4.2 License Law Violations & Discipline

TREC protects the public by disciplining licensees who break the License Act. The core enforcement statute is T.C.A. 62-13-312.

Grounds for Discipline (T.C.A. 62-13-312)

Exam point: Acting for more than one party in a transaction without the written consent of all parties is a specific statutory ground for discipline - it ties directly back to Tennessee's agency/disclosure rules.

Range of Sanctions

TREC can tailor discipline to the conduct:

Factors TREC Weighs

Escrow misuse illustrates the range: a minor recordkeeping lapse may draw a fine, while conversion of client funds can lead to revocation and criminal referral.

Due Process and the Disciplinary Path (T.C.A. 62-13-313)

A licensee facing discipline is entitled to fair procedure before any sanction.

1. Complaint or self-initiated investigation - TREC receives a complaint or opens its own inquiry.
2. Investigation - staff gather documents, conduct interviews, and may audit escrow.
3. Notice - the licensee is notified of the charges.
4. Hearing - a contested-case hearing where both sides present evidence.
5. Decision - the Commission issues a written order.
6. Appeal - the licensee may seek judicial review of an adverse decision.

Due-process rights include:

• Notice of the specific charges
• A hearing before any adverse action
• The right to counsel and to present evidence and witnesses
• The right to appeal

Exam point: TREC cannot revoke a license by surprise. The licensee must receive notice and an opportunity to be heard first.

Unlicensed Activity and Exemptions

Acts Requiring a License

Listing, showing for compensation, negotiating sales or leases, advertising others' property, and collecting rent for others all require a Tennessee license.

Common Exemptions

Exam trap: An unlicensed assistant may perform clerical tasks but may not negotiate, show property for compensation, or be paid a commission. Paying an unlicensed person for licensed activity is itself a violation.

Consequences of Unlicensed Practice

Reporting and Complaints

Licensees must promptly report criminal convictions and out-of-state disciplinary actions to TREC, and keep contact information current. Consumers file complaints with TREC online or in writing; TREC then investigates and, where warranted, pursues discipline.

Key point: A single act can trigger multiple consequences - TREC discipline, civil liability, a Recovery Account claim, and (for fund misuse or unlicensed practice) criminal exposure.

Mens Rea, Negligence, and the Spectrum of Conduct

Not every violation is intentional theft. The License Act reaches negligent conduct - failing to keep records, missing a disclosure, sloppy supervision - as well as intentional fraud and conversion. TREC calibrates the sanction to the conduct: an honest paperwork lapse may draw a reprimand or small civil penalty, while deliberate misrepresentation or stealing client funds can end a career. This spectrum is why exam answers about 'maximum penalty' depend on the severity described in the fact pattern; a single late deposit is not a revocation case, but conversion is.

The exam also distinguishes civil penalties (fines paid to the state), administrative sanctions (suspension, revocation, probation), and criminal liability (prosecuted by a district attorney, not by TREC). A serious escrow theft can trigger all three plus a Recovery Account claim. Recognizing that these consequences stack - rather than being alternatives - is a frequent discriminator among answer choices.

Supervision, Vicarious Responsibility, and Self-Reporting

Because affiliates work under a principal broker, the broker can be disciplined for failure to supervise even when the affiliate committed the underlying act. This vicarious exposure is intentional: it gives brokers a reason to train affiliates, review advertising, and audit files. A common exam scenario describes an affiliate's misconduct and asks who else is accountable - the answer typically includes the principal broker for inadequate supervision.

Licensees also have affirmative reporting duties. A criminal conviction or discipline in another state must be reported promptly to TREC, and concealing such events is itself a violation that can be treated more harshly than the original conduct. The throughline for the whole disciplinary topic is public protection through due process: TREC must give notice and a hearing before it acts, the licensee may be represented and may appeal, and the sanction must fit the conduct. Answers that skip due process ('TREC revokes on the spot') or that ignore the broker's supervisory role are usually wrong.