property under an exclusive agreement. The broker:

• must inform the party if the broker receives material information related to the transaction, including receipt of an offer; and
• must, at a minimum, answer the party's questions and present any offer to or from the party.

The same section bars a broker from instructing another broker to negotiate directly with a party the broker knows has an exclusive agreement with someone else (§1101.652(b)(22)). A "limited-service" arrangement can reduce many services, but it cannot go below this floor.