4.2 License Law Violations & Discipline
Key Takeaways
- The Real Estate Division investigates and the Real Estate Commission adjudicates violations of NRS Chapter 645 and NAC Chapter 645.
- The Commission may impose an administrative fine of up to $10,000 per violation (NRS 645.630) plus suspension, revocation, restitution, or education.
- Common grounds include misrepresentation, commingling/conversion, undisclosed dual agency, unlicensed activity, and a broker's failure to supervise.
- Practicing real estate without a license is a misdemeanor; fraud, forgery, and theft of trust funds can be charged as felonies.
- Licensees have due-process rights: written notice of charges, a hearing, counsel, the chance to present and cross-examine witnesses, and judicial appeal.
Who Enforces the Law
Two bodies share enforcement. The Real Estate Division (NRED) investigates complaints, audits trust accounts, and prosecutes charges. The Real Estate Commission, a five-member appointed board, hears contested cases and orders discipline. A complaint can come from a consumer, another licensee, a cooperating broker, or the Division acting on its own.
Common Grounds for Discipline (NRS 645.630 & 645.633)
Misrepresentation and Fraud
| Violation | Description |
|---|---|
| Material misrepresentation | False statement about a fact a buyer would rely on |
| Concealment / omission | Hiding a known material defect (e.g., a failed septic) |
| Fraud | Intentional deception for gain |
| False advertising | Misleading marketing claims |
| Substantial misrepresentation | Repeated or egregious false statements |
Trust Account Violations
| Violation | Description |
|---|---|
| Commingling | Mixing client and broker funds |
| Conversion | Spending client funds without authority |
| Failure to deposit timely | Missing the next-banking-day deadline |
| Missing reconciliations | Not reconciling monthly |
Agency and Disclosure Violations
| Violation | Description |
|---|---|
| Undisclosed dual agency | Representing both sides without written consent |
| Missing Duties Owed disclosure | Not delivering required agency disclosure |
| Breach of fiduciary duty | Putting self-interest ahead of the client |
| Secret profit / undisclosed interest | Failing to disclose a personal stake |
Unlicensed Activity and Supervision
| Violation | Description |
|---|---|
| Practicing without a license | Performing licensed acts unlicensed |
| Working on an expired license | Continuing after expiration |
| Paying an unlicensed person | Splitting a commission with a non-licensee |
| Failure to supervise | Broker not overseeing affiliated licensees |
Warning: Practicing real estate without a license is a misdemeanor in Nevada and can bring fines and jail — separate from any administrative penalty the Commission imposes.
The Net-Listing and Kickback Traps
Two specific prohibitions show up often. A licensee may not accept a net listing (where the agent keeps everything above a set price) in most situations because it invites self-dealing. And a licensee may not pay a referral fee or commission to anyone who is not licensed — paying an unlicensed "bird dog" is itself a violation, regardless of how small the fee.
The Disciplinary Process
Investigation to Hearing
- Complaint filed with NRED, or the Division opens its own inquiry.
- Investigation: staff gather documents, conduct interviews, and may audit trust accounts.
- Formal complaint / notice of charges is served in writing on the licensee.
- Answer: the licensee is given time to respond in writing.
- Hearing before the Commission (or a hearing officer): both sides present evidence and witnesses.
- Written decision is issued; orders imposing discipline are public records.
- Judicial review: the licensee may petition a Nevada district court.
Due-Process Rights
| Right | Meaning |
|---|---|
| Notice | Written statement of the charges before the hearing |
| Hearing | Opportunity to be heard before any adverse action |
| Counsel | Right to be represented by an attorney |
| Evidence | Present documents and witnesses |
| Cross-examination | Question the Division's witnesses |
| Appeal | Seek judicial review of an adverse order |
Sanctions the Commission Can Impose
| Action | Description |
|---|---|
| Administrative fine | Up to $10,000 per violation (NRS 645.630) |
| Suspension | Temporary loss of license |
| Revocation | Cancellation of the license |
| Denial | Refusal to issue or renew |
| Reprimand | Formal censure on the record |
| Probation | License kept under conditions |
| Continuing education | Required remedial coursework |
| Restitution | Repayment to harmed parties |
Fines stack: ten separate violations can each draw up to $10,000. The Commission may also assess the costs of the investigation and hearing.
Factors That Move the Penalty
| Factor | Effect |
|---|---|
| Severity & consumer harm | Greater harm = harsher sanction |
| Prior discipline | Repeat conduct = stricter penalty |
| Cooperation | Voluntary correction may reduce it |
| Restitution made | Mitigating factor |
Criminal Exposure
Administrative discipline is separate from criminal prosecution; one event can trigger both.
| Offense | Typical classification |
|---|---|
| Unlicensed practice | Misdemeanor |
| Fraud | Felony, by amount involved |
| Conversion / theft of trust funds | Felony, by amount |
| Forgery of documents | Felony |
Worked scenario: A licensee diverts $40,000 of earnest money to cover payroll. That single act can yield a $10,000-per-count Commission fine plus revocation, a felony theft charge, civil liability, and a claim against the Recovery Fund — four distinct exposures from one transaction.
The Recovery Fund
Nevada maintains an Education, Research and Recovery Fund financed by licensee fees. When a consumer wins a court judgment against a licensee for fraud, misrepresentation, deceit, or conversion of trust funds in a real estate transaction and cannot collect it, the consumer may apply to the Fund for payment. Two facts are commonly tested: the Fund pays only after the claimant exhausts collection efforts and obtains a judgment, and when the Division pays a claim the licensee's license is automatically suspended until the licensee reimburses the Fund in full, plus interest.
The Fund protects the public; it never shields the wrongdoer from repayment.
Statute of Limitations on Complaints
A disciplinary complaint generally cannot be based on conduct discovered more than a set period earlier, but the clock issues are nuanced — the Division can act on patterns and on newly discovered fraud. For the exam, remember the sequence (complaint, investigation, notice, hearing, decision, appeal) and that the burden is on the Division to prove the violation by the applicable standard at the Commission hearing, not on the licensee to prove innocence.
What is the maximum administrative fine the Nevada Real Estate Commission may impose per violation under NRS 645.630?
A broker pays a $500 referral fee to an unlicensed neighbor who sent a buyer their way. Which statement is correct?
Which of the following is a due-process right of a Nevada licensee facing discipline?