Last updated: March 7, 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). The most common violations are not dramatic fraud schemes -- they are routine compliance failures like missed continuing education deadlines, advertising errors, and failure to respond to TREC complaints.
TREC publishes disciplinary actions from every monthly meeting, and the pattern is clear: the violations that cost licensees their careers are preventable.
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The Most Common TREC Violations
Based on TREC disciplinary meeting records and the widely referenced "21 Ways to Lose Your License" (from TREC Core Course materials), here are the violations that most frequently result in formal action:
1. Failure to Complete Continuing Education on Time
| Details | |
|---|---|
| Rule | TREC Rule 1260-01-.11 |
| Requirement | 16 hours CE every 2-year cycle (6-hour TREC Core + 10 hours elective) |
| Typical penalty | Civil penalty of $1,000 + mandatory CE completion |
| Why it happens | Licensees forget deadlines, procrastinate, or assume grace periods exist |
This is the single most common violation. TREC audits CE compliance at renewal, and there is no automatic grace period. If your CE is not complete by your renewal deadline, you are in violation.
2. Engaging in Unlicensed Real Estate Activity
| Details | |
|---|---|
| Statute | T.C.A. 62-13-301 |
| Examples | Practicing on an expired license, performing acts requiring a license without one, paying unlicensed individuals for referrals |
| Typical penalty | Civil penalty up to $1,000 per occurrence + cease and desist order |
This catches licensees who let their license lapse and continue showing property, writing offers, or collecting referral fees. It also applies to unlicensed assistants who cross the line into licensable activities.
3. Failing to Exercise Reasonable Skill and Care
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.01 |
| Examples | Errors in contract preparation, failure to disclose known material defects, poor communication with clients |
| Typical penalty | Civil penalty of $500-$1,000 + required remedial education |
TREC expects licensees to act competently. Repeated errors in contracts, missing key deadlines in transactions, or failing to communicate material information to clients can all trigger this violation.
4. Advertising Violations
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.12 |
| Examples | Ads without firm name, misleading claims, team ads without proper disclosures |
| Typical penalty | Civil penalty of $500-$1,000 + corrective action |
All advertising must include the name of the licensed real estate firm. Team advertising must comply with TREC rules. Misleading claims about guaranteed results, qualifications, or property features are violations.
5. Failure to Adequately Supervise Affiliate Brokers
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.02(5) |
| Who is liable | Principal brokers |
| Typical penalty | Civil penalty of $1,000 + possible suspension |
Principal brokers are personally responsible for the actions of their affiliate brokers. If an affiliate commits a violation that the principal broker should have caught through reasonable supervision, both can face penalties.
6. Failure to Be Loyal to Client Interests
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.02 (duties owed) |
| Examples | Dual agency without proper disclosure, steering, prioritizing personal gain over client interests |
| Typical penalty | Civil penalty of $1,000 + possible suspension |
Agents owe fiduciary duties including loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care. Failing any of these -- especially undisclosed dual agency or self-dealing -- triggers this violation.
7. Failure to Respond to a TREC Complaint
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.02 |
| Deadline | Licensees must respond within the timeframe specified in the complaint notification |
| Typical penalty | Default judgment, civil penalty, suspension |
This is one of the most avoidable yet most damaging violations. When TREC sends a complaint notification, you must respond within the stated timeframe. Ignoring the complaint does not make it go away -- it results in a default judgment, which typically means the worst possible outcome.
8. Violating the Gifts and Prizes Rule
| Details | |
|---|---|
| Rule | TREC Rule 1260-02-.33 |
| Restriction | Cannot offer gifts, prizes, or inducements worth more than $50 to attract business, unless specific conditions are met |
| Typical penalty | Civil penalty of $500-$1,000 |
Tennessee limits inducements licensees can offer to attract clients. Offering cash rebates, gift cards above certain limits, or valuable prizes without complying with TREC Rule 1260-02-.33 triggers a violation.
9. Substantial and Willful Misrepresentation
| Details | |
|---|---|
| Statute | T.C.A. 62-13-312(b)(5) |
| Examples | Lying about property condition, fabricating comparable sales, misrepresenting offers |
| Typical penalty | Civil penalty up to $1,000 + suspension or revocation |
This is one of the most serious violations. It covers intentional lies or material omissions about property conditions, transaction terms, qualifications, or any other fact that a reasonable party would rely upon.
10. Failure to Account for or Remit Moneys Belonging to Others
| Details | |
|---|---|
| Statute | T.C.A. 62-13-312(b)(4) |
| Examples | Commingling escrow funds, misusing earnest money, failing to maintain proper trust accounts |
| Typical penalty | Civil penalty + suspension or revocation |
Trust account violations are among the most severely punished. Every dollar of client funds must be properly accounted for, deposited in a designated trust account, and disbursed according to contract terms.
Additional Violations That Trigger TREC Action
| # | Violation | Rule/Statute |
|---|---|---|
| 11 | Failure to maintain Errors & Omissions (E&O) insurance | T.C.A. 62-13-112 |
| 12 | Failure to timely disburse or interplead earnest money | TREC Rule 1260-02-.09 |
| 13 | Accepting a commission from someone other than your affiliated broker | T.C.A. 62-13-309 |
| 14 | Operating with an expired firm license | T.C.A. 62-13-302 |
| 15 | Inducing a party to break a lawful contract | T.C.A. 62-13-312(b)(13) |
| 16 | Making a false promise likely to influence a transaction | T.C.A. 62-13-312(b)(3) |
| 17 | Demonstrating unworthiness or incompetency | T.C.A. 62-13-312(b)(18) |
| 18 | Violating fair housing laws | Federal Fair Housing Act + T.C.A. 4-21-601 |
| 19 | Failing to disclose personal interest in a transaction | TREC Rule 1260-02-.02 |
| 20 | Performing property management without proper licensing | T.C.A. 62-13-104 |
| 21 | Criminal conviction involving moral turpitude | T.C.A. 62-13-312(b)(7) |
TREC Penalty Framework
TREC has a range of disciplinary tools. Penalties are typically imposed in combination:
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, typically $1,000 per violation (statutory maximum varies) |
| Mandatory Education | Required additional coursework (often 16-30 hours) |
| License Suspension | Temporary loss of license (30 days to several years) |
| License Revocation | Permanent loss of license; may reapply after specified period |
| Probation | License remains active but with conditions (supervision, reporting, etc.) |
Typical Penalty Ranges by Severity
| Severity | Examples | Typical Outcome |
|---|---|---|
| Minor | Late CE, minor advertising error | $500-$1,000 fine + corrective action |
| Moderate | Failure to supervise, unauthorized practice, gifts violation | $1,000 fine + remedial education + possible probation |
| Serious | Trust account violations, misrepresentation, failure to respond | $1,000 fine + suspension (90 days to 2 years) |
| Egregious | Fraud, theft, repeated serious violations | Revocation + referral for criminal prosecution |
The TREC Complaint Process
Anyone -- a client, another agent, a member of the public, or even TREC itself -- can file a complaint against a Tennessee real estate licensee. Here is how the process works:
Step-by-Step Complaint Process
| Step | What Happens |
|---|---|
| 1. Complaint Filed | Complainant submits a written complaint to TREC (online or by mail) |
| 2. Initial Review | TREC staff reviews for jurisdiction and merit; frivolous complaints dismissed |
| 3. Notification | Licensee receives written notice of the complaint with a deadline to respond |
| 4. Investigation | TREC investigator gathers evidence, interviews parties, reviews documents |
| 5. Legal Review | TREC legal counsel evaluates findings and recommends action |
| 6. Consent Order or Hearing | Most cases resolve via consent order; contested cases go to formal hearing |
| 7. TREC Vote | Commission votes on penalty at a public monthly meeting |
| 8. Appeal | Licensee may appeal to Chancery Court within 60 days |
Critical Rules for Licensees Under Complaint
- You MUST respond within the timeframe specified in the notification (typically 30 days)
- 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 in question
- 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 renewal |
| E&O Insurance | Maintain continuous coverage; set auto-renewal |
| Advertising | Include firm name on all ads; review team materials quarterly |
| Trust Accounts | Monthly reconciliation; never commingle personal and client funds |
| Supervision | Principal brokers: conduct regular file reviews and policy training |
| Agency Disclosure | Provide written agency disclosure at first substantive contact |
| Earnest Money | Deposit within the timeframe specified in the contract; disburse or interplead promptly if dispute arises |
| Complaint Response | Always respond within the deadline; retain legal counsel |
| Record Keeping | Maintain transaction files for at least 3 years after closing |
| License Status | Verify your license is active before engaging in any licensable activity |
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 4-8 questions on:
- TREC's authority to impose penalties (civil penalties, suspension, revocation)
- Common violations and what constitutes each one
- Trust account requirements and what happens when they are violated
- Advertising rules and firm name requirements
- Agency duties and what triggers a breach of loyalty/disclosure
- CE requirements and consequences of non-completion
- The complaint process and a licensee's obligation 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 specific rule numbers is less important than understanding the principles behind each violation.
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