Key Takeaways
- Colorado license law violations can result in letters of admonition, fines, suspension, or revocation
- Common violations include trust account mishandling, failure to supervise, and misrepresentation
- The Division investigates complaints and audits brokerages
- Licensees have due process rights including hearing before an administrative law judge
- The Real Estate Recovery Fund compensates victims of licensee misconduct (maximum $50,000 per transaction)
Last updated: January 2026
Colorado License Law Violations and Discipline
The Colorado Division of Real Estate has authority to discipline licensees for violations of license law and Commission rules.
Types of Violations
Common Violations
| Category | Examples |
|---|---|
| Trust Account | Failure to deposit timely, commingling, conversion |
| Supervision | Inadequate oversight by employing broker |
| Disclosure | Failure to disclose material facts |
| Misrepresentation | False statements about property or transaction |
| Advertising | Misleading ads, failure to identify broker |
| Unlicensed Activity | Practicing without valid license |
| E&O Insurance | Failure to maintain required coverage |
| Incompetence | Failure to provide competent service |
Statutory Violations (C.R.S. 12-10-217)
Grounds for discipline include:
- Fraud or misrepresentation in obtaining a license
- Violation of license law or Commission rules
- Conviction of a crime related to real estate
- Dishonest dealing
- Failure to account for funds or documents
- Commingling of client and personal funds
- Failure to maintain required records
- Acting as employing broker without license
- Failure to supervise affiliated brokers
- Violating fair housing laws
Disciplinary Process
Investigation
The Division investigates based on:
- Consumer complaints
- Routine audits
- Referrals from other agencies
- Self-reporting by licensees
Disciplinary Actions
The Division can impose various sanctions:
| Action | Description |
|---|---|
| Letter of Admonition | Formal warning |
| Fine | Monetary penalty |
| Censure | Public reprimand |
| Probation | License remains active with conditions |
| Suspension | Temporary loss of license |
| Revocation | Permanent loss of license |
| Denial | Refusal to issue or renew license |
Due Process Rights
Licensees facing discipline have the right to:
- Written notice of charges
- Hearing before Administrative Law Judge
- Present evidence and witnesses
- Legal representation
- Appeal adverse decisions
Administrative Law Judge Hearings
| Step | Process |
|---|---|
| 1 | Notice of charges served |
| 2 | Licensee may request hearing |
| 3 | Hearing conducted by ALJ |
| 4 | Initial decision issued |
| 5 | Commission reviews/adopts decision |
| 6 | Judicial review available |
Real Estate Recovery Fund
The Recovery Fund compensates victims of licensee misconduct:
| Feature | Detail |
|---|---|
| Maximum per transaction | $50,000 |
| Maximum per licensee | Per statutory limits |
| Source | Licensee fees |
| Condition | Licensee must be unable to pay judgment |
| Effect | License suspended until fund is reimbursed |
Recovery Fund Claims
To claim from the fund:
- Obtain judgment against licensee
- Show licensee cannot pay
- File claim with Division
- Division evaluates claim
- Payment made if approved
Note: If the Recovery Fund pays a claim, the licensee's license is automatically suspended until the fund is reimbursed with interest.
Avoiding Violations
Best practices include:
- Complete required continuing education
- Maintain E&O insurance
- Follow trust account procedures (Rule F)
- Supervise affiliated brokers properly
- Disclose all material facts
- Use Commission-approved forms
- Keep accurate records
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Test Your Knowledge
What is the maximum amount the Colorado Real Estate Recovery Fund can pay per transaction?
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Test Your Knowledge
What happens if the Recovery Fund pays a claim against a Colorado licensee?
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D