4.2 License Law Violations & Discipline
Key Takeaways
- TREC can investigate complaints, conduct hearings, and impose disciplinary actions under T.C.A. Section 62-13-312
- Violations can result in license denial, suspension, revocation, or civil penalties
- Common violations include misrepresentation, commingling, unlicensed activity, and escrow violations
- Misuse of escrow accounts can lead to penalties ranging from civil fines to license revocation
- Licensees have due process rights including notice and hearing before disciplinary action
Last updated: January 2026
TREC has authority to investigate complaints and take disciplinary action against licensees who violate the Tennessee Real Estate Broker License Act under T.C.A. Section 62-13-312.
Grounds for Disciplinary Action
T.C.A. Section 62-13-312 Violations
| Violation Category | Examples |
|---|---|
| Misrepresentation | False statements, fraud, deception |
| Escrow violations | Commingling, conversion, failure to deposit |
| Unlicensed activity | Practicing without license |
| Agency violations | Failure to disclose, breach of duty |
| Advertising violations | False or misleading advertising |
| Criminal conduct | Felonies, crimes of moral turpitude |
Specific Prohibited Acts
| Violation | Description |
|---|---|
| 62-13-312(5) | Misuse of escrow or trust account |
| Material misrepresentation | False statements about important facts |
| Omission | Failing to disclose adverse facts |
| Fraud | Intentional deception for personal gain |
| False advertising | Misleading marketing or claims |
Escrow Account Violations
Misuse of the escrow or trust account by the principal broker can lead to severe consequences:
Potential Penalties
| Level | Penalty |
|---|---|
| Minor violations | Civil penalty (fine) |
| Moderate violations | Suspension |
| Serious violations | Revocation |
| Criminal conduct | Referral for prosecution |
What Constitutes Misuse
| 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 |
| Shortages | Account balance doesn't match records |
Disciplinary Process
Complaint and Investigation
- Complaint filed with TREC (or TREC initiates investigation)
- Investigation conducted by TREC staff
- Evidence gathered (documents, interviews, audits)
- Determination made whether to proceed
Hearing Process
If TREC 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 court |
Due Process Rights
Licensees have the right to:
- Notice of charges
- Hearing before adverse action
- Representation by attorney
- Present evidence and witnesses
- Appeal unfavorable decisions
Disciplinary Actions
TREC may impose various sanctions:
| Action | Description |
|---|---|
| Denial | Refuse to issue license |
| Suspension | Temporary loss of license |
| Revocation | Permanent loss of license |
| Civil penalty | Monetary fine |
| Probation | Conditional license with restrictions |
| Education | Required additional training |
| Consent order | Agreed resolution |
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 |
Unlicensed Practice
What Requires a License
Activities that require a Tennessee real estate license:
| Activity | License Required? |
|---|---|
| Listing property for others | Yes |
| Showing property for compensation | Yes |
| Negotiating sales/leases | Yes |
| Advertising property for others | Yes |
| Collecting rent for others | Yes |
Exemptions
| Exemption | Description |
|---|---|
| Property owners | Selling/leasing own property |
| Attorneys | Licensed attorneys |
| Auctioneers | Licensed auctioneers |
| Property managers | Within scope of lease |
Penalties for Unlicensed Practice
| Consequence | Description |
|---|---|
| Criminal penalties | Misdemeanor charges |
| Civil penalties | Fines |
| Contract voidability | Transactions may be voidable |
| No commission | Cannot collect compensation |
Reporting Requirements
Licensee Obligations
Licensees must report to TREC:
| Event | Timeline |
|---|---|
| Criminal conviction | Promptly |
| Disciplinary action in other states | Promptly |
| Change of address | Update in CORE |
| Change of broker affiliation | Use TREC1 form |
Consumer Complaints
How to File
| Method | Details |
|---|---|
| Online | Through TREC website |
| Written | Submit complaint form |
| Contact | TREC.info@tn.gov |
Note: TREC investigates complaints against licensees and takes appropriate disciplinary action when violations are found.
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Test Your Knowledge
Under T.C.A. Section 62-13-312(5), what can misuse of the escrow account result in?
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Test Your Knowledge
What rights does a Tennessee licensee have before TREC takes disciplinary action?
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Test Your Knowledge
Which of the following activities does NOT require a Tennessee real estate license?
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B
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D
Test Your Knowledge
Which form should a Tennessee licensee use to report a change of broker affiliation?
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D
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