Do you enter into exclusive residential listing agreements that are longer than 12 months? If so, it’s critical that you become familiar with Arizona’s newest law.

Senate Bill 1218 is set to take effect on September 14, 2024, changing the laws surrounding exclusive listing agreements. Specifically, the legislation will create three new statutes: A.R.S. §§ 44-501, 502, and 503, all of which will fall under the heading “Exclusive Property Engagement Agreements.”

Pursuant to A.R.S. § 44-501, Exclusive Property Engagement Agreement means “a contract or agreement that provides an exclusive right to a person to list or sell Residential Real Estate,” which is defined as real property in Arizona that “is used or will be used primarily for a personal, family or household purpose and that contains fewer than five dwelling units.”

A.R.S. § 44-502 then sets forth a litany of unlawful practices pertaining to Exclusive Property Engagement Agreements. While a summary of the restrictions is set forth below, the statute itself should be reviewed for additional details.

Subsection A makes it unlawful for an Exclusive Property Engagement Agreement to:

• Last longer than 12 months after the date that the agreement is signed;

• Be a covenant that runs with the land;

• Bind a future owner unless the future owner acquires an interest in the property after listing services have begun;

• Be recorded in the office of a County Recorder;

• Authorize a person to place a security interest or lien against the property; and

• Allow the Exclusive Property Engagement Agreement to be assigned without notice to and agreement of the owner.

The new law goes on to state that a Court may not enforce any Exclusive Property Engagement Agreement made or recorded in violation of the above. Similarly, any such noncompliant Agreement recorded with a County Recorder’s Office is void and unenforceable.

Finally, A.R.S. § 44-503(D) makes it clear that “A Contract or Agreement that violates this chapter and that is recorded before the effective date of this section is void.”

This article is of a general nature and reflects only the opinion of the author at the time it was drafted. It is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.