Texas broker responsibility: what TREC rule 535.2 asks of a brokerage

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The rules of the Texas Real Estate Commission, known as TREC, speak of sales agents as "sponsored": each one works under a sponsoring broker, and the rules place the weight of that arrangement on the broker. One rule carries most of it: section 535.2 of the Commission's rules, headed "Broker Responsibility", which sits in Title 22, Part 23 of the Texas Administrative Code.

The rule reaches into nearly every corner of a brokerage: what agents are told in writing, who supervises them, how quickly a question is answered, what is kept in the files and where clients' money sits. This guide walks through rule 535.2 as the Commission publishes it, then follows its cross-references to the rules on names in advertising (535.154), advertisements (535.155), trust money (535.146) and the schedule of administrative penalties (535.191). It describes the general rules of the State of Texas only. How they apply to one firm depends on its structure and its facts.

Rule 535.2 from the Texas Real Estate Commission's courtesy copy of its rules; rule 535.146 from the Legal Information Institute's copy of the Texas Administrative Code (history shown to 1 January 2016). Both read on 10 October 2026.

What rule 535.2 makes a broker answerable for

The rule opens with two ideas that frame everything after them. According to the Commission's published copy of its rules, a broker must notify each sponsored sales agent in writing of the scope of that agent's authorised activities. The broker is then responsible for the authorised acts of the broker's sales agents. The same subsection adds a limit that matters for large firms: the broker is not required to supervise the sales agents directly.

Read together, these sentences describe a responsibility for results, with freedom over the method: the broker defines in writing what each agent may do, and answers for what is done inside that scope.

The rule then lists several duties in plain terms. A broker owes the highest fiduciary obligation to the principal, meaning the client the brokerage represents, and must pass on information known to the agent that may affect the principal's decision, unless another law prohibits it. A broker is responsible for trust funds placed with the broker and must follow rule 535.146. A broker is responsible for any property management activity by a sponsored sales agent that requires a licence. Listings and other brokerage agreements must be solicited and accepted in the broker's name.

Two closing subsections settle questions of structure. Where the broker is a business entity, the designated broker is the person responsible for the duties in the rule. And the rule states that it does not create or require an employer and employee relationship between a broker and a sponsored agent.

The written policies every brokerage must keep

The heart of the rule is a list. A sponsoring broker, or the designated broker of an entity, must maintain written policies, and the Commission's text names eight subjects those policies must secure. The table sets them out in the order of the rule.

Several of these deserve a second look. The competence policy is tied to place as well as to task: the rule speaks of competence "including in their geographic market", so a policy that only sorts agents by type of work, such as residential sales or leasing, does not answer the whole requirement.

Under the compensation policy, an agent's pay travels through the sponsoring broker, or is paid with that broker's written consent. A payment made straight to an agent by a third party, without that consent on paper, falls outside what the policy is meant to secure.

The rule-changes policy has a timing element. Notice of a change to the Act (the Texas Occupations Code chapter that governs real estate licensing), to the Commission's rules or to its promulgated contract forms must reach agents before the change takes effect.

The rule requires that these policies be in writing and maintained. The copy read for this guide does not prescribe their length, their format or how frequently they are reviewed.

Training new work: the first three times

The education policy contains a concrete instruction. Beyond whatever additional education the broker considers necessary, the Commission's text says that for a type of activity, the broker must require that the sales agent receive coaching and assistance from an experienced licence holder for the first three times the agent performs it.

The trigger is the type of activity, so the requirement is not limited to newly licensed agents. An agent with years of residential sales who takes a first commercial lease, or a first farm and ranch listing, would, on a plain reading of this wording, be performing a new type of activity; the rule does not define the term. The coach must be an experienced licence holder; the text read for this guide does not say that the coach must be the broker, nor does it define how much experience is enough.

A worked example shows how the count runs. Assume an agent sponsored by a Texas brokerage has closed twelve home sales and now takes a first residential lease listing. Under the rule, the brokerage's policy must provide coaching and assistance from an experienced licence holder on that lease and on the next two, three in all. On the reading that a lease is a different type of activity from a sale, the twelve sales do not count towards the three.

Delegating supervision and the three-month report

A broker with dozens of agents cannot answer every question personally, and the rule allows for that. A broker may delegate to another licence holder the responsibility to assist in administering compliance with the Act and the rules. The same sentence fixes the limit: the broker may not relinquish overall responsibility for the supervision of the licence holders the broker sponsors.

Three conditions attach to a delegation, according to the Commission's copy of the rule. It must be in writing. Any team leader must be delegated as a supervisor, so a team inside a brokerage cannot be led by someone who holds no written delegation. And once a delegation has lasted, or is anticipated to last, more than three consecutive months, the broker must report the delegated supervisor's name to the Commission.

One detail eases the last step. If the delegated supervisor is a broker, or becomes one, that person may report the end of the delegation in place of the sponsoring broker.

The word "anticipated" matters. A worked example: a broker appoints a team leader in writing and expects the arrangement to run for a year. The delegation is anticipated to last more than three consecutive months from its first day, so the duty to report does not wait for the fourth month. A two-month cover for a supervisor on leave, by contrast, stays under the threshold as long as it ends as planned; if it is extended past three consecutive months, it becomes reportable.

The copy of rule 535.2 read for this guide places no course requirement on the delegated supervisor within the rule itself. Education requirements for brokers and supervisors are set elsewhere in the Commission's rules and were not read for this guide.

Two days to answer, three days to pass on the mail

Two short subsections put a clock on everyday supervision. A broker, or a supervisor delegated under the rule, must respond to sponsored sales agents within two calendar days. And a broker or delegated supervisor must deliver mail and other correspondence from the Commission to their sponsored sales agents within three calendar days after receipt.

Both periods are counted in calendar days, so weekends and holidays are inside the count. A worked example, on that reading: an agent sends a question to the supervising broker on a Friday. Two calendar days later is Sunday. A letter from the Commission addressed to a sponsored agent and received by the brokerage on a Friday is due with the agent by Monday, three calendar days later.

The four-year file

Rule 535.2 requires a broker to keep certain records for at least four years, and to keep them readily available to the Commission. The period runs from the date of closing, from the termination of the contract or from the end of a transaction. The Commission's text lists eight kinds of record:

1. disclosures;
2. commission agreements;
3. substantive communications with parties to the transaction;
4. offers, contracts and related addenda;
5. receipts and disbursements of compensation;
6. property management contracts;
7. appraisals, broker price opinions and comparative market analyses;
8. sponsorship agreements between the broker and sponsored sales agents.

The rule makes one exception: records destroyed by an "Act of God".

Two points follow from the wording. First, the list reaches beyond the signed contract. Substantive communications with the parties are records in their own right, so messages exchanged during a negotiation belong in the file when they deal with the substance of the deal. The rule does not name a medium, and the copy read for this guide does not say whether records must be kept on paper or may be kept electronically.

Second, an offer is a record even when it goes nowhere. The rule's period can start at the end of a transaction as well as at a closing, which gives a starting date to deals that never closed.

A worked example of the period: a sale that closed on 2 October 2022 had to stay in the brokerage's records until at least 2 October 2026, four years after closing. Trust account documents follow a different starting point, explained below.

Names in advertising: brokerage, team and assumed names

Rule 535.2 makes the broker responsible for ensuring that a sponsored agent's advertising complies with rules 535.154 and 535.155. The Commission explained both in an article first published in December 2017; that article says the rules took effect on 15 May 2018.

Rule 535.154 deals with names. According to the Commission's article, it defines four terms: alternate name, associated broker, assumed business name and team name. Each kind of name must be registered with the Commission before it appears in an advertisement.

For team names, the Commission's article sets out the limits:

• a team name is not the broker's assumed business name;
• a team name may not include terms implying that the team offers brokerage services independent of the broker;
• a team name must end with the word "team" or "group";
• the rule cites "brokerage", "company" and "associates" as examples of terms a team name may not use, and the article says these are examples and not a complete list.

One word moved from one side of the line to the other. The same article reports that an amendment effective 4 September 2018 removed "realty" from the terms prohibited in team names.

The article is dated, and the Commission can amend its rules. The points above are stated as the Commission published them; any change adopted since is not reflected here.

What an advertisement must show

Rule 535.155 covers the advertisement itself. The Commission's article ties it to two provisions of the Texas Occupations Code. Section 1101.652(b)(23) bars misleading advertising, bars advertising that implies a sales agent is the person responsible for the brokerage, and requires the broker's name. Section 1101.156(b) restricts what the Commission may demand: according to the article, the Commission may not require an advertisement to use the words "broker" or "agent", to refer to the Commission or to show a licence number. Licence holders may still use such terms voluntarily.

Within those limits, the article gives two central requirements of rule 535.155. Every advertisement must include the name of the licence holder or the team placing it. And the broker's name must appear in at least half the size of the largest contact information for any sales agent, associated broker or team name in the advertisement.

A worked example, with assumed measurements: on a yard sign where a team's telephone number is the largest piece of contact information and stands 8 inches tall, the broker's name must stand at least 4 inches tall, half of 8. If the team name itself is larger than the number, the broker's name is measured against the team name.

Social media has its own treatment. The article says an advertisement there complies if it links to the account's profile page, or to a separate page, that contains the required information.

Finally, the rule lists ways an advertisement can mislead. The Commission's article counts 20 of them in subsection (d) and says the list is not exhaustive. Its examples include titles such as "owner", "president", "CEO" or "COO" used so as to imply that a sales agent is responsible for the brokerage; team names with terms suggesting independence from the sponsoring broker; a sales agent's name used in a broker's name so as to imply the agent runs the firm; and a stated value for a property, unless it rests on an appraisal that is disclosed and readily available on request, or on an opinion that complies with the Commission's rule 535.17 on price opinions.

Trust money: the second working day and the ban on commingling

Rule 535.2 makes the broker responsible for trust funds and sends the reader to rule 535.146. That rule was read for this guide in the copy of the Texas Administrative Code published by the Legal Information Institute at Cornell Law School, which records it as adopted from 8 September 2014 and amended from 1 January 2016, and shows no later history. That copy is not the official text; it was read on 10 October 2026, and the rule could not be read on the Commission's own rules page that day.

The rule defines trust money as money held for another person: client funds, earnest money, rent, unearned fees, security deposits and similar sums. A trust account is an account held for another's benefit at a banking institution authorised to do business in Texas. The broker holds trust money in a fiduciary capacity and has two choices on receiving it, guided by the principals' agreement: deposit it in a designated trust account the broker maintains, or deliver it to an escrow agent authorised in Texas.

A sales agent has no such choice. Under the rule, a sales agent may not maintain a trust account, and any trust money an agent receives must go to the sponsoring broker immediately.

A worked example of the deposit deadline, assuming Monday to Friday are working days and no written agreement sets another time: earnest money received by a broker on a Monday must be deposited or delivered by the close of business on Wednesday. Money received on a Thursday must be dealt with by the close of business on the following Monday, the second working day after receipt.

The rule's ban on commingling is drawn tightly. A broker may not mix trust money with personal money or other non-trust money, and may not keep trust money in a personal account or any kind of business account. Two acts are treated as prima facie evidence of commingling: placing trust money in a personal or operating account, and paying operating expenses from the trust account or withdrawing from it for any purpose other than proper disbursement.

The account itself must be clearly identified as a trust account; separate accounts for each client or type of money are optional. An interest-bearing account is permitted if the money stays available when it is due and the interest goes to the parties who receive the disbursement, unless the depositing party has signed an agreement saying otherwise. The broker may keep a reasonable amount in the account to cover bank service fees, with detailed records of those funds.

On paperwork, the rule requires a documentary record of every deposit and withdrawal. The broker may authorise another licence holder to withdraw or transfer funds, and remains responsible for all trust money received and all activity in the account. If a deposited cheque is dishonoured, the broker must immediately notify every party to the transaction in writing; the same immediate written notice follows a disbursement made on a written demand or a later agreement. Where the broker cannot reasonably determine who is entitled to the money, the rule allows it to be paid into the registry of a court, leaving the parties to make their claims there.

Trust account documents are kept for four years from the date the broker receives or creates each document, a different starting point from the transaction records of rule 535.2, which run from closing or the end of the transaction.

What a breach can cost: the penalty schedule

The Commission's schedule of administrative penalties is rule 535.191. It was read for this guide on 10 October 2026 in the Legal Information Institute's copy, which records its latest amendment as effective 5 March 2025. An attempt to read the rule on the Commission's own rules page the same day did not succeed: the text available there stopped well before rule 535.191. For that reason this guide describes how the schedule is built and leaves out its dollar amounts, which could not be confirmed against an official text.

As reproduced in that copy, the schedule sorts provisions into three tiers, each with a range of dollars per violation per day. The rules covered in this guide do not sit together. Rules 535.154 and 535.155, with the misleading-advertising provision of the Occupations Code, are in the lowest tier. Rule 535.2 is in the middle tier. Rules 535.145 to 535.148, and therefore the trust money rule, are in the highest. On that copy, a breach of the trust money rule is exposed to a higher range than a breach of the broker responsibility rule, and both to a higher range than a breach of the advertising rules.

Because each range is per violation per day, time multiplies the figure: a breach treated as continuing for ten days carries ten times the daily exposure of a breach treated as lasting one day. The copy adds that for a person with a history of previous violations, the Commission may assess an additional penalty of up to two times the amount assessed under the tier. All of this is subject to the statutory maximum in section 1101.702(a) of the Occupations Code, which the schedule cites without restating.

Money is one option among several. The schedule opens by saying that the Commission may suspend or revoke a licence, or take other disciplinary action under the Act, in addition to an administrative penalty or instead of one. It also states that its amounts take into account the criteria listed in section 1101.702(b) of the Act. Where in a range a given case falls is a matter for the Commission on the facts.

What the pages read do not settle

Several questions a Texas broker might ask are not answered by the texts used for this guide, and they are left open.

The Commission's own copy of its rules carries no "as of" date and describes itself as a courtesy copy; the official text is the one maintained by the Texas Secretary of State in the Texas Administrative Code. Rule 535.2 is quoted here as that courtesy copy stood on 10 October 2026.

The rules on trust money and penalties were read in a law school's reproduction of the Code, whose history for rule 535.146 stops in 2016. A later amendment to that rule would not appear in this guide. The dollar amounts of the penalty schedule are left out because they could not be checked against an official text.

The hours and scope of the Commission's broker responsibility course, and who must complete it, are set outside rule 535.2 and were not read. Nor were the ceiling in section 1101.702(a), the definition of a working day, or the event from which the 30-day delegation report is counted.

Texas lets a broker share every task with supervisors, team leaders and signatories. Under rule 535.2, the answer for how those tasks were done still comes from the broker.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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