Since the Arizona Constitution, Article 26, specifically permits licensed real estate agents to draft or complete real estate contracts, real estate agents are required and presumed to know the relevant contract law. However harsh the result may be, the law is strictly enforced against real estate agents seeking compensation.
This strict interpretation of real estate compensation agreements dates back decades in Arizona. In Red Carpet- Barry & Associates v. Apex Associates, 130 Ariz. 302 (App.1981), the real estate broker had a written compensation agreement with the seller, but the agreement lacked an expiration date. The Department of Real Estate’s then-existing rules (now codified as a law) required real estate employment agreements to have a definite duration or expiration date. The Court held that the agreement could not be enforced since it was unlawful. The agent could not collect a commission for that sale.
A.R.S. §32-2151.02(A) provides:
“All real estate employment agreements shall:
- Be written in clear and unambiguous language.
- Fully set forth all material terms, including the terms of broker compensation.
- Have a definite duration or expiration date, showing dates of inception and expiration.
- Be signed by all parties to the agreement.”
In Young v. Rose, 230 Ariz. 433 (App. 2012), Young, a real estate agent had an exclusive buyers’ agent agreement with the Roses, but the agreement expired. A few months later, Young sent the Roses an email regarding properties that met their “wish list.” Young attached a new buyers’ agent agreement for the Roses to sign identifying specific zip codes for the potential purchase. The Roses signed and emailed the agreement back to Young’s assistant, who responded with “Thank you.” During the term of that new buyers’ agent agreement, the Roses purchased a house within one of the listed zip codes through another agent, who received a commission for the transaction. Young sued to collect her commission, but the Court held that the agreement failed to meet the statutory requirements; it had to be “signed by all parties to the agreement” and the assistant’s thank-you email was insufficient. The Court acknowledged the harsh result, but the licensed real estate agent is presumed to know the law.
Another case applying §32-2151.02(A) was decided in August 2016, Register v. Hickman (App.). Register, a licensed real estate broker had an exclusive buyer-broker agreement. Hickman was the seller’s agent, who received a commission for the sale and refused to share the commission with Register, stating that he had no written agreement with Register to pay her a commission. (Apparently this Cochise County property was not listed or sold through a Multiple Listing Service (“MLS”) with a commission sharing agreement.) Register sued for her share of the commission, lost and appealed. The Court of Appeals agreed that, absent an agreement that complies with the statute, Register had no right to a commission.
The clear conclusion is that real estate agents must be careful regarding their compensation agreements. Buyers’ brokers must be careful to have fully-executed current agreements that meet the statutory requirements in case their clients use another agent or purchase a property other than through an MLS. Even seller’s agents must be careful to follow the statutory requirements or they, too, could wind up without a commission after a sale.