When a payment is made from the Real Estate Recovery Fund to satisfy a judgment against a licensee, the license is automatically suspended by law. This is a mandatory disciplinary action, not a voluntary status change. The purpose of the suspension is to protect the public from a licensee who has been found liable for fraudulent or dishonest dealings. The license remains suspended until the licensee has repaid the fund in full, including interest, and has met any other requirements for reinstatement imposed by the state's real estate commission.

A. Active: The license is not active. A payment from the Recovery Fund signifies a serious offense, triggering immediate and automatic disciplinary action.

B. Inactive: An inactive status is generally a voluntary choice by a licensee who is not currently practicing but wishes to maintain their license, not a disciplinary penalty.

C. Reinstated: Reinstatement is the process of restoring a license after a period of suspension, once all conditions, such as repayment to the fund, have been met.

1. Texas A&M University, Real Estate Center. (2023). TRELA Update: Changes to the Real Estate License Act. In the discussion of the Real Estate Recovery Trust Account, it is clarified that under §1101.613 of the Texas Real Estate License Act, a license is automatically suspended upon payment from the account on behalf of a license holder. (See Texas Occupations Code, Chapter 1101, Subchapter M, Sec. 1101.613).

2. California Department of Real Estate. (2023). Real Estate Law. Sacramento, CA. California Business and Professions Code §10475(a) explicitly states: "If the commissioner pays from the Recovery Account any amount in settlement of a claim or toward satisfaction of a judgment against a licensee, the license of the licensee shall be automatically suspended upon the date of payment from the Recovery Account."

3. Florida Statutes, Title XXXII, Chapter 475. (2023). Real Estate Brokers, Sales Associates, Schools, and Appraisers. Section 475.484(3) mandates: "Upon the payment of any amount from the Real Estate Recovery Fund in settlement of a claim or toward satisfaction of a judgment against a licensee, the license of the licensee shall be automatically suspended upon the date of payment from the fund." This is a primary legal source often referenced in university real estate law courses.