Unit 6: Violations of License Law, Penalties, and Procedures

Florida Real Estate Principles, Practices & Law 44th Edition

Unit 6: Violations of License Law, Penalties, and Procedures

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Legal Terms to Know

• Breach of trust– Breaking of a promise or obligation

• Commingle– To mix money of buyer or seller with broker’s money

• Concealment– Withholding information

• Conversion– Licensee’s use or misuse of client (or customer)

monies• Culpable negligence

– Negligent conduct

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More Legal Terms

• Failure to account or deliver– Failing to deliver personal property to the person entitled to it

• Fraud– Intentional deceit and reliance on the deception to get someone to

part with something of value or a legal right• Material fact

– Relevant information• Misrepresentation

– Untrue statement or fact• Moral turpitude

– Conduct contrary to honesty or good morals – Crimes including embezzlement, larceny, and robbery

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Complaint Process (Overview)

1. A complaint is filed

2. Investigation of the complaint

3. Probable cause determination

4. Formal complaint is issued if probable cause is found

5. Either an informal or formal hearing is conducted

6. Final order is issued

7. Judicial review (appeal) of final order

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Step 1: Filing the Complaint

• Complaint

– An alleged violation of law or rule

– Uniform Complaint Form - DBPR

– Legally sufficient if a violation of

• Florida statute

• DBPR rule

• FREC rule

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Anonymous Complaints

DBPR may investigate anonymous complaints or ones made by a confidential informant provided

– The complaint is in writing and legally sufficient

– Alleged violation is substantial

– The DBPR has reason to believe the alleged violations are true

Consumer complaint driven enforcement

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Step 2: Investigation

• Complainant

– Person who files the complaint

• Copy of complaint sent to the subject of investigation

• Licensee may submit a written response

• DBPR conducts investigation

– DBPR issues an investigative report

– Submit report to the probable-cause panel

– The complaint and information obtained during investigation is confidential until 10 days after probable cause is found

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Summary Suspension

• If investigation reveals public is endanger, the DBPR or FREC may decide not to allow licensee to continue to work during the disciplinary process

• DBPR Secretary can issue a summary suspension (also called emergency suspension)

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Step 3: Probable Cause

• Reasonable grounds for prosecution• Each probable-cause panel is composed of 2 individuals

– One panel member must currently serve on Commission– At least one member must be a former or current

professional Commission member

• “Grand jury” arrangement• Determination, by majority vote, as to whether probable

cause exists• Complainant and subject of complaint are sent written

notification of outcome– May dismiss the case or dismiss with a letter of guidance

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Step 4: Formal Complaint

• Administrative complaints sent by email, regular U.S. mail, or certified mail to address of record

– Probable cause exists

• DBPR files a formal complaint

• Allegations of facts and charges against the licensee

• Copy sent to sales associate’s broker

– Licensee is also sent an Election of Rights

• 21 days to respond

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Election of Rights

• Respondent is entitled to– Not dispute the allegations and request an

informal hearing– Dispute the allegations and request a formal

hearing– Not dispute the allegations and waive the right to

be heard

• If licensee does not respond to the election of rights within 21 days after receipt of the administrative complaint, the respondent gives up right to dispute the charges

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Settlement Stipulation

• Licensee-respondent can meet with a DRE attorney prior to a hearing to discuss a settlement

• Stipulation is an agreement as to the facts of the case and the penalty reached

• Terms of the stipulation must be approved by FREC

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Voluntary Relinquishment forPermanent Revocation

• Used to avoid a disciplinary hearing

• Licensee relinquishes the license in lieu of discipline

• Permanent revocation

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Step 5: Informal or Formal Hearing

• Informal Hearing conducted if

– No disputed facts

• Case is heard by FREC at a Commission meeting

• Licensee admits to the facts of the case

• Licensee can submit mitigation in hopes of reducing the penalty

• The FREC (probable cause panel excused) decides the case and imposes the penalty

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Waiver Hearing

• If the subject of the complaint fails to timely respond to the Election of Rights

– Licensee-respondent has waived the election of rights (by default, admits to the charges)

– The case proceeds and is heard by the FREC in an informal hearing

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Formal Hearing

• Licensee may request a formal hearing

• Formal hearing required if there are disputed facts

• DBPR must agree that there are disputed facts

– F.S. 120

– Division of Administrative Hearings (DOAH)

– Administrative law judge (ALJ)

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Recommended Order

• Submitted by administrative law judge

– Findings of fact

– Conclusions of law

– Recommended penalty (in accordance with the FREC’s range of penalties)

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Step 6: Final Order

• FREC issues the final order

– Final decision as to innocence or guilt and penalty

• Probable cause members are excused

• FREC considers law judge’s report and recommended order and filed exceptions

• Copy mailed to all parties

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Step 7: Judicial Review (Appeal)

• Licensee may appeal the order– 30 days to file appeal

– Filed with the DBPR and the district court of appeals

– Licensee may request stay of enforcement (stops enforcement of a suspension or revocation in final order, pending appeal)

– To obtain a stay court issues a writ of supersedeas(supersedes the FREC order licensee continues to practice until appeal is heard)

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Types of Penalties

• Administrative penalties (FREC imposes)• Civil penalties (civil court)• Criminal penalties (criminal court)

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Administrative Penalties

• Denial of an application (or refusal to renew)

• Notice of noncompliance

• Citation

• Probation while completing terms of penalty

• Administrative fine

• Suspension

• Revocation

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Notice of Noncompliance

• Issued for a first-time offense of a minor violation established by rule

– Does not result in economic or physical harm to a person

– 15 days to take corrective action

– Failure to timely comply with the notice of noncompliance results in a citation or disciplinary proceedings

– Least severe administrative penalty

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Citation

• Issued by DBPR investigators-auditors for minor violations listed in rule

• 30 days to accept/reject alleged violation

– No action – case closed

– File written objection within 30 days

• Penalty – fines $100 to $500

• Example: Failed to follow the requirements for team advertising, citation and fine of $500.

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More Serious Administrative Penalties

• Administrative fine of up to $5,000 per violation of Chapters 455 and 475, F.S.

• Suspension of license for up to 10 years

• Revocation

– Most severe type of administrative penalty

– Revocation is permanent and may affect other licensees held

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Revocation Without Prejudice

• In the case where a license was issued through an error of the FREC or DBPR

– For example, the DBPR mistakenly issues a contractor’s license rather than broker’s license

– The license issued in error is revoked, and action will not be held against the applicant for future DBPR applications for licensure

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Civil and Criminal Penalties

• Civil penalties are imposed by the civil courts

– For example, buyer sues to recover earnest money deposit that an EDO instructed the broker to give to the seller

• Criminal penalties are issued in criminal court

• DBPR must report criminal violations to state attorney’s office

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Second-Degree Misdemeanors

• Least serious misdemeanor crime in Florida• If the Legislature fails to classify a misdemeanor,

then it is punishable as a second-degree misdemeanor

• Criminal violations of real estate license law are second degree misdemeanors, unless specifically deemed in statute to be a more severe violation

• Criminal fine maximum of $500 and/or– 60 days imprisonment– Issued by a criminal court of law

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First-Degree Misdemeanor

• The most serious type of misdemeanor crime in Florida

• For example, failing to provide accurate and current rental information for fee

• Maximum penalty is a fine of $1,000 and/or one year in jail

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Third-Degree Felonies

Felonies are the most serious type of crimes

1. Falsifying an application

2. Unlicensed practice of real estate

3. Theft or reproduction of license exam

• Maximum penalty

– Fine of $5,000 and/or 5 years in jail

– Referred to state attorney’s office

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Maximum Criminal Penalties

Criminal Penalty Fine Incarceration

Second-degree misdemeanor $500 60 days

First-degree misdemeanor $1,000 1 year

Third-degree felony $5,000 5 years

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Self-Report

• Licensee must inform the FREC, in writing, within 30 days of being convicted or found guilty of a crime, regardless of where the event occurred. This includes

– Misdemeanors

– Felonies

– A plea of nolo contendere or a guilty plea, regardless of adjudication

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Real Estate Recovery Fund

• Reimburses consumers who have been financially injured by a licensee (last resort)

– Involves a civil suit in Florida court

– For monetary losses suffered in Florida real estate transaction

– Losses caused by actions of real estate licensee

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Recovery Fund Licensee Requirements

• Held a current, valid, active license at time action was committed

• Was not the owner of the property, not the buyer, not the tenant (not an officer in the business that was any of the above)

• Acted solely as a licensee in transaction

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Recovery Fund Claimant Requirements

• File civil lawsuit in Florida court against licensee– Suit cannot be against a brokerage entity

• Be awarded a judgment against licensee• Diligently attempt to collect on the judgment

(obtained a writ of execution)– Unable to locate enough assets of licensee to

collect on the judgment

• Affidavit stating final judgment is not on appeal• Claimant cannot be the spouse of offending

licensee

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Time Limit to File Claim

• Claim must be made within two years of the alleged violation or discovery of the alleged violation

• A claim for recovery may be made no more than four years after the alleged violation occurred

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Monetary Limits of Claims

• Maximum payment from the fund

– $50,000 per transaction

– $150,000 against one licensee

• Amount of the fund

– Funded by license fees and fines

– Additional license fee charged if fund drops below $500,000

– Additional fee dropped when fund reaches $1,000,000

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Compensatory Damages and Mandatory Suspension

• Compensatory damages only

– Actual monetary damages incurred

– Will not reimburse attorney’s fees, court costs, treble damages or punitive damages

• License is suspended upon payment of money from the fund

• License will not be reinstated until fund is repaid with interest

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Claims Resulting From an EDO

• When a broker is sued for complying with an EDO– FREC authorized to reimburse broker for amount of

judgment against broker up to $50,000– No disciplinary action against broker– Does not have to repay fund– Broker must notify FREC of the court case and

diligently defend in court the disputed actions concerning transaction

– Reimburse broker’s reasonable attorney fees and court costs (applies to EDO claims only)

– If plaintiff prevails in court, reimburses plaintiff’s court costs and attorney fees (EDO claims only)

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Key Concepts

• Fund will NEVER reimburse punitive damages, treble damages, or interest on judgment

• A broker who complies with an EDO may be reimbursed the amount of the EDO, broker’s attorney fees, and court costs

– If the plaintiff prevails in court, the fund will also reimburse the plaintiff’s attorney fees and court costs