Last updated: July 17, 2026.
Fast Answer: How Tennessee Licensees Lose Their License
The Tennessee Real Estate Commission (TREC) has the authority to fine, suspend, or revoke the license of any real estate licensee who violates the Tennessee Real Estate Broker License Act (T.C.A. Title 62, Chapter 13) or the TREC Rules of Conduct (Chapter 1260-02). Many of the violations TREC actually acts on are not dramatic fraud schemes -- they are routine compliance failures like a lapsed license from missed continuing education, advertising errors, and failure to respond to a TREC complaint on time.
TREC publishes disciplinary actions from every monthly meeting as part of the Department of Commerce and Insurance's Disciplinary Action Report, and the pattern is clear: the violations that end careers are usually preventable.
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The Most Common TREC Violations
Based on TREC disciplinary meeting records and the framework taught in TREC Core Course materials (sometimes referred to as "ways to lose your license"), here are the violations that regularly result in formal action -- with the exact statute or rule that governs each one.
1. Letting Your License Expire From Missed Continuing Education
| Details | |
|---|---|
| Statute | T.C.A. 62-13-303(g)-(h) |
| Requirement | 16 classroom hours every 2-year renewal cycle, including a mandatory TREC Core course plus elective hours |
| What actually happens | Your license expires -- it is not a $1,000 fine. Reinstating it means completing the missing education plus TREC Rule 1260-01-.21 penalty fees |
| Reinstatement fees | $50 per 30-day period for the first 60 days late; past 120 days, an additional $100 per 30-day period applies; past 1 year, you must reapply, retest, and meet current education requirements |
TREC does not grant an automatic grace period. If a licensee keeps practicing on an expired license instead of renewing it, that becomes a separate and more serious violation -- unlicensed activity (see #2) -- which carries an actual civil penalty, not just a reinstatement fee.
2026 note: as of January 1, 2026, principal/managing brokers who supervise even one agent are no longer exempt from the 16-hour CE requirement.
2. Engaging in Unlicensed Real Estate Activity
| Details | |
|---|---|
| Statute | T.C.A. 62-13-301 (license required); civil penalty under TREC Rule 1260-02-.32(2) |
| Examples | Practicing on an expired license, performing acts that require a license without holding one, paying unlicensed individuals for referrals |
| Civil penalty | Up to $1,000 per violation -- assessable against licensed and unlicensed persons alike |
This catches licensees who let their license lapse and keep showing property, writing offers, or collecting referral fees. It also applies to unlicensed assistants who cross the line into activity that requires a license, such as negotiating a sale or collecting rent (see #20).
3. Failing to Exercise Reasonable Skill and Care
| Details | |
|---|---|
| Statute | T.C.A. 62-13-403(1) -- every licensee owes all parties to a transaction the duty to "diligently exercise reasonable skill and care" |
| Examples | Errors in contract preparation, missed transaction deadlines, poor communication with clients and customers |
| Related grounds | Failing to preserve transaction records for 3 years (T.C.A. 62-13-312(b)(6)) and failing to furnish signed contract copies to all parties at execution (T.C.A. 62-13-312(b)(8)) are frequently charged alongside this |
TREC expects competent practice from every licensee toward every party in a transaction, not just toward the licensee's own client. Sloppy contract work or missed deadlines can trigger discipline even without any intent to deceive.
4. Advertising Violations
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.12 |
| Examples | Ads that omit the firm name, franchise ads that show only the franchise name and not the firm name, team ads using words like "Realty," "Company," or "LLC" that could mislead the public into thinking the team is an independent brokerage |
| Civil penalty | Up to $1,000 per violation under TREC Rule 1260-02-.32 |
Every ad -- signs, flyers, websites, social media, video -- must display the firm name in letters the same size or larger than any individual licensee's or team's name. A webpage that links to an unlicensed entity that appears to be offering brokerage services is also a rule violation.
5. Failure to Adequately Supervise Affiliate Brokers
| Details | |
|---|---|
| Statute/Rule | T.C.A. 62-13-312(b)(15) and TREC Rule 1260-02-.01 (Supervision of Affiliate Brokers) |
| Who is liable | Principal brokers |
| Requirement | A principal broker must be devoted full-time to managing the office and may supervise only licensees who are primarily engaged in real estate and accessible during normal working hours |
Principal brokers are personally responsible for the affiliate brokers in their office. If an affiliate commits a violation the principal broker should have caught through reasonable supervision -- including an affiliate letting E&O insurance lapse -- both can face discipline.
6. Failure to Be Loyal to Client Interests
| Details | |
|---|---|
| Statute | T.C.A. 62-13-404(2) (duty of loyalty to a client) and 62-13-403(7)(A) (no self-dealing without disclosure); T.C.A. 62-13-312(b)(7) makes acting for more than one party without the written consent of all parties a discipline ground |
| Examples | Undisclosed dual agency, steering, putting the licensee's own interests ahead of the client's |
A licensee must place the client's interests before all others in a transaction and must not act on behalf of a party in which the licensee has a personal interest without disclosing it and getting written consent. Undisclosed dual representation is the most commonly charged version of this violation.
7. Failure to Respond to a TREC Complaint
| Details | |
|---|---|
| Statute | T.C.A. 62-13-313(a)(2) |
| Deadline | The licensee must file a written answer with TREC within 10 days of receiving notice of the complaint |
| Consequence | The matter proceeds without the licensee's input, and TREC's investigation and any resulting discipline move forward largely unopposed |
This is one of the most avoidable yet most damaging mistakes a licensee can make. Ten days passes quickly -- ignoring a TREC notice does not make the complaint go away, it just removes the licensee's voice from the process.
8. Violating the Gifts, Prizes, and Cash-Rebate Rule
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.33; statutory basis T.C.A. 62-13-302(b) |
| Non-cash gifts/prizes | Allowed as an inducement only with the licensee's firm's sponsorship and approval, and only if disclosed in writing specifying the fair market value, timing, and any conditions |
| Cash-based incentives | Cash rebates, cash gifts, gift cards, and cash prizes are banned in connection with a real estate transaction, with two narrow exceptions: a gift card offered to other licensees at an open house, and a gift card given as a closing gift (which cannot then be used in advertising to induce business) |
There is no specific dollar-amount threshold in the current rule -- the restriction is about the form of the inducement (cash vs. non-cash) and whether it was disclosed and firm-approved, not a dollar figure.
9. Substantial and Willful Misrepresentation
| Details | |
|---|---|
| Statute | T.C.A. 62-13-312(b)(1) |
| Examples | Lying about property condition, fabricating comparable sales, misrepresenting the terms of an offer |
| Typical outcome | Civil penalty up to $1,000 per violation, plus suspension or revocation for serious cases |
This is among the most serious violations TREC pursues. It covers intentional lies or material omissions about property condition, transaction terms, or any other fact a reasonable party would rely on.
10. Failure to Account for or Remit Moneys Belonging to Others
| Details | |
|---|---|
| Statute | T.C.A. 62-13-312(b)(5); the underlying duty to timely account for trust funds and other property is set out in 62-13-403(6) |
| Examples | Commingling escrow funds, misusing earnest money, failing to maintain proper trust accounts |
| Typical outcome | Civil penalty plus suspension or revocation; theft of client funds can also be referred for criminal prosecution |
Trust account violations are treated among the most seriously by TREC. Every dollar of client funds must be properly held in a designated escrow or trustee account and disbursed exactly as the contract requires.
Additional Violations That Trigger TREC Action
| # | Violation | Statute/Rule |
|---|---|---|
| 11 | Failure to maintain Errors & Omissions (E&O) insurance | T.C.A. 62-13-112; lapse penalties and reinstatement fees under TREC Rule 1260-01-.16 |
| 12 | Failure to timely disburse or interplead earnest money (must act within 21 calendar days of a written request absent a compelling reason) | TREC Rule 1260-02-.09(9) |
| 13 | Accepting a commission from someone other than your affiliated broker | T.C.A. 62-13-312(b)(11) |
| 14 | Continuing to practice after a license has expired | T.C.A. 62-13-301; reinstatement mechanics under TREC Rule 1260-01-.21 |
| 15 | Inducing a party to break a lawful contract for personal gain | T.C.A. 62-13-312(b)(10) |
| 16 | Making a false promise likely to influence a transaction | T.C.A. 62-13-312(b)(2) |
| 17 | Any other improper, fraudulent, or dishonest dealing (TREC's general catch-all ground) | T.C.A. 62-13-312(b)(20) |
| 18 | Violating fair housing laws | Federal Fair Housing Act, T.C.A. 4-21-601, and T.C.A. 62-13-312(b)(13) |
| 19 | Failing to disclose personal interest in a transaction | TREC Rule 1260-02-.11 (Personal Interest); T.C.A. 62-13-312(b)(18) and 62-13-403(7)(A) |
| 20 | Performing property management (e.g., collecting rent) without a license | T.C.A. 62-13-102(4)(A) (the definition of "broker" includes collecting rents) and 62-13-301 |
| 21 | Criminal conviction for forgery, embezzlement, larceny, extortion, or similar offenses | T.C.A. 62-13-312(b)(12); the license is automatically revoked 60 days after conviction unless the licensee requests a hearing within that window (T.C.A. 62-13-312(f)) |
TREC Penalty Framework
TREC has a range of disciplinary tools, and penalties are often combined.
Types of Penalties
| Penalty | Description |
|---|---|
| Letter of Warning | Informal warning for minor first offenses; no public record |
| Consent Order | Agreed-upon penalty between licensee and TREC; becomes public record |
| Civil Penalty | Monetary fine of up to $1,000 per violation -- the Commission sets the exact amount from $0, and each day a violation continues can count as a separate violation (TREC Rule 1260-02-.32) |
| Mandatory Education | Required additional coursework |
| License Suspension | Temporary loss of license |
| License Revocation | Permanent loss of license; may reapply after a period set by the Commission |
| Downgrade to Affiliate Broker | TREC can downgrade a broker's status instead of, or along with, other discipline (T.C.A. 62-13-312(c)) |
How TREC Sets the Civil Penalty Amount
TREC Rule 1260-02-.32 caps every civil penalty at $1,000 per violation but gives the Commission discretion on the exact figure. In deciding where in that range to land, the Commission may weigh:
- Whether the amount will be a substantial economic deterrent to the violation
- The circumstances leading to the violation
- The severity of the violation and the risk of harm to the public
- Any economic benefit the licensee gained from the violation
- The interest of the public
Because each day of a continued violation can count as a separate violation, a single ongoing problem -- like an unlicensed person who keeps practicing for weeks after being caught -- can produce a total civil penalty well above $1,000, even though no single violation exceeds the $1,000 cap.
The Real Estate Education and Recovery Account
Separate from TREC's power to discipline a licensee, Tennessee maintains a Real Estate Education and Recovery Account (T.C.A. 62-13-208) that can compensate members of the public harmed by a licensee's violation of the Act or TREC's rules.
| Detail | Amount |
|---|---|
| Maximum recovery per transaction | $15,000, regardless of how many people were harmed or how many parcels were involved |
| Maximum aggregate recovery per licensee | $30,000 across all judgments against that licensee |
| Minimum account balance TREC must maintain | $500,000 |
| Funded by | A $1 fee added to every original license application, plus renewal-related assessments |
The account exists because a civil penalty paid to the state doesn't put money back in a harmed consumer's pocket -- it's a separate, capped source of recovery for people who suffered a monetary loss because of a licensee's violation. The Commission cannot order a refund directly; see TREC's Education and Recovery Account page for current claim procedures.
The TREC Complaint Process
Anyone -- a client, another agent, a member of the public, or TREC itself -- can file a complaint against a Tennessee real estate licensee. Here is how it works.
Step-by-Step Complaint Process
| Step | What Happens |
|---|---|
| 1. Complaint Filed | Complainant submits a verified written complaint to TREC (online or by mail); it must generally be filed within 2 years of the violation or of discovering it (T.C.A. 62-13-313(e)) |
| 2. Notification | TREC notifies the licensee in writing and encloses a copy of the complaint (T.C.A. 62-13-313(a)(1)) |
| 3. Licensee's Answer | The licensee must file a written answer with TREC within 10 days (T.C.A. 62-13-313(a)(2)) |
| 4. Investigation | If warranted, TREC staff and investigators gather evidence, interview parties, and review documents |
| 5. Legal Review | TREC legal counsel evaluates the findings and recommends action |
| 6. Consent Order or Hearing | Most cases resolve via consent order; contested cases proceed to a formal hearing |
| 7. TREC Vote | A majority vote of the full Commission is required to suspend or revoke a license (T.C.A. 62-13-313(c)); action is taken at a public monthly meeting |
| 8. Appeal | The licensee may petition for judicial review in Chancery Court within 60 days of the Commission's final order, under the Uniform Administrative Procedures Act (T.C.A. 4-5-322) |
Critical Rules for Licensees Under Complaint
- You MUST answer within 10 days of receiving TREC's notice (T.C.A. 62-13-313(a)(2)) -- there is no 30-day grace period
- Consult an attorney experienced in TREC matters before responding
- Do not contact the complainant to pressure them to withdraw the complaint -- this can become an additional violation
- Preserve all records related to the transaction, including under the 3-year record-retention requirement in T.C.A. 62-13-312(b)(6)
- Cooperate with investigators -- obstruction can lead to additional charges
How to Stay Compliant: Prevention Checklist
| Area | Action |
|---|---|
| CE Deadlines | Set calendar reminders 6 months, 3 months, and 1 month before your 2-year renewal -- TREC does not grant an automatic grace period |
| E&O Insurance | Maintain continuous coverage; a lapse can suspend your license and trigger TREC Rule 1260-01-.16 reinstatement fees |
| Advertising | Include the firm name (in letters the same size or larger than any individual/team name) on all ads; review team materials for misleading entity names |
| Trust Accounts | Monthly reconciliation; never commingle personal and client funds |
| Supervision | Principal brokers: conduct regular file reviews and confirm affiliated licensees maintain active E&O coverage |
| Agency Disclosure | Provide written agency disclosure at first substantive contact; get written consent before acting for more than one party |
| Earnest Money | Deposit promptly upon acceptance; disburse or interplead within 21 calendar days of a written request absent a compelling reason (TREC Rule 1260-02-.09) |
| Complaint Response | File a written answer within 10 days of any TREC notice -- calendar it immediately |
| Record Keeping | Maintain transaction files for at least 3 years after closing (T.C.A. 62-13-312(b)(6)) |
| License Status | Verify your license is active before engaging in any activity that requires one, including rent collection or property management |
How This Connects to the Tennessee Real Estate Exam
TREC rules and disciplinary procedures are heavily tested on the state portion of the Tennessee real estate licensing exam. Expect several questions on:
- TREC's authority to impose penalties (civil penalties, suspension, revocation)
- Common violations and what constitutes each one
- Trust account requirements and the consequences of violating them
- Advertising rules and firm-name requirements
- Agency duties under T.C.A. 62-13-403 and 62-13-404, and what triggers a breach of loyalty or disclosure
- CE requirements and what happens when a license lapses
- The complaint process, including the licensee's 10-day duty to respond
- Broker supervisory responsibility for affiliate broker conduct
The exam tests your understanding of what is prohibited and what the consequences are. Knowing the exact statute number matters less than understanding the principle behind each violation -- but the citations above will help you recognize a question when you see one.
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