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Who can be a signor on an Arizona property management trust account?

Oct 26th, 2015 | By | Category: Real Estate Broker Law

Arizona Department of Real Estate Compliance Law Firm

phoenix ADRE property management audit

Introduction

Arizona Department of Real Estate takes trust accounting rules and property management compliance very serious.  How the trust account is handled is one of the biggest issues both in-state and out-of-state brokerages need to be concerned with.  This blog discusses who can be a signor on the trust account.  If you are facing an investigation or audit, don’t go it alone, seek legal counsel.  We are licensed in California and Arizona and we are uniquely qualified to help clients who have interstate real estate brokerage issues.  Attorney Steve Vondran is licensed to practice law, and is a licensed real estate broker in both California and Arizona.

Who may act as a signer on the broker’s trust account?

The general rules is that the broker shall grant authority to withdraw monies from the broker’s trust account ONLY TO OTHER ARIZONA LICENSED INDIVIDUALS (See A.R.S. § 32-2151.01.B).  However, if you read this code section, you will see that it also has a way for UNLICENSED persons to be signors on the trust account.

B. Except as provided by section 32-2174, subsection C, a broker shall not grant any person authority to withdraw monies from the broker’s trust fund account unless that person is a licensee under that broker’s license.

A.R.S. 32-2174 (C) – (unlicensed signors on trust account)

It is possible to have an UNLICENSED person to serve as a signor on your AZ trust account:

“C. The designated broker for a property management firm may authorize either a licensee or an unlicensed natural person in the direct employ of the broker to transfer monies or to be a signatory on the property management firm’s trust accounts.”

The code section continues:

“If the person who is designated to sign on behalf of the designated property management broker is an unlicensed person, that person shall be a bona fide officer, member, principal or employee of the property management firm. The broker may require dual signatures on checks and may use a facsimile signature according to the broker’s business policies and procedures. The designation of a licensed or unlicensed person to transfer monies or to be a signatory on trust accounts does not lessen the broker’s responsibility or liability for any monies handled.”

So for the out-of-state brokerage doing business in Arizona, an unlicensed “natural” person (not an LLC member), ex a person licensed under the real estate laws of Texas, New York, Washington, California, Florida or some other state, but who is NOT LICENSED under the Arizona real estate laws, could conceivably become a signor on an Arizona trust account.  Consult with your legal advisor in your state for any additional requirements that may apply.  Our real estate firm is licensed only in California and Arizona.

A.R.S. 32-2151.01. (Broker record keeping requirements)

Another important legal issue that could up for out-of-state real estate brokers is the duty to keep records IN ARIZONA.  Here is what the statute says on this point:

A. Each licensed employing broker shall keep records of all real estate, cemetery, time-share or membership camping transactions handled by or through the broker and shall keep employment records, including copies of employment status, for all current and former employees.  The records required by this section shall include copies of earnest money receipts, confirming that the earnest money has been handled in accordance with the transaction, closing statements showing all receipts, disbursements and adjustments, sales contracts and, if applicable, copies of employment agreements.  The records shall be open at all reasonable times for inspection by the commissioner or the commissioner’s representatives.”

How long does the real estate broker need to keep property management and employment records?

According to Arizona law:

“The records of each transaction and employment records shall be kept by the broker for a period of at least five years from the date of the termination of the transaction or employment.”  Section I of this code section also states:

“The broker shall retain an original, a copy or a microfilm copy of any document evidencing a rejected offer to purchase real property as a matter of record for at least one year. In instances that result in binding contracts, the broker shall retain prior rejected offers for at least five years.”

Where do my records need to be kept?

“The records shall be kept in the employing broker’s principal office or licensed branch office in this state or at an off-site storage location in this state if the broker provides prior written notification of the street address of the off-site storage location to the department.”

Attorney Steve tip:  Note, if you have a California headquarters and Arizona office, you need to make sure you are keeping records of your property management transactions ON SITE in ARIZONA at the “principle office” or a “licensed branch office in this state” or at an “offsite storage location in this state” (written notice of same being required to be sent to the ADRE).

Duty of broker to supervise and review agreements (A.R.S. 32-2174 G)

 

G. The designated broker shall review each listing agreement, purchase or nonresidential lease agreement or similar instrument within ten business days of the date of execution by placing the broker’s initials and the date of review on the instrument on the same page as the signatures of the parties. A designated broker may authorize in writing an associate broker who the designated broker employs to review and initial these instruments on the designated broker’s behalf.

Property management trust fund accounts must be “designated as trust accounts.”

A.R.S. Section 32-2174 requires that:

“All property management accounts shall be designated as trust accounts and shall include descriptive wording, substantially similar to one of the following, in the trust account title:”

1. “Trust account”.

2. “Fiduciary account”.

3. “In trust for (individual or entity name)”.

4. “Trustee for (individual or entity name)”.

5. “Fiduciary for (individual or entity name)”.

Leases must clearly state the disposition of tenant deposits

 “E. Each rental agreement executed by a property manager shall include a provision that clearly states the disposition of any tenant deposits.

Contact a Maricopa County Real Estate Compliance Law Firm

We have helped many companies in both Arizona and California with real estate compliance issues.  From preparing responses to investigations, subpoena responses, audits, accusations, compliance, real estate arbitration and mediation or responding to other legal issues relating to residential or commercial real estate, mortgage lending law, property management disputes or other related real estate issues.  We offer low flexible legal fees, including flat rate fees for many of the cases we work on.  Contact us at (877) 276-5084 to discuss your case with one of our compliance and licensing lawyers.  You may also leave your phone number and brief description of your case using the below form and one of our lawyers or a representative of our firm will contact you, normally within the hour.

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We are a business and civil litigation firm with a focus on copyright infringement cases involving illegal movie downloads (torrent cases such as London Has Fallen and Malibu Media defense), software audits (ex. Microsoft audits, SPLA, Autodesk audit notification letter, Siemens PLM defense, SIIA, Adobe and Business Software Alliance defense) and other software vendors threatening piracy and infringement. We also handle cases involving internet law, anti-SLAPP, media law, right of publicity, trademarks & domain name infringement, and we have a niche practice area handling California BRE licensing disputes, accusations, subpoena response, statement of issues and investigations. We have offices in San Francisco, Beverly Hills, Newport Beach, San Diego & Phoenix, Arizona and accept federal copyright and trademark cases nationwide. All content on our website is general legal information only and not a substitute for legal advice, and should not be relied upon. Decisions to hire counsel should not be based on advertising alone. Blogs, videos and podcasts are authored by Steve Vondran, Esq. unless otherwise noted. We can be reached at (877) 276-5084.

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