Key Takeaways
- Commingling funds (mixing personal and escrow money) is a serious violation in New York
- Net listings are illegal in New York—all listings must specify the commission clearly
- Kickbacks and undisclosed referral fees are prohibited under New York law
- Misrepresentation and fraud can result in license revocation and criminal charges
- Salespersons cannot operate independently—must work under a broker
Last updated: January 2026
License Law Violations and Ethics
Understanding prohibited practices helps licensees avoid discipline and protect consumers.
Prohibited Practices
Net Listings
Net listings are illegal in New York:
| What it is | Why prohibited |
|---|---|
| Agent keeps anything over net price | Conflict of interest |
| No stated commission | Potential for fraud |
Example: Seller says "Get me $300,000 net" and agent keeps everything above that amount. This is ILLEGAL in NY.
Commingling
Commingling is mixing escrow and personal funds:
| Prohibited | Required |
|---|---|
| Client funds in personal account | Separate escrow account |
| Personal funds in escrow | Only client funds in escrow |
Conversion
Conversion is using client funds for personal use:
| Action | Consequence |
|---|---|
| Using earnest money | Revocation, criminal charges |
| Taking from escrow | Felony prosecution |
Kickbacks and Referral Fees
| Prohibited | Allowed |
|---|---|
| Undisclosed payments | Disclosed compensation |
| Kickbacks to unlicensed | Referrals between licensees |
| Secret referral fees | Disclosed referral fees |
Other Violations
Misrepresentation
| Type | Example |
|---|---|
| Fraud | Intentional false statements |
| Negligent misrepresentation | Careless false statements |
| Omission | Failing to disclose material facts |
Operating Without Broker
Salespersons CANNOT:
| Prohibited | Required |
|---|---|
| Collect fees directly | All fees through broker |
| Advertise independently | Broker name in all ads |
| Operate without broker | Active broker sponsorship |
Advertising Violations
| Violation | Example |
|---|---|
| Blind ads | No broker name |
| False advertising | Misleading claims |
| Bait and switch | Advertising unavailable property |
Penalties
Administrative Penalties
| Penalty | When Imposed |
|---|---|
| Reprimand | Minor violations |
| Fine | Monetary penalty |
| Suspension | Temporary license removal |
| Revocation | Permanent removal |
Criminal Penalties
Serious violations may result in:
| Offense | Penalty |
|---|---|
| Fraud | Criminal prosecution |
| Conversion | Felony charges |
| Unlicensed practice | Misdemeanor |
Best Practices
| Practice | Purpose |
|---|---|
| Maintain separate accounts | Avoid commingling |
| Document everything | Prove compliance |
| Disclose all compensation | Avoid kickback issues |
| Work under broker | Legal compliance |
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Test Your Knowledge
Are net listings legal in New York?
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Test Your Knowledge
What is commingling in New York real estate?
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