Commissioner Corner

As I meet with licensees and consumers on a regular basis, I am frequently asked certain questions. I’d like to take this opportunity to share the answers with all of you.

The most routine questions, other than those relating to obtaining and renewing a real estate license, cover topics such as setting up and running a brokerage, property management operations and trust accounts.

1. How do I set up a brokerage?
Decide if you will operate as a corporation, a limited liability company (LLC) or a partnership—or as a self-employed broker. Most brokers operate as corporations or LLCs. The organizational documents filed with the Corporation Commission should explicitly name the Designated Broker, or a separate resolution must be passed to name the Designated Broker. These documents are filed with ADRE when applying for the license. Self-employed brokers have similar requirements, although it is recommended that the broker also file their DBA-fictitious name with the local county where they will conduct business.

2. What are the signage requirements for a brokerage located in an HOA-regulated area?
The ADRE website, www.azre.gov, provides a sample of an acceptable sign. Click on “Auditing,” then “Proper Brokerage Signage.” Generally, the broker must affix a sign in the window next to the front door, observable to all before the door opens.

3. Do I need a trust account?
Yes, unless escrow is immediately deposited with a title company. And yes, for brokers performing property management, unless all monies (including tenant security deposits) are directly deposited to the property owner’s bank account and the broker does not have access to the owner’s account.

4. Do I need a license to manage my property, or that of a friend or relative?
A license is not required if you receive no compensation—that is, if you do it for free. If an LLC or corporate entity owns the property, and you are an owner or manager of the entity, then you must be licensed if you receive any compensation for your management services.

5. How long must I maintain my records?
You must maintain records for five years for sales transaction documents (including purchase contracts, earnest money receipts and closing statements); five years for employment records (including listing and property management agreements); one year after the expiration date for any residential lease; and five years for any financial documents associated with a licensed transaction. Additionally, you must maintain all originals or copies of current rental agreements and related documents until they are turned over to the property owner at the termination of the management contract.

The department’s website, www.azre.gov, is user friendly and regularly updated to provide consumers, licensees and the general public with quick and easy answers to frequently asked questions (FAQs).

Please don’t hesitate to share your feedback. Email Assistant Commissioner Mary Utley at mutley@azre.gov. We’re always interested in hearing from you!