4.2 License Law Violations & Discipline
Key Takeaways
- MREC can investigate complaints, conduct hearings, and impose disciplinary actions
- Violations can result in license denial, suspension, revocation, or fines
- Common violations include misrepresentation, commingling, unlicensed activity, and disclosure violations
- Practicing without a license is prohibited and may result in criminal penalties
- Licensees have due process rights including notice and hearing before disciplinary action
Last updated: January 2026
MREC has authority to investigate complaints and take disciplinary action against licensees who violate the Maine Real Estate License Law.
Common Violations
Misrepresentation and Fraud
| Violation | Description |
|---|---|
| Material misrepresentation | False statements about important facts |
| Omission | Failing to disclose known material defects |
| Fraud | Intentional deception for personal gain |
| False advertising | Misleading marketing or claims |
Trust Account Violations
| Violation | Description |
|---|---|
| Commingling | Mixing client and broker funds |
| Conversion | Using client funds without authorization |
| Failure to deposit | Not depositing funds timely |
| Poor records | Inadequate documentation |
| No reconciliation | Failing to reconcile monthly |
Agency and Disclosure Violations
| Violation | Description |
|---|---|
| Disclosure violations | Failing to provide required disclosures |
| Undisclosed dual agency | Acting for both parties without consent |
| Breach of fiduciary duty | Violating duties to clients |
| Undisclosed interest | Failing to disclose personal interest |
Unlicensed Activity
| Violation | Description |
|---|---|
| Practicing without license | Performing activities requiring a license |
| Practicing on expired license | Continuing to work after expiration |
| Paying unlicensed persons | Compensating unlicensed individuals |
| Aiding unlicensed activity | Helping others practice without license |
Warning: Practicing real estate without a license is prohibited in Maine and may result in civil penalties and criminal prosecution.
Grounds for Discipline
MREC may take disciplinary action for:
Statutory Grounds
| Ground | Description |
|---|---|
| Conviction of crime | Crimes related to real estate or moral turpitude |
| Incompetence | Demonstrated lack of knowledge or skill |
| Untrustworthiness | Actions showing dishonesty |
| Violation of law | Violating license law or rules |
| Failure to supervise | Broker failing to supervise salespersons |
Additional Grounds
| Ground | Description |
|---|---|
| Drug/alcohol abuse | Substance issues affecting practice |
| Mental incapacity | Inability to practice safely |
| Disciplinary action in other state | Action by another state's board |
| Failure to cooperate | Not responding to MREC investigation |
Disciplinary Process
Investigation
- Complaint filed with MREC (or MREC initiates investigation)
- Investigation conducted by MREC staff
- Evidence gathered (documents, interviews, audits)
- Determination made whether to proceed
Hearing Process
If MREC proceeds with disciplinary action:
| Step | Description |
|---|---|
| Notice | Licensee notified of charges |
| Hearing | Formal hearing before Commission |
| Evidence | Both sides present evidence |
| Decision | Commission issues written decision |
| Appeal | Licensee may appeal to Superior Court |
Due Process Rights
Licensees have the right to:
- Notice of charges
- Hearing before adverse action
- Representation by attorney
- Present evidence and witnesses
- Cross-examine witnesses
- Appeal unfavorable decisions
Disciplinary Actions
MREC may impose various sanctions:
| Action | Description |
|---|---|
| Denial | Refuse to issue license |
| Suspension | Temporary loss of license |
| Revocation | Permanent loss of license |
| Reprimand | Formal warning |
| Fine | Monetary penalty (up to $1,500 per violation) |
| Probation | Conditional license with restrictions |
| Education | Required additional training |
| Consent agreement | Negotiated settlement |
Factors Considered
| Factor | Impact |
|---|---|
| Severity of violation | More serious = harsher penalty |
| Prior disciplinary history | Repeat violations = stricter |
| Harm to consumers | Consumer damage = more serious |
| Cooperation | Cooperation may reduce penalty |
| Rehabilitation | Remedial steps may help |
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Reporting Requirements
Licensee Reporting Obligations
Licensees must report to MREC:
| Event | Timeline |
|---|---|
| Criminal conviction | Promptly |
| Civil judgment | Promptly |
| Disciplinary action in other state | Promptly |
| Change of address | Within 10 days |
| Change of broker affiliation | Within 10 days |
Mandatory Reporting
| Who Reports | What to Report |
|---|---|
| Broker | Termination of salesperson for cause |
| Anyone | Suspected unlicensed activity |
| Anyone | Suspected violations of license law |
Common Exam Scenarios
Trust Account Issues
| Scenario | Violation |
|---|---|
| Broker uses earnest money for office rent | Conversion |
| Salesperson deposits into personal account | Improper handling |
| Broker fails to reconcile for 3 months | Record keeping violation |
| Client funds in operating account | Commingling |
Agency Issues
| Scenario | Violation |
|---|---|
| Agent represents buyer and seller without consent | Undisclosed dual agency |
| Agent fails to provide disclosure form | Disclosure violation |
| Agent shares client confidential info | Breach of fiduciary duty |
| Agent fails to present offer | Breach of duty |
Misrepresentation Issues
| Scenario | Violation |
|---|---|
| Agent says roof is new when it's not | Misrepresentation |
| Agent conceals known foundation problem | Omission |
| Agent advertises "ocean view" for inland property | False advertising |
| Agent forges client signature | Fraud |
Test Your Knowledge
What is the maximum fine MREC can impose per violation?
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Test Your Knowledge
What rights does a Maine licensee have before MREC takes disciplinary action?
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Test Your Knowledge
A broker uses client earnest money to pay office expenses. This is called:
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Test Your Knowledge
Where may a licensee appeal an unfavorable MREC decision?
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Test Your Knowledge
Within how many days must a Maine licensee report a change of address to MREC?
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