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ARIZONA STATE SENATE
Fifty-Sixth Legislature, Second Regular Session
exclusive agreements; residential property sales
Purpose
Outlines unlawful practices for exclusive property engagement agreements.
Background
The Arizona Department of Real Estate (ADRE) regulates the real estate profession in Arizona. A real estate employment agreement is a written agreement by which a real estate broker is authorized to purchase or sell real property for compensation or commission. All real estate employment agreements must: 1) be written in clear and unambiguous language; 2) fully set forth all material terms, including the terms of broker compensation; 3) have a definite duration or expiration date, showing dates of inception and expiration; and 4) be signed by all parties to the agreement. An employing broker may only assign a real estate employment agreement to another broker with the express written consent of all parties to the agreement at the time of the assignment.
A licensee may not procure, or attempt to procure, a real estate employment agreement from a party who is already subject to an existing exclusive real estate employment agreement unless the licensee has received written acknowledgment from the party that the execution of additional real estate employment agreements could expose the party to liability for substantial additional commissions (A.R.S. §§ 32-2151.02 and 44-101).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Defines exclusive property engagement agreement as a contract or agreement that provides an exclusive right to a person to list or sell residential real estate.
2. Prohibits an exclusive property engagement agreement from:
a) lasting longer than 12 months after the execution date of the agreement;
b) being a covenant that runs with the land;
c) binding a future owner of an interest in residential real estate that is the subject of the agreement, unless the future owner acquires an interest in the residential real estate after listing services have begun and a broker has a ready, willing and able purchaser;
d) being recorded in the county recorder's office;
e) authorizing a person to place a security interest or lien against, or otherwise encumber any residential real estate, or to constitute a lien, encumbrance or security interest in the residential real estate;
f) allowing for the assignment of the exclusive property engagement agreement or the obligation to provide the underlying services without notice to, and agreement by, the owner of the residential real estate that is the subject of the agreement; and
g) failing to meet statutory real estate employment agreement requirements.
3. Voids an exclusive property engagement agreement if the listing services do not begin within 180 days after execution of the agreement.
4. Prohibits a court from:
a) enforcing an exclusive property engagement agreement made in violation of the prescribed requirements; and
b) imposing a constructive trust in the residential real estate that is the subject of the agreement or on the disposition proceeds of a related residential real estate transaction.
5. Deems a contract or agreement made or recorded in violation of the prescribed requirements as void and unenforceable.
6. Forfeits any consideration paid to a homeowner relating to a contract or agreement in violation of the prescribed requirements.
7. Voids a contract or agreement recorded before the general effective date if the contract or agreement is in violation of the prescribed requirements.
8. Requires the ADRE Commissioner to execute and record in each county recorder's office a document that disclaims the validity and enforceability of any contract or agreement or any related liens or assignments that violate prescribed requirements and directs ADRE to display the documents on its website.
9. Deems, as an unlawful practice under the Arizona Consumer Fraud Act, an act or practice in violation of the prescribed requirements and subjects an unlawful act or practice to enforcement through private action and by the Attorney General.
10. Subjects any person who violates the prescribed requirements to statutorily outlined liability and penalties.
11. Specifies that the prescribed remedies are not the exclusive remedies for a violation.
12. Defines residential real estate.
13. Contains a statement of legislative intent and a severability clause.
14. Becomes effective on the general effective date.
Prepared by Senate Research
February 1, 2024
MG/AB/cs