State Investigates Licensees Alleged to Have Violated Governor’s Closure Orders

The process of reopening business in Pennsylvania has been a bumpy road and the twists and turns ahead make predictions difficult. Not so in the past: we know what was allowed and what was not at any particular time. On March 19, 2020, Gov. Tom Wolf ordered all non-life-sustaining businesses in Pennsylvania to close their physical locations and cease in-person operations to slow the spread of the coronavirus. Real estate licensees were not included in the list of life-sustaining businesses and thus ordered to close their doors.

Opinions and reactions varied from the start and with the passage of time many have modified their views. Some licensees even modified their practices to include in-person operations in violation of the applicable order. Rationalization varies from appreciating the necessity of shelter to the belief that enforcement is impossible and no one will really be busted for violations. This article does not weigh competing views or advance a position; rather, it offers insight into enforcement.

The Commonwealth of Pennsylvania has begun investigating licensees perceived to have violated the governor’s orders. Investigations are being conducted by the Bureau of Enforcement and Investigations, which falls under the commonwealth’s Department of State. My knowledge is firsthand, having participated in investigations on behalf of licensees.

The investigation for violating the orders prohibiting in-person operations has been given a high priority. Investigations previously initiated that do not involve coronavirus-related issues have been set aside so that all priority is devoted to the investigation of those alleged to have violated the governor’s original order, as well as the subsequent applicable orders and amendments.

Who is filing the complaints? I know that in several cases in which I am involved, the complaints have mostly come from competitor licensees. BEI investigators do not reveal the names of the complainants, but generally, the factual basis they provide at the start of an investigation may be sufficient to reveal who the complainant is. One of my clients named the complainant to the BEI investigator, who did not dispel my client’s belief.

Supporting the notion that licensees are reporting others is what I’ve heard from many licensees over the course of the past several months. A significant number have told me how angry they are at licensees who have refused to abide by the governor’s orders and who are “known” to be engaging in sales and other activities on an in-person basis. I’ve also had licensees telling me, regardless of my advice about what restrictions apply, that they are fearless of prosecution and going to do things they think are essential regardless of how the orders may be interpreted.

What will happen to a licensee under investigation? Whatever the outcome, it will arrive soon. As I mentioned, these investigations have been given priority. Following a traditional investigative interview, a client would have a week or 10 days to submit a written account of exculpatory factors or that may mitigate against the claims made. In cases averring coronavirus order violations, any responsive materials are required to be submitted by the next business day! As for the time between the BEI investigation and the issuance of an order to show cause (complaint) or a letter exonerating the licensee, it can take from three months to a year! I am anticipating that this span will be markedly shortened for alleged violations of the governor’s orders.

As for punishment, I have no idea. Every act found to be a violation of the Real Estate Licensing and Registration Act and/or Rules and Regulations of the State Real Estate Commission may be punished by a fine of $10,000, as well as suspension or revocation of a license. Depending on the number of perceived violations, the potential fines can be in the thousands of dollars. With no known case having reached the penalty phase, I cannot predict with any degree of accuracy as to what penalties or fines will be issued. Keep in mind that every case involves different facts and that mitigating and aggravating facts are taken into consideration for penalty purposes.

What we do know is that investigations for alleged violations of the governor’s orders are marching forward and that is something we did not know days or weeks ago.

James Goldsmith is an attorney with Mette, Evans & Woodside and serves as general counsel to PAR.