Rules & Regulations of the State of Tennessee Title 1260 - Real Estate Commission
I. Statutory Authority and Purpose (Title 1260 – Generally)
Title 1260 implements and enforces Tennessee Code Annotated (T.C.A.) § 62-13-101 et seq., which governs real estate brokers, affiliate brokers, firms, timeshare agents, and related licensees.
Core Purposes
Protection of the public
Regulation of professional competence
Prevention of fraud, misrepresentation, and unethical conduct
Standardization of brokerage practices
Judicial Recognition
Tennessee courts consistently hold that real estate licensing laws are remedial, not punitive, and must be interpreted to protect the public rather than licensees.
Illustrative Principle:
In Lambdin v. Garland, 291 S.W.2d 610 (Tenn. 1956), the Tennessee Supreme Court emphasized that real estate regulation exists to protect consumers and that brokers must strictly comply with licensing statutes to recover commissions.
II. Licensing Requirements and Qualifications
A. Broker and Affiliate Broker Licensing
Title 1260 establishes:
Education prerequisites
Examination requirements
Experience thresholds (for brokers)
Moral character and trustworthiness standards
The Commission has discretion to deny licensure for:
Prior criminal conduct
Dishonesty or fraud
Acts demonstrating unfitness
Case Law Application
Tennessee courts defer to the Commission’s fact-based determination of fitness, so long as it is supported by substantial and material evidence.
Courts apply the Uniform Administrative Procedures Act (UAPA) standard:
No reweighing of evidence
No substitution of judicial judgment for agency expertise
Key Doctrine:
Administrative licensing decisions are upheld unless they are arbitrary, capricious, or unsupported by substantial evidence.
III. Scope of Practice and Unauthorized Brokerage Activity
Regulated Activities Include:
Listing property
Negotiating purchase or lease terms
Advertising real estate for others
Collecting commissions or referral fees
Prohibited Conduct:
Acting without a license
Paying commissions to unlicensed persons
Using misleading titles or advertisements
Case Law Principle
Tennessee courts strictly prohibit recovery of commissions by unlicensed individuals.
Established Rule:
A person acting as a broker without a license cannot enforce a commission agreement, even if services were fully performed (Lambdin v. Garland).
IV. Duties Owed to Clients and Customers
Title 1260 reinforces statutory duties imposed on licensees, including:
A. Fiduciary Duties (When Representing a Client)
Loyalty
Obedience to lawful instructions
Disclosure of material facts
Confidentiality
Accounting
Reasonable care and diligence
B. Duties to Customers (Non-Clients)
Honest dealing
Disclosure of known material defects
No misrepresentation or concealment
Case Law Guidance
Tennessee courts hold that material facts include any information that would affect a reasonable buyer’s decision, including latent defects and adverse property conditions.
Failure to disclose can result in:
License discipline
Civil liability
Commission forfeiture
V. Agency Relationships and Disclosure
Required Disclosures:
Agency confirmation
Dual agency consent
Designated agency notice
Failure to properly disclose agency status is a serious regulatory violation.
Judicial Interpretation
Courts treat agency disclosure failures as consumer protection violations, even absent actual fraud.
Key Principle:
Informed consent is essential; silence or technical compliance is insufficient if the consumer is misled.
VI. Advertising and Marketing Regulations
Title 1260 strictly regulates advertising to prevent consumer deception.
Requirements:
Broker name prominence
Accurate license status
No false or misleading claims
Firm responsibility for affiliate broker advertising
Violations Include:
“Coming soon” misuse
Unlicensed team branding
Misrepresentation of experience or listings
Case Law Standard
Tennessee courts defer to the Commission’s interpretation of advertising rules where consumer confusion is likely.
VII. Handling of Trust Funds and Escrow Accounts
Core Requirements:
Prompt deposit of earnest money
Proper escrow accounting
No commingling of funds
Accurate records
Seriousness of Violations
Misuse of trust funds is considered one of the most severe violations, often justifying license revocation.
Judicial View
Courts consistently uphold harsh discipline for escrow violations, even where:
No client suffered financial loss
Funds were eventually returned
Legal Rationale:
Public trust in the profession is paramount.
VIII. Disciplinary Authority and Sanctions
The Commission may impose:
License denial
Suspension
Revocation
Civil penalties
Mandatory education
Censure
Due Process Protections:
Notice of charges
Opportunity for hearing
Right to present evidence
Judicial review under UAPA
Case Law on Discipline
Tennessee courts recognize the Commission’s broad discretion in selecting sanctions, intervening only when punishment is grossly disproportionate or unlawful.
IX. Administrative Hearings and Judicial Review
Governing Law:
Tennessee Uniform Administrative Procedures Act
Standard of Review:
Courts may reverse agency decisions only if:
Constitutional rights were violated
Decision exceeded statutory authority
Procedure was unlawful
Decision lacked substantial evidence
Action was arbitrary or capricious
Key Holding:
Courts do not substitute their judgment for the Commission’s expertise in real estate regulation.
X. Recovery Fund (Real Estate Recovery Account)
Title 1260 governs claims against the Recovery Fund when consumers suffer losses due to a licensee’s misconduct.
Conditions:
Final civil judgment
Exhaustion of other remedies
Conduct occurred while properly licensed
Judicial Interpretation
Courts construe Recovery Fund eligibility strictly, as it involves public money.
XI. Overall Judicial Philosophy Toward Title 1260
Tennessee courts consistently apply the following principles:
Consumer protection overrides licensee convenience
Strict compliance with licensing laws is required
Administrative expertise is respected
Professional misconduct need not rise to criminal fraud to justify discipline
Conclusion
Title 1260 operates as a comprehensive regulatory framework designed to:
Maintain ethical real estate practices
Ensure transparency in transactions
Protect consumers from financial and informational harm
Tennessee case law reinforces the Commission’s authority and emphasizes that real estate licensure is a privilege, not a right, conditioned upon ongoing compliance with both the letter and spirit of the law.
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