TREC complaint rules and time limits
The Tennessee Real Estate Commission complaint process enables a member of the public to file a formal complaint against a real estate licensee they believe has acted improperly or illegally in the performance of their duties as a real estate licensee. Show
Before you file with our office, the Commission requests that you read the following information which explains its function, responsibilities and powers. When I put out these informational posts, I usually do so with the notice that here at All City Real Estate we believe in sharing information and knowledge with every agent. And that that information and knowledge crosses over broker boundaries so that we’re all the best agents we can be. That we’re all the fiduciary for our clients at the highest possible level. This post is an informational post in that same vein, but what we’re going to talk about today is exactly how to maintain that high level of professionalism within our industry. So what we’re going to talk about today is the structure of where a consumer might go to file a complaint against a real estate agent, where an agent might go to file a complaint against another agent, and the differences in what might occur when those reportings take place. Let’s take our first example. A consumer who has a complaint against a licensed Texas real estate agent is going to go through the Texas Real Estate Commission. There is a complaint process, that is very structured, that a consumer can go to TREC and say, “Hey, Susie Smith did wrong. She did a violation, and that violation was X, Y, and Z.” The Texas Real Estate Commission will then vet that complaint. They will talk to all of the parties involved, get official statements from the agent against whom the complaint was made, that agent’s broker, and then all of the information will be reviewed, and a decision will be made as to whether or not a violation of the TREC rules took place. So remember, the Texas Real Estate Commission governs the rules and laws of being a licensed Texas real estate agent. That is different and separate from TAR, the Texas Association of Realtors, which remember, you can be a licensed Texas real estate agent and not necessarily be a member of the Texas Association of Realtors. And therefore by default, you would also not be a member of the National Association of Realtors. You wouldn’t be a realtor at all, unless you were a member at the highest level of NAR down to our state level, TAR, and then the local board level below that. So an agent-to-agent complaint is going to be handled by the Texas Association of Realtors, and there are two basic types of complaints that may be filed with TAR on agent-to-agent complaints. One of those is arbitration regarding commission disputes. The other is cases involving potential ethics violations. So, what we need to do in our industry is make sure that as agents, as realtors, we are policing our industry. I just got done being a guest on a panel at the Austin Board of Realtors, where I sit on the board of directors. The discussion turned towards professional standards and ethics. Upholding our code of ethics for the Texas Association of Realtors, the National Association of Realtors, and it is incumbent upon agents, like you, and like me. And like all of our colleagues out there, to police ourselves, to make sure that if we see an agent who’s doing something questionable, in terms of our code of ethics, we must … It is our duty to report them so that we can be the agents at the highest level so that we can maintain a standard of professionalism in our industry that will hopefully engender trust amongst consumers to a greater degree than what we have now. Among the 1,584 total allegations in that time period, the most complaints were under TREC’s Sales-Other category (33%), which includes violations such as general negligence, false promises, improper rebates, and earnest-money issues not related to leasing and property management. The category with the second most complaints was Licensure Issues (20%), which could be failing to disclose criminal history or probationary license. Get data on the current license and complaint count totals on TREC’s website. It’s hard to know how to avoid TREC complaints and disciplinary actions unless you stay wellversed in what specific situations are the most likely to lead to TREC complaints. Many agents assume they will never get into trouble simply because they view themselves as fair and ethical agents. While most agents really are fair and ethical, the truth about TREC complaints is more complicated than that. That truth is that the world of buying and selling real estate is incredibly technical. At the same time, an agent’s career is built upon how willing they are to go above and beyond for their clients. Sometimes an agent goes too far and crosses the line into actions that put them in danger of a TREC complaint, or even a lawsuit by a disgruntled client. This is usually the result of being too focused on making the client happy at any cost or ensuring the transaction goes through after serious hiccups. This can result in allegations against the agent such as those for unauthorized practice of law. And then again, there are times when agents don’t even come close to going above and beyond. Instead, for one reason or another, they fail to respond to a client in a reasonable manner or time. Or, perhaps they make a significant mistake in showing a home or completing a contract. These situations can lead to accusations by clients and TREC of breach of fiduciary duty. In this article, I aim to highlight several of the most common TREC complaint categories against agents. My goal is to show how these complaints and violations can be avoided, by providing examples of situations leading to common complaints as well as best practices to avoid finding yourself in those situations. We live in a litigious society, and even the best of us can learn something from the mistakes others have already made. When it comes to liability, what you don’t know really can hurt you. Leasing and Property Management Every year, one of the top categories of complaints received by TREC is leasing and property management violations. Of these, most complaints relate to improper conduct concerning property management. A common violation within this category is a broker or agent who purposefully or mistakenly commingles their own funds (including operating funds) with those from tenants and clients. This leads to inadvertent misappropriation of funds that should go to the client/landlord and either goes to another client or ends up in the agent’s pocket. Furthermore, failure to properly account for money coming in and going out can cause a broker or agent to be fined by TREC and sometimes results in a lawsuit by the client for conversion (the civil version of theft). How do I avoid this? The Texas Operations Code §1101.652(b)(10) prohibits commingling of a license holder’s money with money that belongs to another person. To avoid a violation, agents should always deposit clients’ money into a trust or escrow account that is dedicated to money from properties being managed. A security deposit that is held onto for the landlord is also often deposited into an account entirely separate from the main trust account, although technically this is not a requirement. Failing to properly account for or remit money within a reasonable period of time can result in disciplinary action by TREC, as can paying an operating expense with unearned trust account funds. Always keep your books and accounting updated, and never, ever borrow from your trust account! Advertising Another common category of TREC complaints concerns violations of advertising rules applying to license holders. Many of these have to do with misleading information or advertising that fails to include required information, such as the brokerage name. Even use of an unregistered DBA or assumed name by the agent (or the brokerage) can lead quickly to a complaint. Some agents have asked me in the past whether TREC views advertising violations differently if the advertisement is targeting commercial properties instead of residential ones. This question makes sense when you consider that most consumer protections applying to primary residence transactions don’t apply to commercial transactions, where parties are assumed to be more sophisticated. However, the short answer is no. Any advertising rules in place generally apply to commercial agents and commercial properties as much as to residential. How do I avoid this? The easiest way to avoid advertising dilemmas is to become very familiar with the TREC requirements. Refresh yourself with these requirements before you embark on any course of advertising – and remember that in today’s age of social media, a casual Facebook post can be considered an advertisement! Here is a simple checklist to get you started on advertising compliance:
Of course, this isn’t a comprehensive list. In addition, TREC recently adopted updated advertising rules. These rules won’t be in effect until May 15, 2018, but you can familiarize yourself with them ahead of time to avoid inadvertent violations. I have a forthcoming article that will explain and analyze the changes to advertising rules, so check back here soon! Breach of Fiduciary Duty Agents owe what are known as “fiduciary duties” to their clients. It can be hard to put succinctly into words what this means, but essentially it obliges the agent to always act in the best interest of the client, to hold their confidences, communicate fully, obey their directions concerning the transaction, perform due diligence, and account for all money or property entrusted to them. The obligations of a fiduciary can arise either through a written contract with the client OR through actions between you and a client. Yes, this means that in the eyes of the legal system, and of TREC, you can accidentally or unknowingly become burdened with fiduciary duties. I have a forthcoming article that will detail the six fiduciary duties of an agent, namely: loyalty, confidentiality, disclosure, obedience, reasonable care and diligence, and accounting. How do I avoid this? In my upcoming article on fiduciary duties I will go into detail on the six duties and how to avoid their breach. For now, here is a snapshot of each duty and a common example of its breach.
Improper Referrals and Referral Fees In most cases, there needs to be a referral agreement between brokers in order for one agent to refer to another. Although not a technical or legal requirement, you are advised to get this in writing every time to avoid ambiguities, misunderstandings, and claims of improper referrals. Your broker can sign this agreement, or you can sign it yourself – but only with your broker’s permission! If you refer to someone else, you are under a duty to the client to make sure that the other agent has the proper experience to serve the client’s interests. Not doing so can be a violation of your fiduciary duty or constitute negligence, making the referral an improper one. In addition, referral fees often trip up unwary agents. Referral fees to unlicensed persons are generally disallowed under current rules. However, there is an exception that allows you to give an unlicensed person a gift of merchandise valued at $50 or less, without risking a TREC violation. These gifts are considered nominal as long as they are not paid in cash and do not exceed the $50 limit. How do I avoid this? Generally, the most-cited danger in this category is an accusation that an agent has exceeded the $50 nominal gift limit, given cash or cash equivalent (such as a gift card), or otherwise participated in an illegal kickback scheme. Another variation on an improper referral complaint is an agent not disclosing to their client that they are paying a referral fee. For example, relocation companies can charge referral fees that sometimes approach 50%. However, they cannot demand that the agent refrain from disclosing this to the agent’s client, which is a request that is sometimes made. Remember, your fiduciary duties require you to disclose to the client all information that is pertinent to the transaction. Unauthorized Practice of Law (UPL) TREC has cracked down in recent years on activities it considers the unauthorized practice of law by agents. Unfortunately, many of these activities have been so casually practiced by brokers and agents, and for so long, that it can be difficult to know what an agent can and cannot safely do. For instance, agents can prepare purchase and sale contracts using preprinted forms such as the ones available from TREC and TAR. All agents know that if they drafted a contract from scratch, that would be considered the unauthorized practice of law. Most agents also know that if they write in special provisions to TREC and TAR contracts, that is ALSO considered the unauthorized practice of law. However, many agents believe that having an attorney do that for the client will be costprohibitive. Others are worried that bringing in an attorney for that purpose will make the client doubtful of whether the agent is qualified or competent to handle the transaction. Still others simply do not know any real estate attorneys willing to do this quickly and for a nominal fee. (For the record, the Law Office of Christopher J. Sullivan routinely provides this service free or low-cost whenever we have cultivated a relationship with an agent.) How do I avoid this? Unauthorized practice of law is no joke, and is best held back by a 10-foot pole. The easiest way to routinely avoid this is to establish a relationship with a knowledgeable and reliable (and costeffective!) real estate attorney. Having an attorney draft special provisions, as well as give limited legal advice or opinions to clients, removes you safely from claims of unauthorized practice of law. In addition, having an attorney you trust in your back pocket looks good to clients, who know they are going to get excellent service from you that is backed by all the resources you have at your disposal. What is the most common complaint filed against realtors?According to the National Association of Realtors, the most common complaint filed against realtors involves fraud. These suits most often allege a failure to disclose defects in a property. Your solution boils down to two words: inspection and documentation.
What is the statute of limitations for the submission of consumer complaints to the Texas Real Estate Commission?TREC cannot investigate an incident that occurred four or more years ago.
What is the purpose of the rules of the Texas Real Estate Commission?TREC implements the laws passed by the Texas Legislature through the rulemaking process. Additionally, TREC educates, licenses, and disciplines license holders—no more, and no less.
What categories of people are barred from serving on the commission?What categories of people are barred from serving on the commission? Trade association employees and lobbyists are barred from membership.
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