4.2 Maryland License Law Violations and Discipline

MREC's Disciplinary Authority

The Maryland Real Estate Commission (MREC) has statutory power to discipline any licensee — salesperson, associate broker, or broker — who violates the Real Estate Brokers Act (Title 17) or the Commission's COMAR regulations. Sanctions range from a written reprimand to permanent revocation, and MREC can stack a civil penalty on top of any other sanction.

Common Grounds for Discipline

Specific Prohibited Acts (Title 17)

1. Fraud or misrepresentation in obtaining a license
2. Dishonest or fraudulent dealing in a transaction
3. False or misleading advertising
4. Failure to account for money or documents that belong to others
5. Commingling client and personal funds
6. Paying or splitting a fee with an unlicensed person
7. Failing to disclose the licensee's own interest in a property
8. Violating fair-housing laws
9. Conviction of a crime involving fraud or moral turpitude
10. Practicing while a license is suspended or expired

Exam tip: A licensee may pay a referral fee to another licensee, but never to an unlicensed person (including a past client "finder"). That distinction is a frequent test item.

Broker Supervision and Vicarious Exposure

Maryland holds the broker of record responsible for supervising every affiliated salesperson. Failure to supervise is its own ground for discipline even if the broker did not personally commit the underlying act. A broker who ignores a salesperson's pattern of late deposits, unauthorized advertising, or skipped agency disclosures can be sanctioned alongside the salesperson. This is why brokers adopt written policies, review transaction files, and audit advertising — supervision failures are easy for MREC to prove from the paper trail.

Penalties and Sanctions

Two Different Penalty Tracks — Civil vs. Criminal

Maryland law has two distinct money penalties under Title 17, and the exam tests whether you can tell them apart.

1. The Commission's administrative civil penalty (Section 17-322). MREC may impose a civil penalty of up to $5,000 for EACH violation, in place of or in addition to a reprimand, suspension, or revocation. This is a flat per-violation cap — it does not tier up to $15,000 or $25,000. Because each separate act is its own violation, multiple counts of $5,000 still add up quickly.

2. Criminal penalties on conviction (Section 17-613). Separately, a person criminally convicted of violating the Brokers Act commits a misdemeanor, and the fine escalates with repeat convictions (and can include imprisonment):

Exam trap: The tiered $5,000 / $15,000 / $25,000 schedule is the criminal penalty for repeat convictions (Section 17-613), prosecuted in court. The Commission's own administrative discipline caps the civil penalty at $5,000 per violation (Section 17-322). Do not assume MREC can administratively fine $25,000 — that ceiling belongs to a third criminal conviction.

Other Sanctions

The Hearing Process

Discipline cannot be imposed by surprise. Under the Administrative Procedure Act, a licensee facing action is entitled to:

1. Written notice of the specific charges.
2. A formal hearing before the Commission or an administrative law judge.
3. The right to present evidence, call witnesses, and cross-examine.
4. The right to legal counsel.
5. Judicial appeal to circuit court of an adverse final order.

Most matters begin with a complaint (consumer, another licensee, or another agency) or an audit finding. Many minor cases resolve by consent order rather than a contested hearing.

The Real Estate Guaranty Fund

Maryland funds a Real Estate Guaranty Fund to make whole consumers harmed by licensee misconduct when the licensee cannot pay.

How a Claim Works

1. Consumer wins a court judgment against the licensee.
2. Licensee fails to pay.
3. Consumer applies to the Fund.
4. Fund pays up to the $50,000 per-claim cap.
5. The licensee cannot practice until the Fund is paid back in full.

Common trap: The Fund is a last resort — the consumer must first obtain and be unable to collect a judgment. It does not cover ordinary contract disputes where the licensee simply owes money on a personal debt.

Penalty Math on the Exam

Expect a fact pattern that tests whether you can separate the two tracks. If a question asks the maximum administrative civil penalty MREC can impose for a single violation, the answer is $5,000 (Section 17-322), no matter how many prior offenses — administrative penalties do not tier. The escalating $5,000 / $15,000 / $25,000 numbers appear only when the question describes a criminal conviction (first / second / third offense) under Section 17-613. If a consumer's judgment exceeds the $50,000 Guaranty Fund cap, the consumer recovers only $50,000 from the Fund and must pursue the licensee personally for the rest.

Remember that a civil penalty, a suspension, and required education can all be imposed in the same MREC order — they are not mutually exclusive — and that paying a penalty does not by itself restore a suspended or revoked license.