4.2 License Law Violations & Discipline
Key Takeaways
- DCREC investigates complaints and may deny, reprimand, place on probation, suspend, revoke, or fine up to $2,500 per violation (D.C. Code § 47-2853.197)
- Common violations include fraud, misrepresentation, undisclosed dual agency, commingling/conversion, and unlicensed activity
- Licensees have due-process rights: notice, a hearing, the chance to present evidence, and appeal to the DC Court of Appeals
- The Commission imposes administrative penalties only and cannot order imprisonment; serious misconduct may trigger separate criminal prosecution
- A Guaranty Fund payout automatically suspends the license until the licensee repays the amount plus interest set by the Mayor
License Law Violations and Discipline
The DC Real Estate Commission protects the public by investigating complaints and disciplining licensees who violate the District's real-estate statutes — chiefly D.C. Code § 47-2853.197 (prohibited acts for the occupation) and Title 17 DCMR. Expect the exam to give you a fact pattern and ask whether it is a violation and what sanction applies.
Prohibited Acts
Fraud and Dishonest Dealing
| Violation | Description |
|---|---|
| Material misrepresentation | False statement about an important fact |
| False advertising | Misleading marketing or claims |
| Fraud | Intentional deception for gain |
| Dishonest dealing | Any dishonest conduct in a transaction |
| False promises | Promising what you cannot or will not deliver |
Conflict-of-Interest Violations
| Violation | Description |
|---|---|
| Undisclosed dual agency | Representing both sides without written consent of all clients |
| Hidden interest | Concealing your role or ownership in the deal |
| Self-dealing | Buying a client's property without disclosure |
| Undisclosed compensation | Accepting a fee or referral without disclosure |
Agency and Trust Violations
| Violation | Description |
|---|---|
| Acting for multiple parties | Without the knowledge/consent of all parties |
| Failure to disclose representation | Not telling an unrepresented party whom you represent |
| Breach of fiduciary duty | Violating loyalty, confidentiality, accounting, or disclosure |
| Commingling / conversion | Mixing or misusing client escrow funds |
| Failure to deposit timely | Missing the 7-day escrow rule |
Unlicensed and Improper Activity
| Violation | Description |
|---|---|
| Practicing without a license | Performing licensed acts while unlicensed or expired |
| Paying unlicensed persons | Sharing commissions with unlicensed individuals for licensed activity |
| Net listings / undisclosed profit | Profiting on the spread without disclosure |
| Operating without a broker | A salesperson acting without an affiliated DC broker |
Exam Trap: A salesperson must always be affiliated with a DC broker. Accepting compensation directly from a buyer or seller (rather than through the employing broker) is a classic prohibited act.
The Disciplinary Process
Investigation
- A complaint is filed (by a consumer, another licensee, or the Commission on its own initiative).
- The Commission reviews whether the facts allege a violation.
- If valid, an investigation gathers evidence.
- The licensee is notified and given an opportunity to respond.
- The Commission decides whether to proceed to a hearing.
Hearing and Due Process
| Step | Description |
|---|---|
| Notice | Licensee is formally notified of the charges |
| Hearing | A formal hearing before the Commission |
| Evidence | Both sides present evidence and witnesses |
| Decision | The Commission issues a written decision |
| Appeal | The licensee may appeal an adverse decision (to the DC Court of Appeals) |
Licensees have due-process rights: notice of the charges, an opportunity to respond, a hearing before any adverse action, the right to present evidence and witnesses, and the right to appeal.
Available Sanctions
| Action | Description |
|---|---|
| Denial | Refuse to issue or renew a license |
| Reprimand | Formal warning on the record |
| Probation | Conditional license with restrictions |
| Suspension | Temporary loss of licensure |
| Revocation | Permanent loss of licensure |
| Fine | Up to $2,500 per violation |
Key Limit: The Commission imposes administrative penalties only. It cannot order imprisonment — criminal punishment requires prosecution in the courts. Fraud or conversion can trigger both Commission discipline and a separate criminal case.
Aggravating and Mitigating Factors
| Factor | Effect |
|---|---|
| Severity / harm to consumers | Harsher penalty |
| Prior disciplinary history | Stricter for repeat offenders |
| Cooperation and restitution | May reduce the sanction |
Guaranty Fund Interaction
If a consumer obtains a final court judgment against a licensee and the Commission orders payment from the Real Estate Guaranty and Education Fund, the licensee's license is automatically suspended. To restore it, the licensee must repay the full amount paid from the Fund plus interest at the rate set by the Mayor and satisfy all licensure requirements. The Fund pays a maximum of $50,000 in the aggregate per single transaction (regardless of the number of claimants).
Criminal Convictions and Complaints
Licensees must disclose criminal convictions on initial application, at renewal, and within the required time after a conviction. Crimes involving fraud, dishonesty, or real-estate dealings may bar or revoke a license; other offenses are reviewed case-by-case, with appeal rights. Complaints may be filed online through the DLCP website, in writing to the Commission, or by phone.
Practicing Real Estate Without a License
Only a licensed broker, salesperson, or property manager may perform real-estate brokerage acts for compensation in the District. Unlicensed activity is both a prohibited act and grounds for the Commission to pursue penalties against the unlicensed person and any broker who pays them.
| Scenario | Result |
|---|---|
| Unlicensed assistant negotiates a contract term | Violation — negotiation is a licensed act |
| Salesperson's license lapses, keeps closing deals | Practicing on an expired/inactive license |
| Broker pays a finder's fee to an unlicensed referrer | Prohibited compensation sharing |
| Owner sells their own property | Generally exempt — owners may sell their own real estate |
Exam Trap: Compensation may flow only from the employing broker to a salesperson; a salesperson who takes a commission check directly from a buyer or seller has committed a prohibited act, even if the amount is correct.
Settlement, Consent Orders, and Restitution
Not every case ends in a contested hearing. The Commission may resolve matters through a consent order in which the licensee agrees to sanctions without admitting all allegations, and it may require restitution to harmed consumers as a condition of keeping a license. A pattern of complaints — even minor ones — weighs as an aggravating factor at the next disciplinary stage, so timely, documented responses to consumer complaints are part of risk management for any DC licensee.
What is the maximum fine the DC Real Estate Commission can impose per violation?
Which of the following is a prohibited act under DC real estate law?
Which disciplinary action is NOT available to the DC Real Estate Commission?
What happens to a licensee's license when the Commission orders payment from the Real Estate Guaranty and Education Fund on the licensee's behalf?