4 ‘Musts’ of an Arizona Real Estate Commission Agreement

Gaya Shanmuganatha,  |  November 16, 2018

Arizona law places strict requirements on real estate professionals who are seeking to recover their commissions (Young v. Rose, 286 P.3d 518, 521; Ariz. App. 1st Div. 2012). Arizona courts have expressly held that a licensed “real estate agent may sue to recover compensation due under a real estate employment agreement only if there is a written agreement that complies with both A.R.S. §§ 44–101(7) and 32–2151.02(A).” Id. at 522.

Specifically, Arizona Revised Statute § 44-101, more commonly known as the Statute of Frauds, expressly provides that a real estate agent or broker cannot file a lawsuit regarding “an agreement authorizing or employing an agent or broker…for compensation or commission” unless that promise or agreement “is in writing and signed by the party to be charged.” A.R.S. § 44-101(7).

Arizona Requirements of Real Estate Employment Contracts

The Arizona statute that governs real estate employment agreement – Arizona Revised Statute § 32-2151.02 – is read in harmony with the Statute of Frauds by Arizona courts. Arizona Revised Statute § 32-2151.02 requires all real estate employment contracts to:

1. Be written in clear and unambiguous language.
2. Fully set forth all material terms, including the terms of broker compensation.
3. Have a definite duration or expiration date, showing dates of inception and expiration.
4. Be signed by all parties to the agreement.

Arizona courts have consistently held that a realtor is not entitled to a commission even if just one of the four requirements is not met.

For example:

• Red Carpet–Barry & Associates v. Apex Associates, 130 Ariz. 302, 303, 635 P.2d 1224, 1225 (App.1981): The complaint for commission was dismissed because the written agreement lacked an expiration date.
• Olson v. Neale, 570 P.2d 209 (Ariz. App. 1st Div. 1977): The commission award was reversed because there was no written agreement with an expiration date.
• Young v. Rose, 286 P.3d at 522: The superior court’s denial of broker’s claim for commission was affirmed, because the written agreement was not signed by all the parties to the agreement.

Realtors: To Get Paid, Make Sure Your Employment Contract Is Valid

If you are a real estate agent or broker and you want to be paid for securing or selling property, you must ensure that your contract or agreement conforms to the law.