4.2 License Law Violations
Key Takeaways
- Misrepresentation, fraud, and concealment of material defects are grounds for suspension or revocation under M.G.L. c. 112, § 87AAA¾
- A salesperson may not operate independently, collect a fee directly from the public, or advertise without the broker's name (blind advertising is prohibited)
- Brokers may not pay a referral fee or commission to an unlicensed person; doing so is a violation and may breach RESPA
- The Board of Registration can fine, suspend, revoke, or refuse to renew a license, and unlicensed practice is a separate criminal offense
- Brokers are responsible for supervising their salespersons and can be disciplined for an agent's misconduct (failure to supervise)
Who Disciplines — and What They Can Do
Violations are enforced by the Board of Registration of Real Estate Brokers and Salespersons within the Division of Occupational Licensure. The Board can fine, suspend, revoke, or refuse to renew a license after a hearing. Separately, practicing real estate without a license is a criminal offense — an expired or inactive license counts the same as no license at all.
| Sanction | Trigger |
|---|---|
| Fine / reprimand | Lesser or first-time violations |
| Suspension | Serious or repeated misconduct |
| Revocation | Fraud, conversion, conviction |
| Criminal charge | Unlicensed practice, larceny |
Misrepresentation, Fraud, and Concealment
These are the heart of license discipline. A licensee owes honesty to all parties, even a customer who is not the client.
| Type | Description | Example |
|---|---|---|
| Intentional fraud | Deliberate lie to induce a deal | Stating a basement "never floods" knowing it does |
| Negligent misrepresentation | Careless false statement | Quoting square footage without checking |
| Material omission | Failing to disclose a known material fact | Hiding a recurring foundation crack |
| Concealment | Actively hiding a defect | Painting over water-damaged drywall |
Massachusetts wrinkle: A broker is generally not required to volunteer that a property was the site of a death or felony (these are not "material defects" under Massachusetts practice), but the broker may never lie if directly asked. Affirmative misrepresentation is always a violation.
Net Listings
A net listing lets the broker keep everything above a price the seller "nets." Massachusetts does not flatly outlaw net listings, but they create a built-in conflict of interest and routinely lead to fraud claims, so they are strongly discouraged.
| Status in MA | Detail |
|---|---|
| Not explicitly banned | Unlike several other states |
| High risk | Broker is tempted to inflate the spread |
| Practical effect | Disclose fully and avoid; treated as suspect |
Compensation and Kickbacks
The core rule: a broker may pay another licensee, but not an unlicensed person, for real estate services. Undisclosed kickbacks for settlement services also violate the federal RESPA (Real Estate Settlement Procedures Act).
| Prohibited | Allowed |
|---|---|
| Referral fee to an unlicensed finder | Referral fee between licensed brokers |
| Secret kickback from a lender/inspector | Disclosed, documented cooperative split |
| Splitting a fee with a non-licensee | MLS-arranged co-broke compensation |
Advertising Rules
Massachusetts advertising must let the public identify the responsible broker. The classic prohibited form is the blind ad — an advertisement that omits the broker's business name so a consumer cannot tell who is behind it.
| Advertising violation | Why it is prohibited |
|---|---|
| Blind ad (no broker name) | Consumer cannot identify the licensee |
| Salesperson advertising solo | All ads run under the broker |
| Bait-and-switch listing | Promotes a property not actually available |
| Misleading photos/claims | False or doctored representations |
Worked Scenario
A salesperson posts a Facebook ad for a listing using only her cell number and "Call Jane — Top Agent," with no brokerage named. That is a blind ad and a license violation, regardless of how accurate the property details are. The fix: include the brokerage's business name in the ad.
The Salesperson Cannot Operate Independently
A salesperson must work under and be paid through a sponsoring broker. The exam repeatedly tests where that line falls.
| Salesperson CANNOT | Salesperson MUST |
|---|---|
| Accept a commission directly from a buyer/seller | Be paid by the sponsoring broker |
| Advertise without the broker's name | Run all ads through the broker |
| Open an independent office | Operate under broker supervision |
| Hold an escrow deposit personally | Turn deposits over to the broker |
Discrimination and Failure to Supervise
Fair-housing violations are a fast path to discipline. Massachusetts enforces M.G.L. c. 151B through the Massachusetts Commission Against Discrimination (MCAD), which protects more classes than federal law — including, for example, source of income (such as a Section 8 voucher), sexual orientation, gender identity, marital status, age, and ancestry.
| Issue | Enforcement |
|---|---|
| Federal fair-housing breach | HUD / fair-housing law |
| Chapter 151B breach | MCAD |
| Agent misconduct | Broker disciplined for failure to supervise |
Trap: Refusing to rent to a tenant because they hold a Section 8 voucher is illegal source-of-income discrimination in Massachusetts even though it is not a protected class under the federal Fair Housing Act. The broker who supervises that agent can also be disciplined.
How the Board Learns About Violations
Most discipline begins with a consumer complaint to the Board of Registration. After investigation the Board may hold a hearing where the licensee can appear, present evidence, and be represented. Outcomes range from a warning letter to revocation, and the Board reports certain actions publicly. Because discipline follows the license, a salesperson cannot escape it by switching brokers, and a revoked licensee generally must wait and reapply rather than simply renew.
| Stage | What happens |
|---|---|
| Complaint filed | Consumer or another licensee reports conduct |
| Investigation | Board reviews records, the trust account, ads |
| Hearing | Licensee may appear and defend |
| Decision | Fine, suspension, revocation, or dismissal |
Putting the Rules Together
The unifying theme across every violation question is honesty plus accountability through a broker. Misrepresentation breaks the duty of honesty owed to all parties; blind ads and direct fee collection break the rule that a salesperson acts only through and is paid only by the sponsoring broker; paying unlicensed referrers and taking secret kickbacks break the rule that only licensees are compensated for brokerage; and discrimination breaks Chapter 151B.
When a scenario describes a licensee acting secretly, independently, or dishonestly, the answer is almost always that the conduct is a violation and the broker may share responsibility for failing to supervise.
A Massachusetts broker pays a $500 'thank-you' fee to a former client (who has no real estate license) for sending a buyer her way. Is this permissible?
A landlord instructs a property manager to reject all applicants who would pay rent with a Section 8 housing voucher. Under Massachusetts law, this is: