4.3 Real Estate Guaranty & Education Fund
Key Takeaways
- Each licensee pays a $60 fee at original licensing into the Real Estate Guaranty and Education Fund (part of the $295 license cost)
- A consumer must first obtain a final court judgment against the licensee before applying to the Fund for payment
- Maximum payment is $50,000 aggregate per single transaction regardless of the number of claimants; an escalating per-licensee cap runs from $10,000 in year one to $50,000 by year five
- When the Commission orders a payment, the licensee's license is automatically suspended until the full amount plus interest is repaid
- Up to 20% of the Fund's deposits may be used annually for real estate education programs
The Real Estate Guaranty and Education Fund is DC's consumer-protection backstop. When a licensee's misconduct costs a consumer money and the consumer cannot collect from the licensee directly, the Fund can pay the loss. It is governed by D.C. Code § 42-1706 and § 42-1707 and 17 DCMR Chapter 27.
How the Fund Is Funded
| Source | Amount |
|---|---|
| Per-licensee fee at original licensing | $60 (part of the $295 total license cost) |
| Additional assessments | The Mayor may require deposits to maintain the Fund balance |
| Recovered repayments | Suspended licensees repay amounts paid on their behalf, plus interest |
Key Point: The $60 Guaranty Fund fee is paid once at original licensing, alongside the $65 application fee and the $170 license fee.
Two Purposes of the Fund
- Guaranty (consumer reimbursement) — pay victims of licensee fraud, misrepresentation, deceit, or conversion of funds who hold an unsatisfied judgment.
- Education — the Board may spend up to 20% of the amounts on deposit in the Fund (measured on October 1 each year) on educational programs for licensees, applicants, and the public.
How a Consumer Recovers From the Fund
The process is strict — the Fund is a payer of last resort, not a quick claims desk.
- The consumer is harmed by a licensee's act (fraud, misrepresentation, deceit, or conversion) in a transaction requiring a license.
- The consumer sues and obtains a final court judgment — including a settlement that is reduced to a final judgment — in a court of competent jurisdiction.
- The consumer attempts to collect the judgment from the licensee and is unable to satisfy it.
- The consumer applies to the Commission for payment from the Fund.
- The Commission reviews the application and, if eligible, issues an order directing payment.
- On the payment order, the licensee's license is automatically suspended.
Exam Trap: A consumer cannot go straight to the Fund. A final judgment against the licensee must come first. Mere allegations or a pending complaint are not enough.
Payment Caps
| Cap | Amount |
|---|---|
| Aggregate per single transaction | $50,000 regardless of how many claimants share that transaction |
| If claims exceed $50,000 | Paid pro rata among claimants in proportion to their unpaid judgments |
| Per-licensee year 1 | $10,000 |
| Per-licensee year 2 | $20,000 |
| Per-licensee year 3 | $30,000 |
| Per-licensee year 4 | $40,000 |
| Per-licensee year 5 and after | $50,000 |
What Conduct Qualifies — and What Does Not
The Fund covers a narrow set of harms tied to a licensed real estate transaction.
| Likely covered | Generally NOT covered |
|---|---|
| Fraud or intentional misrepresentation by a licensee | Ordinary breach of contract by a buyer or seller |
| Conversion or theft of escrow/earnest-money funds | A bad investment that simply lost value |
| Deceit that causes a quantifiable financial loss | Losses from an unlicensed person's acts |
| Misrepresentation a court reduces to a money judgment | Claims with no final judgment behind them |
Exam Trap: The wrongdoer must be a licensee acting in a transaction requiring a license. Losses caused by an unlicensed person, or losses that are really just a buyer's or seller's contract dispute, are not Fund-eligible.
The Fund is also distinct from a broker's private errors-and-omissions (E&O) insurance or any surety bond. The Guaranty Fund is a statutory, industry-wide pool funded by the $60 fees of all licensees, not a policy a single broker buys. It steps in precisely when the consumer holds a judgment but cannot collect it from the licensee or any private coverage.
Filing Discipline
When a consumer applies, the Commission verifies: (1) a final judgment exists; (2) the judgment arose from a licensed transaction; (3) the consumer made reasonable efforts to collect; and (4) the claim falls within the caps. The Commission may require the consumer to assign the judgment to the Fund so the Commission can pursue the licensee for repayment after it pays the claim.
Worked Claim Scenario
A DC salesperson collects a $30,000 earnest-money deposit, deposits it into the brokerage escrow account, then converts it to personal use and disappears. The buyer sues and obtains a final judgment of $30,000 but cannot collect because the licensee has no assets.
- The buyer applies to the Commission for payment from the Guaranty Fund.
- Because $30,000 is below the $50,000 single-transaction cap, the Fund can pay the full $30,000 (subject to the applicable per-licensee annual cap).
- The Commission orders payment; the licensee's license is automatically suspended.
- The license stays suspended until the licensee repays the full $30,000 plus interest at an annual rate set by the Mayor and meets all other licensure requirements.
Now suppose three buyers were each defrauded of $25,000 in the same transaction — total $75,000 in judgments. Because the aggregate per-transaction cap is $50,000, the Fund pays $50,000 split pro rata: each claimant recovers two-thirds of their judgment (about $16,667).
Restoring a Suspended License
| Requirement | Detail |
|---|---|
| Repay principal | Full amount the Fund paid on the licensee's behalf |
| Pay interest | At an annual rate set by the Mayor (the rate is not a fixed statutory figure) |
| Satisfy licensure rules | Meet all current requirements for the license |
| Until repaid | The license remains suspended |
Critical: The automatic suspension is not optional or discretionary. A payout from the Fund always suspends the responsible licensee until full repayment with interest.
Why This Matters
The Fund aligns with DC's trust-account rules: conversion of escrow money is exactly the kind of harm the Fund exists to remedy. For the exam, pair this section with the escrow rules — a broker who commingles or converts client funds risks both discipline (suspension/revocation, fine up to $2,500 per violation) and triggering a Fund payout that suspends the license until repaid.
Before a consumer can be paid from the DC Real Estate Guaranty and Education Fund, the consumer must first:
What is the maximum aggregate the Fund will pay for losses arising from a single transaction, regardless of how many claimants there are?
When the Commission orders a payment from the Guaranty Fund on account of a licensee's conduct, what happens to that licensee's license?
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