Arizona Real Estate Principles Revised Kathy Howe Copyright

Arizona Real Estate Principles, Revised Kathy Howe Copyright ©Kaplan, Inc. All rights reserved.

Unit 1 Arizona Real Estate Law, Rules, and Licensing

Arizona Real Estate Law Book • • • Arizona State Constitution Common Law Arizona Revised Statutes Arizona Administrative Code Substantive Policy Statements ©Kaplan, Inc.

Arizona Department of Real Estate • The purpose of ADRE is to protect the public interest through licensure and regulation of the real estate profession in this state. • The Arizona Legislature passes laws meant to protect the public in a real estate transaction, and passes on to the ADRE the responsibility of promulgating rules of regulation and enforcement. ©Kaplan, Inc.

Arizona Real Estate Commissioner • To administer the ADRE, the governor of Arizona appoints the Arizona Real Estate Commissioner. • The Commissioner is responsible for the licensing of real estate licensees, cemetery licensees, and membership campground licensees. ©Kaplan, Inc.

Duties and Powers of the Real Estate Commissioner • • Power to administer the Department Ability to receive compensation for the Department Prepare and produce educational materials for public and licensees, for a fee Develop and hold, in cooperation with the real estate industry, seminars and workshops for licensees Establish a revolving education fund Adopt rules to administer under Chapter 20, Title 32— Professions and Occupations—of the Arizona Revised Statutes) May approve standard legal forms Conduct investigations and audit brokerage records ©Kaplan, Inc.

Arizona Real Estate Advisory Board • • • Composed of 10 members No salary—voluntary Six-year staggered terms Two members with five years of real estate broker experience Two members whose primary business is subdividing real property Three members doing residential real estate for five years, one with multifamily residential family rentals Three public members not related to anyone holding an Arizona real estate license Meets once per quarter Makes recommendations to Real Estate Commissioner Presents annual report to the governor about real estate department and the Commissioner ©Kaplan, Inc.

Who Must Have a License Any person, company or legal entity who, with the expectation of any payment, barter or favor in exchange or compensation, acts on the behalf of another person, acting in the capacity of a: 1. Real estate broker. 2. Real estate salesperson. And similarly 3. Cemetery broker. 4. Cemetery salesperson. 5. Membership camping broker. 6. Membership camping salesperson. ©Kaplan, Inc.

License Exemptions • Not all real estate transactions require a license and may be performed by other professionals or individuals in certain circumstances. • The exemptions to license requirements are outlined in ARS 32 -2121 ©Kaplan, Inc.

Obtaining a Salesperson or Broker License • License Denial • Out-of-State Licensees ©Kaplan, Inc.

License Maintenance An important part of maintaining a real estate license is keeping information current with the Department. Commissioner’s Rule R 4 -28 -301. F requires licensees to notify the Commissioner in writing of changes to • home address • phone number • any other contact or identifying information That written notification is to be given within 10 calendar days of each such occurrence. ©Kaplan, Inc.

Active v. Inactive – ARS 32 -2101 • Inactive status: A licensee who is on inactive status during the current license period and who is not engaged by or on behalf of a broker. • Active status: A licensee who is active has met the current licensing requirements and who is engaged by or on behalf of a broker. ©Kaplan, Inc.

Renewal of License – ARS 32 -2130 • Continuing Education • Nonrenewal of License – Failure to Renew by Licensee – Denial by the Department ©Kaplan, Inc.

Professional Conduct • While Arizona does not instruct licensees on how to represent clients by statute as do states with statutory agency, Arizona licensees have regulatory rules which give guidance as to what is expected of them in order to reach the “standard of care” for a client and all parties to the transaction, as outlined in R 4 -28 -1101 ©Kaplan, Inc.

Investigations and Administrative Procedures The Commissioner has the right to • examine the employing broker’s books and records; • investigate actions of an entity, broker, salesperson, or anyone acting in the capacity of one requiring a license; • establish an investigative and enforcement division (or investigative unit) within which investigators may take testimony relating to an investigation; if necessary, subpoenas may be issued to require testimony; and • require documentation to determine good moral character of an entity, an applicant, or a licensee, which might include background checks for any applicants or any holders of 10% or more of a company. ©Kaplan, Inc.

The Recovery Fund Under ARS 32 -2186 the Real Estate Commissioner is required to set up a fund for the benefit of any person aggrieved by any act, representation, transaction or conduct of a licensed real estate broker or salesperson. The limits of the fund are as follows: • $30, 000 for each transaction • $90, 000 for each licensee ©Kaplan, Inc.

Unit 2 Real Estate Brokerage

Organization and Management of Brokerage Firms • Employing Brokers • Sole Proprietors • LLCs ©Kaplan, Inc.

Restriction on Employment or Compensation • Professional Corporation or Professional Limited Liability Company • Temporary Licenses • Nonresident Licensees and Brokers • Broker Place of Business • Branch Office and Branch Managers ©Kaplan, Inc.

Broker Audit • Declarative - Self-audit (done online by designated broker). • Normal and routine - Employing brokers are audited on a random basis by the ADRE. • Electronic - ADRE is granted limited, remote access to the Employing Broker’s computer to audit certain electronic records. • Investigative - This is the result of a complaint, or a problem that shows up in an electronic or normal and routine audit. ©Kaplan, Inc.

License Transfer and Compensation • Compensation can only be paid by an employing broker to – The employing broker’s licensees, – a former licensee of the employing broker if the licensee’s commission was earned while working for the employing broker, and – another employing broker. ©Kaplan, Inc.

Broker Duties, Supervision, and Control • • • Office Policies No Office Policies General Brokerage Trust Accounts Trust Account Recordkeeping and Accounting Unlawful License Activity ©Kaplan, Inc.

The Rules of Advertising • • • Licensees Blind Ads R 4 -28 -502. Advertising by a Licensee R 4 -28 -502. Rules for Teams R 4 -28 -503. Promotional Activities ©Kaplan, Inc.

Unit 3 Agency Relationships

Dual Agency • Limited Representation – Limited Representation and Stigmatized Property • Procuring Cause ©Kaplan, Inc.

Duties and Responsibilities • Fiduciary Duties to Clients – Disclosure Exception • Required Disclosures to Customers • Case Law – Misrepresentation & Fraud – Vicarious Liability and Imputed Notice – E&O Insurance • Arizona’s Handyman Exemption—ARS 32 -1121 ©Kaplan, Inc.

Agreements • • Unrepresented Compensation Agreement “Coming Soon” Listings Pocket Listings All Signatures Required on Employment Agreements ©Kaplan, Inc.

Commissions • Buyer Broker Agreement Commissions • Commission Court Case ©Kaplan, Inc.

Unit 4 Real Estate Ownership

Foreclosures and Forfeitures • Title 33. Chapter 6 Article 1 Deeds of Trust • Foreclosure Processes – Title theory vs. lien theory – Land contract, agreement for sale, contract for deed, contract for conveyance – Names – Acceleration clause – Demand for payoff – Deed in Lieu – Commercial Foreclosures ©Kaplan, Inc.

Foreclosures and Forfeitures • Staying a Foreclosure – Chapter 13 bankruptcy – Chapter 7 bankruptcy – Means test • Alternatives to foreclosure • Deficiency Judgments – Nonrecourse states for residential mortgages – Arizona’s anti-deficiency statutes ©Kaplan, Inc.

Foreclosures and Forfeitures • Liens and Deeds – Purchase money mortgage – Quiet title action – Arizona tax lien sales – Arizona’s homestead exemption ©Kaplan, Inc.

Estates, Ownership, Acquisition, and Transfer • Categories of Property – Manufactured homes vs. mobile homes • Freehold estates – Life Estate • Ownership • Ways to take title ©Kaplan, Inc.

Estates, Ownership, Acquisition, and Transfer • Modern types of common ownership – Cooperative – Time-share ownership – Membership camping – Real estate investment trust (REIT) – Joint ventures – Associations ©Kaplan, Inc.

Estates, Ownership, Acquisition, and Transfer • Other routes to property ownership or use – Adverse possession – Prescriptive easement • Arizona Real Property Taxation • Arizona Owner-Occupied Property Taxes • Income Tax Aspects of Real Estate ©Kaplan, Inc.

Estates, Ownership, Acquisition, and Transfer • • Mechanics’ liens Persons ineligible Condominiums Security Agreements and Uniform Commercial Code ©Kaplan, Inc.

Unit 5 Contracts and Contract Law

Contract Essentials and Terminology • • Express and Implied Bilateral and Unilateral Executed or Executory Validity of a Contract ©Kaplan, Inc.

Offer and Acceptance • Signatures – Community Property – Revocable Trust – Power of Attorney • Earnest Deposit ©Kaplan, Inc.

The Executory Period • Broker Review • Due Diligence – Inspection Period – “As Is” Agreements – Contingencies – Marketable Title • Seller Disclosures – Disclosures Not Required ©Kaplan, Inc.

The Executory Period • • • Buyer Disclosures Contract Amendments FIRPTA Settlement Close of Escrow – Risk of Loss – Contract Assignability ©Kaplan, Inc.

Contract Termination • Breach of Contract • Remedies – Specific Performance – Damages – Liquidated Damages – Actual Damages – Dispute Resolution – Concept of Reasonableness ©Kaplan, Inc.

Property Management • • Agreements Trust Accounts Final Accounting at Termination Lease Agreements ©Kaplan, Inc.

Unit 6 Arizona Residential Landlord-Tenant Act

Lease Agreements • • Title 10, Chapter 33 Trends Affecting Tenant Lease Payments Application to Lease Property Occupancy considerations – Felonies – Familial status – Hoarding as a Disability – Group Homes ©Kaplan, Inc.

Lease Agreements • Occupancy Standards • Service and assistive animals • Possession ©Kaplan, Inc.

Notices • • ARLTA Notices Abandonment notice Curable vs. noncurable notices Types of Notices Remedies Access Delivery and Receipt ©Kaplan, Inc.

Requirements of a Lease Agreement Rental Agreements Unconscionability and Prohibited Provisions Important parts of the lease Other provisions How Commercial Leases Differ From Residential Leases • Types of Commercial Leases • Commercial Offers • • • – Letter of Intent ©Kaplan, Inc.

Unit 7 Water, Wells, Waste, and Environmental Issues

Definitions and Statutes • Historical and Departmental information • Central Arizona Groundwater Replenishment District (CAGRD) • ARS 45: Definitions – Water rights as defined in ARS 45 -141 ©Kaplan, Inc.

Definitions and Statutes • Arizona real estate transactions – Ditches – Irrigation ditches – Groundwater rights – Groundwater – General Provisions – Subflow – Earth Fissures – Wells – Arizona Department of Environmental Quality ©Kaplan, Inc.

Definitions and Statutes • Conveying property with a septic or alternative waste disposal system – Sewer connections – Potable Water ©Kaplan, Inc.

Environmental Issues • A. Environmental Concerns Requiring Disclosure in Arizona – – – – Arsenic Uranium Radon Asbestos Lead Wetlands Mold ©Kaplan, Inc. – – – – – Lead Wetlands Mold EIFS Propane tanks Wood infestation Roof rats Scorpions Other wildlife

Unit 8 Land-Use Controls & Property Development

Measurements and Legal Descriptions • • Measurement Systems Legal Description Arizona State Trust Land Arizona State Land Trust History Planning and Zoning Land Patent Arizona Blue-Stake – Arizona 811 – E-Stake ©Kaplan, Inc.

Unsubdivided and Subdivided Lands • • • Unsubdivided Lands Subdivided Lands Unimproved lots Improved lots Subdivision report Subsequent Owner Exemption—ARS 32 -2181 Procedures Acting in Concert Lot Reservations Advertising New Home Sales ©Kaplan, Inc.

Arizona Associations • Planned Communities (HOAs or POAs) • Cemeteries • Membership Campgrounds ©Kaplan, Inc.