Title 44, Chapter 5 - Exclusive Property Engagement (44-501 to 44-503) +14Arizona · Real Estate · English

It is unlawful for such agreements to last longer than 12 months after execution, be a covenant running with the land, bind future owners (with a narrow exception), be recorded with a county recorder, authorize liens/security interests/encumbrances on the property, allow assignment without owner notice and agreement, or fail to meet section 32-2151.02 requirements. The agreement is void if listing services do not begin within one year of execution.

• ✓An exclusive property engagement agreement may not last longer than 12 months after execution
• ✓Such agreements may not be recorded with a county recorder or create liens/encumbrances on the property
• ✓The agreement is void if listing services do not begin within one year of execution

Courts may not enforce an exclusive property engagement agreement made or recorded in violation of the chapter, nor impose a constructive trust on the property or proceeds. Agreements recorded in violation are void and unenforceable, and consideration paid to a homeowner must be forfeited. Agreements recorded before September 14, 2024 in violation are void, and the state real estate commissioner must record disclaimers. Violations are unlawful practices under 44-1522, enforceable by private action and the attorney general, with additional liability under 33-420.

• ✓Courts may not enforce violating agreements or impose a constructive trust on the property or proceeds
• ✓Consideration paid to a homeowner under a violating agreement must be forfeited
• ✓Violations are unlawful practices under 44-1522 and subject to 33-420 liability and penalties

An exclusive property engagement agreement is a contract giving a person an exclusive right to list or sell residential real estate, including agreements to enter future listing arrangements or memoranda recognizing such an agreement. Residential real estate is property used primarily for personal/family/household purposes with fewer than five dwelling units.

• ✓Exclusive property engagement agreement grants an exclusive right to list or sell residential real estate
• ✓Residential real estate has fewer than five dwelling units and is used for personal/family/household purposes

Sections 32-2171 and 32-2172 define property management terms and set out the scope of the property management article, establishing that managing property for others for compensation requires a license.

• ✓Property management performed for others for compensation requires a real estate license
• ✓Definitions in 32-2171 govern the article
• ✓Scope excludes owners managing their own property

Section 32-2173 governs property management agreements, including required contents and termination provisions. Agreements must be in writing with specified terms.

• ✓Property management agreements must be in writing
• ✓Agreements must specify the scope, term, compensation, and termination provisions
• ✓Both parties must be provided a copy of the executed agreement

Section 32-2174 governs property management accounts, requiring proper handling of tenant deposits, rents, and owner funds in trust accounts. Amended by SB1171 in 2024.

• ✓Property management funds must be held in designated trust accounts
• ✓Funds must not be commingled with broker operating funds
• ✓Accounts are subject to department audit

Section 32-2175 sets out property management records requirements and authorizes audits by the department.

• ✓Complete property management records must be maintained and retained
• ✓Records are subject to department audit
• ✓The designated broker is responsible for records compliance

Section 32-2176 addresses payment of finder fees to apartment tenants, imposing limits and prohibited activities with civil penalties and definitions.

• ✓Finder fees to apartment tenants are limited by statute
• ✓Certain activities related to finder fees are prohibited
• ✓Violations are subject to civil penalties

No criminal, civil, or administrative action may be brought against a transferor, lessor, or licensee for failing to disclose that property is or has been the site of a natural death, suicide, homicide, or felony; was owned/occupied by a person with HIV/AIDS or a disease not transmitted by common occupancy; or is located near a sex offender. Failing to disclose these facts is not grounds for termination or rescission.

• ✓No liability for failing to disclose death, suicide, homicide, or felony on property
• ✓No liability for failing to disclose prior occupant's HIV/AIDS status
• ✓No liability for failing to disclose proximity to a sex offender
• ✓Non-disclosure of these facts is not grounds for rescission or termination

Under A.R.S. § 32-2130, an active licensee must first sever from the employing brokerage before requesting inactive status. On prescribed forms, the licensee may request inactivation for a period not to exceed 15 years. Inactive licenses do not require completing continuing education until the licensee applies to return to active status, but inactive status does NOT relieve the licensee from renewing and paying required fees. The Department must change to inactive upon receipt of a complete application and may not refund any renewal fee already paid.

• ✓Licensee must sever from the employing brokerage before requesting inactive status
• ✓Inactive status may not exceed 15 years
• ✓Inactive licensees must still renew and pay fees but need not complete CE until reactivating

An inactive, non-suspended, non-revoked license may be reactivated on 30 days' written notice with evidence of CE taken within 24 months prior. CE requirements scale with inactivity: less than 3 years requires the same hours as A.R.S. § 32-2130; 3–6 years requires 6 additional hours; 6–10 years requires 15 additional hours; 10–15 years requires 30 additional hours (added to the base 24 for salesperson or 30 for broker/delegated). A waiver of additional hours may apply for those who worked continuously in real estate not requiring a license or in government regulation/policymaking.

• ✓Reactivation requires 30 days' written notice and CE completed within the prior 24 months
• ✓Additional CE hours increase with the length of inactivity (6, 15, or 30 extra hours)
• ✓Continuous real estate or government work may qualify for a waiver of additional hours

An examination may not be required to reactivate an inactive license if reactivated less than 15 years after changing to inactive. If not reactivated within 15 years, a new application for licensure must be made, meeting statutory qualification requirements including completion of prelicensing education and passing the state required examination.

• ✓No exam required if reactivating within 15 years of going inactive
• ✓After 15 years inactive, a full new application, prelicensing education, and exam are required

Failure of an inactive licensee to pay the renewal fee and renew results in license expiration. An expired inactive license remains expired for one year and may be renewed within that year to return to inactive status. The Department shall terminate an inactive license that has been expired for more than one year.

• ✓An expired inactive license may be renewed within one year to return to inactive status
• ✓The Department terminates an inactive license expired for more than one year

The holder of an inactive license is prohibited from performing activities requiring an active license until reactivated. An inactive licensee who acts directly or indirectly in a transaction must comply with all duties of a licensee under R4-28-1101 except duties owed to a client. The inactive status does not prevent the Commissioner from taking disciplinary action for any grounds in the chapter.

• ✓Inactive licensees cannot perform activities requiring an active license
• ✓Inactive licensees acting in a transaction must comply with R4-28-1101 duties except those owed to a client
• ✓Inactive status does not shield a licensee from disciplinary action

An active licensee must sever from the employing brokerage before requesting inactive status, which may last up to 15 years. Inactive licenses do not require CE until reactivation but must still be renewed and fees paid. Failure to renew causes expiration; an expired inactive license may renew within one year, and is terminated after one year expired.

• ✓A licensee must sever from the brokerage before requesting inactive status, which may not exceed 15 years
• ✓Inactive status does not relieve the licensee from renewing and paying required fees
• ✓An inactive license expired more than one year is terminated by the department

An inactive license (not suspended/revoked) may be reactivated on 30 days' notice. CE required increases with inactivity: less than 3 years requires standard hours; 3-6 years adds 6 hours; 6-10 years adds 15 hours; 10-15 years adds 30 hours (over the base 24 salesperson/30 broker hours). No exam is required if reactivated within 15 years; otherwise a new application and exam are required.

• ✓Reactivation requires 30 days' written notice and CE hours completed within 24 months of applying
• ✓CE add-ons: +6 hours (3-6 yrs), +15 hours (6-10 yrs), +30 hours (10-15 yrs) above base requirements
• ✓No exam if reactivated within 15 years; a new application with prelicensing and exam is required after 15 years

If a licensee makes timely and sufficient application to renew a license for a continuing activity, the existing license does not expire until the application is finally determined, and if denied, until the last day for seeking review or a later court-fixed date.

• ✓Timely and sufficient renewal application keeps the existing license from expiring
• ✓License continues until the application is finally determined by the agency
• ✓If denied, license continues until the last day for seeking review or later court date

Revocation, suspension, annulment or withdrawal of a license is unlawful unless the agency first provides notice and opportunity for a hearing. If public health, safety or welfare imperatively requires emergency action, the agency may summarily suspend pending revocation proceedings.

• ✓License revocation/suspension requires prior notice and opportunity for a hearing
• ✓Emergency summary suspension requires a finding that public health/safety imperatively requires it
• ✓Emergency proceedings must be promptly instituted and determined

It is unlawful for such an agreement to last longer than 12 months, run with the land, bind a future owner (except in a narrow ready-willing-able-purchaser case), be recorded with a county recorder, authorize liens/encumbrances/security interests, allow assignment without owner notice and agreement, or fail to meet §32-2151.02 requirements. These provisions target abusive 'NOSAs' (non-title-recorded long-term listing agreements).

• ✓An exclusive property engagement agreement may not last longer than twelve months after execution
• ✓It may not run with the land, bind future owners, be recorded, or create liens/encumbrances

Courts may not enforce an agreement made or recorded in violation of the chapter or impose a constructive trust on the property or sale proceeds. Agreements recorded with a county recorder in violation are void and unenforceable; any consideration paid to a homeowner under a violating agreement must be forfeited. Agreements violating the chapter recorded before September 14, 2024 are void, and the state real estate commissioner records disclaimers.

• ✓Agreements made or recorded in violation are void and unenforceable; no constructive trust may be imposed
• ✓Consideration paid to a homeowner under a violating agreement must be forfeited

An exclusive property engagement agreement is a contract giving a person an exclusive right to list or sell residential real estate, including future listing arrangements or memoranda acknowledging such an agreement. Residential real estate means Arizona property used primarily for personal/family/household purposes containing fewer than five dwelling units.

• ✓An exclusive property engagement agreement grants an exclusive right to list or sell residential real estate
• ✓Residential real estate contains fewer than five dwelling units used primarily for personal/family/household purposes

An exclusive property engagement agreement is void if the listing services do not begin within one year after the parties execute the agreement.

• ✓The agreement is void if listing services do not begin within one year of execution
• ✓Timely commencement of listing services is required for validity

A violation of the exclusive property engagement chapter is an unlawful practice under §44-1522 (Consumer Fraud Act) subject to private action and attorney general enforcement, and violators are also subject to liability and penalties under §33-420 (false document recording). These remedies are not exclusive.

• ✓Violations are unlawful practices under section 44-1522 enforceable by private action and the attorney general
• ✓Violators are also subject to liability and penalties under section 33-420

A nonresident licensee may accept employment or compensation only under section 32-2155 and only from a broker actively licensed in this state. A nonresident broker must maintain required records in this state or use online recordkeeping with backup and notify the department of the provider.

• ✓Nonresident licensee may only be employed by a broker actively licensed in this state
• ✓Nonresident broker must maintain records in-state or use notified backed-up online recordkeeping

Under section 32-4302, a broker or salesperson license applicant who does not reside in this state must pass the portion of the examination specific to this state's real estate practice and laws.

• ✓Nonresident applicants must pass the state-specific portion of the examination
• ✓Requirement is pursuant to section 32-4302

Applying for and accepting a nonresident license constitutes irrevocable appointment of the commissioner as agent for service of process in Arizona actions arising from the license or transactions. Service requires duplicate copies and a $15 payment, and the commissioner forwards a copy by certified mail.

• ✓Nonresident license constitutes irrevocable appointment of commissioner as agent for service of process
• ✓Plaintiff must pay commissioner $15, taxable as costs, and serve duplicate copies of process
• ✓Commissioner forwards copy by certified mail to licensee's last address of record

A nonresident licensee may accept employment/compensation only under 32-2155 from a broker actively licensed in Arizona. A nonresident broker must maintain 32-2151.01 records in Arizona or use online recordkeeping with backup and department notification of the provider. Nonresident applicants must pass the state-specific exam portion.

• ✓Nonresident licensee accepts compensation only from a broker actively licensed in this state
• ✓Nonresident broker must maintain records in-state or use backed-up online recordkeeping with department notification
• ✓Nonresident applicants must pass the Arizona state-specific portion of the exam

Applying for and accepting a nonresident license constitutes irrevocable appointment of the commissioner as agent for service of process for actions arising out of licensing, transactions, or recovery fund claims. Duplicate copies of process are served on the commissioner with a $15 payment.

• ✓Nonresident license constitutes irrevocable appointment of commissioner as agent for service
• ✓Plaintiff pays $15 to commissioner, taxable as costs, when serving process

Licensees may not contact a principal represented by another licensee unless the principal's Designated Broker, delegated broker representative, and licensee are unavailable for 24 hours. A principal may waive or alter this by written instructions. Buyer negotiations must go exclusively through the principal's broker unless the required parties are unavailable for 24 hours.

• ✓No contact with a represented principal unless the broker and licensee are unavailable for 24 hours
• ✓A principal may waive or alter the requirement by written instructions
• ✓Buyer negotiations conducted exclusively through the principal's broker unless parties unavailable 24 hours

Licensees may not contact a principal represented by another licensee unless the principal's designated broker, broker representative with delegated authority, and the licensee are unavailable for 24 hours. A principal may waive or alter this by written instructions.

• ✓No contact with a principal represented by another licensee unless the designated broker, delegated broker representative, and licensee are all unavailable for 24 hours
• ✓A principal may waive or alter this requirement by issuing written instructions

For a buyer, negotiation must be conducted exclusively through the principal's broker or broker's representative unless the designated broker, a delegated broker, and the buyer's licensee are all unavailable for 24 hours, or the buyer waives this in writing.

• ✓Buyer negotiation must go exclusively through the principal's broker/representative unless all responsible parties are unavailable for 24 hours
• ✓The buyer may waive this requirement in writing

A claimant whose application is denied may file a verified application within six months in the court where judgment was entered, seeking an order for payment from the fund on the grounds in the original application. The claimant must serve the commissioner and the judgment debtor and file proof of service.

• ✓Verified court application must be filed within six months of denial notice
• ✓Filed in the court where judgment was entered in the claimant's favor
• ✓Service on commissioner is by certified mail; service on debtor per 32-2188.01
• ✓A certificate or affidavit of service must be filed with the court

The commissioner and judgment debtor each must file a written response within 30 calendar days after service. The court then sets a hearing. If the debtor fails to respond, the commissioner may compromise and, on joint petition with the applicant, the court shall order payment from the fund.

• ✓Commissioner and debtor must respond within 30 calendar days after service
• ✓Debtor's failure to respond waives right to defend against the claim
• ✓Court grants a commissioner continuance of up to 30 calendar days
• ✓Claimant must establish compliance with section 32-2188 at the hearing

No advertising or sales literature, including oral statements, may contain untrue material statements, claims of no risk or impossible loss, misrepresented improvements/scenes, or unsupported homesite suitability claims.

• ✓No untrue statement of material fact or misleading omission is permitted
• ✓No statement that land is offered without risk or that loss is impossible
• ✓Homesite/building lot claims require potable water and sewage availability, or clear disclosure of facts to the contrary in each advertisement

Owner or agent must file copies of original promotional/advertising material and material changes with the commissioner. Subsequent advertising must be filed within 21 days of use; repetitive filings of essentially identical material are unnecessary.

• ✓Original promotional/advertising material and material changes must be filed with the commissioner
• ✓Subsequent advertising must be filed within twenty-one days of use

Advertising must be consistent with the notice of intention and public report. The commissioner may hold hearings, issue orders, or seek injunctions. Newspapers, radio, and TV operators without knowledge of intent are exempt.

• ✓All advertising and sales literature must be consistent with the notice of intention and public report
• ✓Newspaper/magazine publishers and radio/TV operators are exempt when they have no knowledge of the advertiser's intent
• ✓It is unlawful for any owner, agent, or employee to authorize, use, or aid in advertising that violates this section

The developer is not entitled to release of escrowed monies (under 32-2197.05) for a timeshare interest until providing satisfactory evidence of one of several protections against blanket encumbrances, ensuring purchasers' interests are protected.

• ✓Escrow release requires proof the interest is free and clear, OR a recorded subordination/notice to creditors, OR transfer to a nonprofit/owners' association, OR commissioner-approved alternative arrangements
• ✓A subordination document must provide the encumbrance is subordinate to owners' rights regardless of purchase date
• ✓Purchase-money financing encumbrances on the purchaser's interest are excluded from this requirement

A person reporting an alleged violation must disclose their name, and the complainant's name is generally a public record during investigation or enforcement.

• ✓A person must disclose their name during the course of reporting an alleged violation of law or rule
• ✓The complainant's name is a public record unless the agency determines release may result in substantial harm to any person or to public health/safety

When the commissioner issues a cease and desist order, obtains an injunction, issues a prohibition order, or suspends approval, the action is recorded in the county recorder's book of deeds with the legal description. Notice must go to affected record owners within ten business days. An order of release is recorded within ten business days after revocation.

• ✓Enforcement actions recorded in county book of deeds with legal description
• ✓Notice to affected record owners required within 10 business days
• ✓Order of release recorded within 10 business days after revocation

Certain commissioner actions must be recorded with the county recorder and affected parties notified, with releases recorded upon resolution.

• ✓Cease and desist orders, injunctions, orders of prohibition, or suspensions must be recorded in the book of deeds in each affected county with legal description
• ✓Affected owners of record must be notified within ten business days of the suspension order
• ✓An order of release must be recorded within ten business days after revocation, and a public notice/release recorded for violations and compliance

When a developer sells or leases property without a listing or selling broker, the developer must maintain records as required by statute.

• ✓If real property is sold or leased by a developer without a listing/selling broker, the developer must keep all records required by A.R.S. § 32-2151.01(A) and (C)
• ✓Recordkeeping obligations apply to developers acting without broker services

An employing broker and designated broker must exercise reasonable supervision and control over licensed activities, including establishing and enforcing written policies to review transactions, disclosure forms, document handling, trust funds, unlicensed assistants, and advertising.

• ✓Must exercise reasonable supervision and control over licensees and employees
• ✓Must establish/enforce written policies for transactions, trust funds, and advertising
• ✓Must review documents that materially affect party rights and advertising/marketing
• ✓Must familiarize licensees with federal, state, and local real estate laws

A designated broker must establish a system for monitoring compliance including a progressive disciplinary policy for managing violations that also represent statutory violations. Failure to enforce the disciplinary policy is a violation. An employing broker is responsible for the acts of all licensees and employees acting within scope of employment.

• ✓Designated broker must establish a monitoring compliance system
• ✓System must include a progressive disciplinary policy
• ✓Failure to enforce the disciplinary policy is a violation
• ✓Employing broker is responsible for acts of all licensees within scope of employment

Employing and designated brokers must exercise reasonable supervision and control over licensees, establishing written policies to review/manage transactions, disclosure forms, document handling, trust funds, unlicensed assistants, and advertising; oversee delegation; familiarize licensees with laws; and review documents and marketing.

• ✓Employing and designated brokers must establish written policies, procedures, and systems for supervision
• ✓Must review/manage transactions, disclosure forms/contracts, document filing/storage, trust fund handling, unlicensed assistants, and advertising
• ✓Must familiarize licensees with federal, state, and local real estate laws and review documents/advertising

An employing broker is responsible for the acts of all licensees and employees within the scope of employment. A designated broker may use employees to help administer supervision but cannot relinquish overall responsibility for supervision and control.

• ✓An employing broker is responsible for the acts of all licensees/employees acting within the scope of employment
• ✓A designated broker may use employees to assist but may not relinquish overall responsibility for supervision and control

A designated broker who immediately reports a licensee's violation to the Department is not subject to disciplinary action for failure to supervise. A single-office broker with a designated broker, no more than one other licensed person, and no more than one unlicensed person is not required to maintain written supervision policies.

• ✓Immediate reporting of a violation exempts broker from failure-to-supervise discipline
• ✓Designated broker may use employees to assist but may not relinquish overall responsibility
• ✓Small single-office brokers (1 other licensee, 1 unlicensed) need not maintain written policies

A designated broker must establish a compliance-monitoring system that includes a progressive disciplinary policy for violations of broker policies that also violate statutes. Failure of the employing broker to enforce the disciplinary policy is a violation of subsection (D).

• ✓The monitoring system must include a progressive disciplinary policy for violations that also breach statutory requirements
• ✓Failure of an employing broker to enforce the disciplinary policy is a violation

A designated broker who immediately reports a licensee's violation to the Department upon learning of it is not subject to disciplinary action for failure to supervise that licensee.

• ✓Immediate reporting of a licensee's violation to the Department shields the designated broker from failure-to-supervise discipline

An employing broker with one office, a designated broker, no more than one other licensed person, and no more than one unlicensed person is not required to develop written policies, procedures, and systems under subsection (A).

• ✓Exemption applies with one office, a designated broker, no more than one other licensed person, and no more than one unlicensed person
• ✓Such brokers are not required to develop and maintain written policies, procedures, and systems