Can the Texas Real Estate Commission secretly send auditors into continuing-education classes without breaking the ban on undercover investigations?

Texas AG Opinion JM-1236: Can the Real Estate Commission Run Surprise Audits of CE Classes?

Plain-English summary

The Administrator of the Texas Real Estate Commission asked whether the Commission could adopt a rule letting its employees drop in on mandatory continuing education (MCE) courses without warning. The proposed rule (22 T.A.C. section 535.73(c)) allowed commission employees to conduct on-site audits of any course offered by an approved MCE provider, without prior notice, and to enroll and attend a course without identifying themselves as commission staff. If an audit turned up noncompliance, the report would be treated as a written complaint against the provider or instructor and sent to the enforcement division.

The worry was section 15B(a) of the Real Estate License Act, which says there shall be no undercover or covert investigations under the Act unless the commission expressly authorizes them after finding they are necessary, and which bars investigations of licensees based on anonymous complaints. Did that provision forbid the sneak-in audits?

The Attorney General said no. The section 15B ban is aimed at investigations of licensees, real estate brokers and salespersons, not at reviews of course content, providers, or instructors in the continuing education program. Reading the statute's history, the opinion explained that the undercover-investigation limit was added alongside educational-licensing revisions and was tied to the commission's authority to investigate licensees under section 15(a). An MCE course audit is a different animal: it examines whether a course meets the section 7A education requirements, not whether a licensee broke the law. Given the detailed continuing-education duties section 7A placed on the commission, and the section 5(h) power to make rules to ensure compliance with the Act, the opinion concluded it was reasonable for the commission to let employees audit continuing education classes without notice.

Currency note

This opinion was issued in 1990 and interprets the Real Estate License Act (article 6573a, V.T.C.S.), which has since been recodified into the Occupations Code, and the Real Estate Commission's rules in the Texas Administrative Code have changed. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

The Texas Real Estate Commission: The opinion confirmed the commission could adopt and enforce a rule allowing unannounced audits of MCE courses, drawing on its section 5(h) rulemaking authority and the section 7A continuing-education framework.

Continuing education providers and instructors: They could expect commission staff to attend and audit their courses without notice and without announcing themselves, with a noncompliance finding treated as a written complaint routed to enforcement.

Real estate licensees: The opinion reaffirmed the flip side of the section 15B protection. Investigations of licensees, and other actions against them, could not be launched on anonymous complaints and could not be conducted through undercover methods unless the commission expressly authorized it after due consideration.

Common questions

Could the Commission send someone into a CE class without saying they worked for the agency?
Yes. The opinion concluded the rule allowing employees to enroll and attend a course without identifying themselves, and to audit it without prior notice, was within the commission's authority and did not violate the undercover-investigation ban.

Doesn't the law prohibit undercover investigations?
It prohibits undercover or covert investigations of licensees unless the commission expressly authorizes them. The opinion read that ban to protect licensees from covert investigation, not to shield continuing education courses from being audited for compliance.

Why does the difference between a licensee and a course matter?
Because section 15B and section 15(a) are both about investigating licensees on the commission's own motion or a verified written complaint. A course audit reviews course content and hours to check compliance with the section 7A education requirements. It is not an investigation of a licensee, so the section 15B restriction does not reach it.

Background and statutory framework

The 71st Legislature added section 7A to the Real Estate License Act, requiring certain applicants and licensees to show proof of meeting continuing education requirements in order to renew or apply for licenses. Section 7A took effect August 31, 1991, and applied to licenses issued or renewed on or after that date. It set course-content requirements (commission rules, fair housing laws, agency laws, antitrust laws, plus approved real estate topics), set minimum and maximum daily course hours, allowed substitution of approved correspondence courses, and granted the commission authority under section 7A(d) to adopt implementing rules. To make the program work, the commission had to approve courses and providers and police their quality.

The audit rule, 22 T.A.C. section 535.73(c), was proposed under section 5(h), which lets the commission make and enforce all rules necessary to ensure compliance with the Act. The question was whether section 15B(a) got in the way. Section 15B(a) opens with "Notwithstanding any other provision of this Act" and bars undercover or covert investigations unless expressly authorized, and bars investigations of licensees on anonymous complaints. The opinion traced section 15B to a 1981 enactment tied to educational-licensing revisions and to the Senate Bill 484 bill analysis, which described the provision as governing motions to investigate a licensed broker or salesperson. Since the state began regulating real estate dealers (renamed brokers by a 1955 amendment) and salespersons, the licensing authority has had express authority to investigate licensees. Reading section 15B alongside section 15(a), both of which address investigations of licensees on the commission's own motion or a verified written complaint, the opinion concluded that section 15B limits how licensees may be investigated and does not touch audits of continuing education courses.

Citations

Statutes:

• Tex. Rev. Civ. Stat. art. 6573a, § 5(h) (commission authority to make and enforce rules to ensure compliance with the Act)
• Tex. Rev. Civ. Stat. art. 6573a, § 7A (mandatory continuing education requirements; effective Aug. 31, 1991)
• Tex. Rev. Civ. Stat. art. 6573a, § 15(a) (authority to investigate licensees)
• Tex. Rev. Civ. Stat. art. 6573a, § 15B(a) (restriction on undercover or covert investigations of licensees; no action on anonymous complaints)
• 22 Tex. Admin. Code § 535.73(c) (rule permitting unannounced on-site audits of MCE courses)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1236
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1236.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

October 18, 1990

Mr. Wallace Collins
Administrator
Texas Real Estate Commission
P. O. Box 12188
Austin, Texas 78711-2188

Opinion No. JM-1236

Re: Authority of the Texas Real Estate Commission to adopt a rule permitting on-site audits of Mandatory Continuing Education (RQ-2057)

Dear Mr. Collins:

You ask about the validity of a rule promulgated by the Texas Real Estate Commission [hereinafter the commission] concerning continuing education courses. The 71st Legislature added section 7A to the Real Estate License Act [hereinafter the act] to require that, in order to renew or apply for licenses, certain applicants for real estate licenses and certain licensees provide the commission with proof of having met statutory continuing education requirements. Acts 1989, 71st Leg., ch. 169, § 6, at 561, 568. Section 7A becomes effective on August 31, 1991, and applies only to licenses issued or renewed on or after that date. Id. § 17(b). Given the extensive duties, outlined below, that have been conferred on the commission and the fact that persons renewing or applying for licenses on or after August 31, 1991, must provide proof of having met the statutory requirements, the commission must provide the means whereby those licensees and applicants may fulfill the requirements.

Section 7A implicitly requires the commission to approve continuing education courses and providers of those courses. It also grants the commission specific authority to adopt rules to implement the section's mandatory continuing education requirements. V.T.C.S. art. 6573a, § 7A(d). Subsection (a) details specific statutory requirements regarding the content of required continuing education courses (e.g., the rules of the commission, fair housing laws, agency laws, antitrust laws) and requires the commission to approve real estate related topics for the remainder of the course work. Id. § 7A(a). Subsection (a) also establishes the minimum and maximum hours for daily course work. The section also allows the commission to provide for the substitution of commission approved correspondence courses for classroom work and prohibits it from requiring examinations, except for correspondence courses.

You ask whether the act permits the commission to adopt the following rule concerning continuing education courses offered pursuant to the act:

Commission employees may conduct on-site audits of any course offered by an approved MCE [mandatory continuing education] provider. Audits shall be conducted without prior notice to the MCE provider, and commission employees may enroll and attend an MCE course without identifying themselves as employees of the commission. An audit report indicating noncompliance with these sections shall be treated as a written complaint against the provider or instructor concerned and shall be referred to the enforcement division for appropriate resolution.

22 T.A.C. § 535.73(c).

When the rule was proposed, section 5(h) of the act was cited as the authority for its adoption. 14 Tex. Reg. 5716 (Oct. 27, 1989). Section 5(h) gives the commission the authority to make and enforce all rules necessary "to insure compliance with the provisions of this Act." V.T.C.S. art. 6573a, § 5(h).

The rule, which is only one of several, is aimed at ensuring compliance with section 7A of the act. Specifically, you ask whether section 15B(a) of the act, which restricts undercover investigations, precludes the adoption of the rule. Section 15B(a) reads as follows:

Notwithstanding any other provision of the Act, there shall be no undercover or covert investigations conducted by authority of this Act unless expressly authorized by the commission after due consideration of the circumstances and determination by the commission that such measures are necessary to carry out the purposes of this Act. No investigations of licensees or any other actions against licensees shall be initiated on the basis of anonymous complaints whether in writing or otherwise but shall be initiated only upon the commission's own motion or a verified written complaint. Upon the adoption of such motion by the commission or upon receipt of such complaint, the licensee shall be notified promptly and in writing unless the commission itself, after due consideration, determines otherwise.

V.T.C.S. art. 6573a, § 15B(a).

It has been suggested that the proposed unannounced audits violate the restriction on undercover investigations. We read the prohibition found in section 15B to apply only to investigations of licensees and not to assessments of the course content of mandatory continuing education courses, providers, or instructors. The prohibition found in section 15B was originally adopted along with revisions to educational licensing requirements. Acts 1981, 67th Leg., ch. 71, § 5, at 158, 161. The bill analysis for Senate Bill 484 describes the then new section 15B as:

Allow[ing] the Texas Real Estate Commission to make a motion in a public meeting to investigate a licensed real estate broker or licensed real estate salesman. Also provides the Commission the right to probate a license.

Bill Analysis, S.B. 484, 67th Leg. (1981).

There is no indication that the prohibition on undercover investigations applies to anyone other than licensees. In fact, we believe that the proviso found in section 15B, "Notwithstanding any other provision of this act," was inserted in recognition of the commission's express authority to investigate licensees, found in section 15(a). Section 15B makes it clear that the section 15(a) investigatory authority does not include authority to conduct undercover investigations without "due consideration of the circumstances and determination by the commission that such measures are necessary to carry out the purposes of this Act." V.T.C.S. art. 6573a, § 15B(a). Since the state began regulating real estate dealers[1] and salesmen, the licensing authority has had express authority to investigate the actions of licensed dealers and salesmen. See Acts 1939, 46th Leg., §§ 5(c), 11, at 560, 563, 569.

A comparison of sections 15(a) and 15B reinforces our conclusion, inasmuch as both allow investigations of licensees upon the commission's own motion or a verified, written complaint. By contrast, the audit permitted under the commission rule is an examination or review of the course content or, possibly, the hours of courses offered to satisfy statutory continuing education requirements.

We think, given the detailed requirements of section 7A and the section 5(h) authority to ensure compliance with the act, that it is reasonable for the commission to allow its employees to audit, without notice, continuing education classes to ensure that the requirements of section 7A of the act are being met.

SUMMARY

Article 6573a, section 15B, V.T.C.S., prohibits undercover and covert investigations of licensees under the Real Estate License Act. That section does not prohibit unannounced audits of courses offered to satisfy the continuing education requirements of the act.

Very truly yours,

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by Karen C. Gladney
Assistant Attorney General

[1] We use the generic term "dealers" because that was the term used in the 1939 act. The statutory designation was changed to "real estate brokers" by a 1955 amendment. Acts 1955, 54th Leg., ch. 383, at 986.