QUICK ANSWER

TREC may impose administrative penalties and license discipline when authorized. Unlicensed brokerage can also lead to cease-and-desist orders, injunctions, civil liability, and a Class A misdemeanor. The Real Estate Recovery Trust Account is a separate, limited remedy for qualifying civil judgments, not an automatic payment after a complaint.

EXAM PREP ONLY

This article is educational exam preparation, not legal, licensing, disciplinary, criminal, or consumer-claim advice. Use current official law and qualified counsel for an actual matter.

$5,000
maximum administrative penalty per violation
$125,000
recovery cap for one transaction
$250,000
recovery cap for one license holder

Where This Fits on the Exam

Pearson VUE places this material under C. Penalties for Violation, one of three Commission Duties and Powers rows. Pearson names:

  1. Unlicensed activity.
  2. Authority for disciplinary actions.
  3. Recovery Trust Account.

The exam often describes conduct and asks for the consequence or remedy. Before choosing, identify the path:

Administrative penalty: money paid to the agency
License discipline: reprimand, probation, suspension, or revocation
Unlicensed-activity enforcement: agency, civil, and possible criminal consequences
Consumer refund: limited return of what was paid for a regulated service
Recovery Trust Account: court-supervised payment on a qualifying judgment

These paths can overlap, but they are not interchangeable.

TREC's Disciplinary Authority

Texas Occupations Code Section 1101.656 authorizes TREC to:

  • Suspend a license.
  • Revoke a license.
  • Place a person whose license has been suspended on probation.
  • Reprimand a license holder.

The authority applies when the license holder violates Chapter 1101 or a Commission rule. Probation may include regular reporting, limits on practice, or additional education.

Sections 1101.652 and 1101.653 contain detailed grounds for discipline. For this exam row, recognize the authority rather than memorizing every ground. Common examples include:

  • Fraud or material misstatement in obtaining a license.
  • Misrepresentation or concealment of a material fact.
  • Negligence or incompetence.
  • Improper handling of money.
  • Improper compensation.
  • Failure to comply with an order or request.

A filed complaint does not create automatic discipline. TREC must use the applicable investigation and administrative process.

Administrative Penalties

Section 1101.701 authorizes TREC to impose an administrative penalty for violating Chapter 1101, a Commission rule, or a Commission order.

Section 1101.702 sets the ceiling:

An administrative penalty may not exceed $5,000 for each violation. Each day a violation continues or occurs may be treated as a separate violation.

The executive director considers:

  • Seriousness and gravity.
  • History of previous violations.
  • Deterrence.
  • Efforts to correct the violation.
  • Other matters justice may require.

Current Rule 535.191 provides three schedules:

Range per violation per day General use
$100 to $1,500 Provisions listed in Rule 535.191(c)
$500 to $3,000 Provisions listed in Rule 535.191(d)
$1,000 to $5,000 Provisions listed in Rule 535.191(e)

TREC may suspend, revoke, or take other authorized disciplinary action in addition to or instead of the listed penalty.

Do not assume the maximum applies automatically. The statute sets a ceiling, while the rule and facts determine the authorized range and outcome.

Unlicensed Activity

Unlicensed activity means someone performs an act requiring a broker or sales agent license without the required authority.

It can include:

  • A person who never held a license.
  • A person whose license is expired, inactive, suspended, or revoked.
  • A sales agent acting when not authorized through the required sponsoring broker.
  • An unlicensed assistant crossing from clerical work into negotiation or other brokerage.

The correct analysis is:

  1. Does the act fall within the brokerage definition?
  2. Is a statutory exemption available?
  3. Did the actor hold the required license and active authority?
  4. Did the actor receive or expect compensation?

Read the Texas activities and exemptions guide for the full licensing analysis.

Agency enforcement

Rule 535.181 requires TREC to investigate information indicating unlicensed activity. If the evidence supports a probable violation, TREC may:

  • Impose an administrative penalty.
  • Issue a cease-and-desist order.
  • Refer the matter to an appropriate law-enforcement official.
  • Take another necessary and proper action.

Section 1101.759 also authorizes a cease-and-desist order after notice and an opportunity for hearing. Violation of that order supports an administrative penalty.

Injunction

Sections 1101.751 and 1101.752 authorize court actions to stop or prevent violations. This is an injunction path, not the same as TREC privately ordering a person into jail.

Civil liability tied to compensation

Sections 1101.753 and 1101.754 address a person who receives a commission or other consideration while acting as a broker or sales agent without the required license.

The possible civil penalty is not less than the money received and not more than three times that amount. Section 1101.753 is an action for the state. Section 1101.754 gives an aggrieved person a private cause of action.

Criminal consequence

Section 1101.758 makes acting as a broker or sales agent without the required license a Class A misdemeanor.

TREC does not impose criminal imprisonment. A criminal case belongs to the criminal justice system.

Collection of compensation

Section 1101.806 generally prevents a person from maintaining an action to collect compensation for a broker or sales-agent act performed in Texas unless the person proves the required license status when the act began. The section has an exception for an attorney licensed in any state and separate rules for written commission agreements.

The exam shorthand "no license, no commission suit" is useful, but the statute is more precise.

Consumer Refund Is Not the Recovery Account

Section 1101.659 lets TREC order a regulated person to pay a refund through an informal-settlement agreement or enforcement order, instead of or in addition to other sanctions.

The refund:

  • Cannot exceed what the consumer paid the regulated person for the service or accommodation.
  • Cannot include other damages.
  • Cannot be based on TREC estimating harm.

That is different from a Recovery Trust Account claim. A refund is part of regulatory resolution. A recovery-account claim follows a judgment and court application.

Real Estate Recovery Trust Account

Sections 1101.601 through 1101.615 govern the Real Estate Recovery Trust Account.

Its purpose is to reimburse aggrieved persons who suffer actual damages caused by specified licensed conduct. It is not:

  • A broker's escrow or trust account.
  • Earnest money.
  • A general buyer refund program.
  • Payment for every TREC complaint.
  • Insurance for every bad transaction.

What the claimant generally needs

The full requirements are technical. At exam level, remember:

  1. The conduct must fit Section 1101.602.
  2. The responsible license or certificate holder must have held the credential when the act occurred.
  3. The claimant needs a final court judgment.
  4. The claimant must complete specified collection efforts and court-claim steps.
  5. A court determines whether payment is proper.
  6. Payment remains subject to statutory caps.

Section 1101.605 also sets a two-year limit for bringing an action that may result in recovery-account payment. This is separate from the four-year TREC complaint-investigation rule.

Final judgment and collection steps

Under Section 1101.606, a claimant generally files the verified recovery claim after:

  • Final judgment.
  • Execution returned nulla bona, meaning no property was found to satisfy the judgment.
  • Perfection of a judgment lien.

Bankruptcy and multiple-defendant provisions can change those steps. Those details belong to legal practice, not improvised exam shortcuts.

Who cannot use it for a commission

Section 1101.607 excludes a license or certificate holder seeking compensation, including a commission, in the underlying real estate transaction. The fund protects qualifying aggrieved persons. It is not a collection tool for an unpaid agent.

Current payment limits

Section 1101.610 sets:

  • $125,000 total for claims arising out of one transaction, regardless of the number of claimants.
  • $250,000 total for judgments against one license or certificate holder until the account is repaid.

If claims exceed a limit, the court proportionately reduces them.

These amounts became effective January 1, 2024. Cite the codified section, not the bill number, as the current authority.

What Happens After Payment

Payment does not erase the underlying conduct.

Section 1101.612 subrogates TREC to the judgment creditor's rights up to the amount paid. TREC has priority for repayment from later recovery on the judgment.

Section 1101.655 creates the license consequence:

  1. TREC makes a payment on behalf of a license or registration holder.
  2. The holder does not repay the full amount before the 31st day after TREC provides notice.
  3. TREC must revoke the license, approval, or registration.

TREC may probate the revocation. The person cannot become eligible again until the account payment plus legal interest is repaid in full.

This is stronger and more precise than saying the license is "usually suspended."

Complaint Versus Recovery Claim

TREC's current recovery-fund page makes the distinction direct:

Question Complaint Recovery claim
Is a prior TREC complaint required? Not applicable No
Main purpose Regulatory investigation and possible discipline Payment on a qualifying civil judgment
Does the filer automatically receive the administrative penalty? No No
Is a civil judgment needed? No Generally yes
Who orders payment? Complaint alone does not Court under the statutory process

An administrative penalty is paid to TREC and deposited to the Recovery Trust Account. It is not paid to the complainant.

Six Exam Traps

Trap Correct distinction
Every violation means revocation Consequence depends on authority, facts, and process
$5,000 is the penalty in every case It is the statutory ceiling per violation
TREC can jail an unlicensed person Criminal punishment belongs to a court
Broker permission cures unlicensed activity A broker cannot override the licensing statute
A complaint triggers recovery payment Recovery follows a separate judgment-based process
Recovery payment causes ordinary suspension Failure to repay after notice requires revocation, which may be probated

Quick Scenarios

Unlicensed negotiator

An unlicensed assistant negotiates price for a buyer.

Answer: The conduct may support unlicensed-activity enforcement. Broker permission does not legalize it.

Consumer who filed a complaint

A buyer files a valid TREC complaint and expects the administrative penalty.

Answer: The penalty is paid to TREC, not the complainant. Consumer recovery follows separate legal routes.

License holder does not repay

The account pays a qualifying claim on behalf of a license holder. More than 30 days pass after TREC gives repayment notice, and the amount remains unpaid.

Answer: Section 1101.655 requires revocation. TREC may probate the order.

Frequently Asked Questions

What is the maximum TREC administrative penalty?

Section 1101.702 sets a maximum of $5,000 for each violation. Each day a violation continues or occurs may be treated as a separate violation.

Is unlicensed brokerage a criminal offense?

Yes. Section 1101.758 classifies acting as a broker or sales agent without the required license as a Class A misdemeanor. TREC may also pursue administrative and civil enforcement.

Does filing a TREC complaint qualify someone for Recovery Trust Account payment?

No. The complaint and recovery processes are separate. Recovery generally requires a qualifying civil judgment and compliance with the statutory court process.

What are the current Recovery Trust Account limits?

Section 1101.610 limits payment to $125,000 for claims from one transaction and $250,000 for judgments against one license or certificate holder until repayment.

Can a license holder use the Recovery Trust Account to collect an unpaid commission?

No. Section 1101.607 excludes a license or certificate holder seeking transaction compensation, including a commission.

What happens to the license after TREC pays a recovery claim?

If the holder does not repay the full amount before the 31st day after TREC provides notice, Section 1101.655 requires revocation. The Commission may probate the revocation.

Primary-source verification (2026-07-29): This article was checked against Pearson VUE outline #094401; Texas Occupations Code Sections 1101.601 through 1101.615, 1101.655 through 1101.659, 1101.701 through 1101.710, 1101.751 through 1101.759, and 1101.806; current TREC Rules 535.181 and 535.191; and TREC's current recovery-fund page.

Official Sources

MASTER THE CONSEQUENCES

Separate penalties, discipline, refund, and recovery

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