Senate Engrossed

 

exclusive agreements; residential property sales

 

 

 

 

State of Arizona

Senate

Fifty-sixth Legislature

Second Regular Session

2024

 

 

 

SENATE BILL 1218

 

 

 

 

An Act

 

amending title 44, Arizona Revised Statutes, by adding chapter 5; relating to property contracts.

 

 

(TEXT OF BILL BEGINS ON NEXT PAGE)

 


Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 44, Arizona Revised Statutes, is amended by adding chapter 5, to read:

CHAPTER 5

EXCLUSIVE PROPERTY ENGAGEMENT AGREEMENTS

ARTICLE 1. GENERAL PROVISIONS

START_STATUTE44-501. Definitions

In this chapter, unless the context otherwise requires:

1. "Exclusive property engagement agreement" means a contract or agreement that provides an exclusive right to a person to list or sell residential real estate, including a contract or agreement to enter into any listing agreement or arrangement in the future or any memorandum recognizing the existence of an exclusive property engagement agreement.

2. "Residential real estate" means real property located in this state that is used or will be used primarily for a personal, family or household purpose and that contains fewer than five dwelling units.END_STATUTE

START_STATUTE44-502. Unlawful practices; listing services timeline; void agreement

A. It is unlawful for an exclusive property engagement agreement to:

1. Last longer than twelve months after the date that the agreement is executed by the parties.

2. Be a covenant that runs with the land.

3. Bind a future owner of an interest in the residential real estate that is the subject of the exclusive property engagement agreement unless the future owner acquires an interest in the residential real estate after listing services have begun and a broker as defined in section 32-2101 has a ready, willing and able purchaser for the residential real estate.

4. Be recorded in the office of a county recorder. 

5. Authorize a person to place a security interest or lien against or otherwise encumber any residential real estate or to constitute a lien, an encumbrance or a security interest in the residential real estate.

6. Allow 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 exclusive property engagement agreement.

7. Fail to meet the requirements prescribed in section 32-2151.02.

B. An exclusive property engagement agreement is void if the listing services do not begin within one year after the execution of the exclusive property engagement agreement by the parties.  END_STATUTE

START_STATUTE44-503. Enforcement; recording prohibited; liability

A. A court may not enforce an exclusive property engagement agreement made or recorded in violation of this chapter and may not impose a constructive trust in the residential real estate that is the subject of the exclusive property engagement agreement or on the proceeds of the disposition of a related residential real estate transaction.

B. A contract or agreement made or recorded with a county recorder's office in violation of this chapter is void and unenforceable. 

C. Any consideration that was paid to a homeowner relating to a contract or agreement that violates this chapter must be forfeited.

D. A contract or agreement that violates this chapter and that is recorded before the effective date of this section is void.  The state real estate commissioner shall execute and record in the office of the county recorder in each county in this state a document that disclaims the validity and enforceability of the contract or agreement or any related liens or assignments that violate this chapter. The state real estate department shall display on its website the documents that the state real estate commissioner has executed and recorded pursuant to this subsection.

E. An act or practice in violation of this chapter is an unlawful practice under section 44-1522 and is subject to enforcement through private action and by the attorney general.  Any person who violates this chapter is also subject to liability and penalties under section 33-420.  The remedies provided in this section are not the exclusive remedies for a violation of this chapter.END_STATUTE

Sec. 2. Legislative findings; intent

The legislature finds that:

1. An exclusive property engagement agreement that does not comply with section 44-502, Arizona Revised Statutes, as added by this act, is unfair and deceptive to an owner of residential real estate who enters into the agreement and to a person who may become an owner of the real estate in the future.  The legislature intends to prohibit the use of an exclusive property engagement agreement that does not comply with section 44-502, Arizona Revised Statutes, as added by this act.

2. The recording of an exclusive property engagement agreement that does not comply with section 44-502, Arizona Revised Statutes, as added by this act, can cloud the title to real property and public records.  The legislature intends to prohibit the recording of an exclusive property engagement agreement that does not comply with section 44-502, Arizona Revised Statutes, as added by this act.

Sec. 3. Severability

If a provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of the act that can be given effect without the invalid provision or application, and to this end the provisions of this act are severable.