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Commission Can Use Injunctions to Stop Unlicensed Brokerage

By: Blackwell M. Brogden, Jr., Chief Deputy Legal Counsel

Did you know that the Real Estate License Law allows the Commission to apply to the Superior Court for an injunction to prevent unlicensed people and firms from engaging in real estate brokerage?  Unfortunately, the Commission has had to turn to this remedy more often recently than at any time in its history in order to protect the public.

An injunction is an order issued by a judge directing a person or firm to refrain from specified acts or conduct.  This form of judicial action is used when a simple judgment for money will not protect the rights of a party in a civil action. Injunctions are used in real property cases to enforce restrictive covenants, stop trespassers, or prevent other interference with an owner’s rights in a property; in commercial cases to prevent misuse of trademarks, copyrighted or patented material or breach of an agreement not to compete; and, in cases brought by a government agency, such as the Commission, to end continuing violations of law or prevent further violations of law.

In order to obtain an injunction, the Commission first files a complaint in civil court and serves the unlicensed person or firm.  The defendants can answer the complaint and raise any defenses they may have, e.g. that they are properly licensed or that they are not engaged in unlicensed activity.  Ultimately, the question of whether unlicensed conduct has occurred is decided by the court.  If the Commission proves the unlicensed activity, the court can issue an injunction requiring the unlicensed person or firm to stop.  Failure to comply can result in punishment for contempt of court, including fines and imprisonment.

Of course, not all unlicensed activity is prohibited by law.  For example, buying, selling or leasing one’s own property has always been exempt from the License Law.   However, occasionally someone without a license will attempt to broker real estate transactions, including leases or sales, without a license.  Although such persons may call themselves “consultants” or “advisors,” if they are assisting others in buying, selling, or leasing, for a fee, their conduct is unlawful.

On the other hand, in some cases, unscrupulous persons and firms, while claiming to be dealing on their own account, are actually acting as unlicensed brokers by unlawfully “flipping” property or renting real estate of others through the use of unrecorded sham transactions or using recorded documents that misrepresent the true nature of the transaction.

The Commission’s Legal Division has pursued the civil remedy of injunctive relief against persons and firms who, while claiming to be dealing on their own account, are actually engaged in the unlicensed practice of real estate brokerage.  In other cases, the Commission, together with the Consumer Protection Section of the Attorney General’s office, have jointly filed civil suits to halt unlicensed brokerage and to end unfair and deceptive trade practices being used against consumers.  In these cases, the Commission and Attorney General’s office may pursue violations of additional statutes, such as the laws governing credit repair services, discount buying clubs, the sale of products regulated as insurance or security interests, and loan fraud.

There are several important actions a licensee can take when confronted with a transaction that may involve unlicensed brokerage activity masquerading as something else:

(1) Advise your client to consult with their own attorney before entering into a transaction with unusual documents or a “creative” approach;

(2)  Consult the Consumer Protection Section of the Attorney General’s Office, (919) 716-6000 or;

(3) Contact the Commission’s Legal Services Division, (919) 875-3700, Ext. 131 for additional information.

This article came from the November 2004-Vol35-2 edition of the bulletin.