Prosecutions: What do they really mean?

Prosecutions brought before the State Real Estate Commission (SREC) can be unnerving, even for the most seasoned licensee. The conduct that sparks a prosecution by the Bureau is as varied as the people who practice real estate, and the penalties and sanctions issued by the SREC can range from a reprimand to a permanent revocation of your license.

While we do represent brokers and agents who may have committed serious transgressions of the licensing laws and regulations, most of our clients are hardworking people who may be wrongfully accused or who, through misunderstanding, miscommunication or inexperience, have unknowingly “stepped in it.”

Along with that sudden rush of adrenaline that hits one’s system when first learning of being prosecuted, you may experience feelings of outrage, denial and panic. Too often, the licensee wants to “explain what happened” to the investigator. Sometimes, she wants to call the prosecuting attorney to “work something out.” As a rule, Pennsylvania licensees are a good, hardworking, diligent people; they just can’t believe that they are being prosecuted for a licensing violation.

Sometimes licensees hire us early in the process, before the investigator comes to the office to examine their files. Other times, our services are requested the day before the scheduled hearing. While some of our clients are willing to fight to the bitter end, most just want us to “make it go away.” Whether we are negotiating a compromised settlement, going forward with a hearing before the SREC or a hearing examiner, or taking an appeal to the Commonwealth Court, real estate licensees need to be aware of and consider the consequences of the decisions they make in helping us decide how to proceed.

When we negotiate consent agreements with the SREC, the licensees’ record still shows disciplinary history. When a hearing is taken before the hearing examiner and a decision is rendered, unless all counts are dismissed, licensees will have disciplinary history. Furthermore, if a civil lawsuit is brought against licensees that is borne out of the same facts and circumstances that served as the basis for the prosecution, the hearing examiner’s decision may be admitted by the judge as evidence against the licensees. If a final decision of the SREC is appealed to the Commonwealth Court, but the appeal is settled before the court issues its decision, the final decision of the SREC will remain on the record and still may be admitted in a court of law as evidence against the licensees for the conduct alleged.

What lesson can be learned from this article? Take all the investigations and notices of prosecution seriously. Even if the claims seem meritless, licensees are still required to respond to the allegations, and will be in the best position to affect the outcome by addressing the claims as early in the process as possible. Licensees must evaluate what impact having a “disciplinary history” will have on their business and clientele. Does the licensee work for or have a relationship with a lending institution or governmental entity that might use a “disciplinary history” as a reason to renegotiate or terminate that relationship? Is the prosecution or resulting disposition something that will have to be reported for renewing any other professional licenses? Is this something that will affect malpractice insurance premiums at renewal time?

Before an appeal is taken to the Commonwealth Court, analyze and evaluate the financial costs of taking the appeal to its conclusion versus the impact the underlying decision might have on business and potential civil liability, if the case settles allowing the SREC decision to stand. Your real estate license is the key to being able to practice real estate; isn’t it important to know everything about what might affect it?

James L. Goldsmith and Brett M. Woodburn are attorneys with Caldwell & Kearns, P.C. and serve as General Counsel to the Pennsylvania Association of Realtors®. A substantial portion of their practices are dedicated to providing advice and counsel to various state and local associations on all matters including risk reduction, risk management, employee and employment matters and policy review and implementation. They also routinely counsel employers on employee relations issues. Mr. Goldsmith may be reached at [email protected] and Mr. Woodburn may be reached at [email protected].