The Arizona REALTORS® Buyer-Broker Exclusive Employment Agreement (the “Agreement”) offers benefits to both the buyer and the buyer broker. On the one hand, the Agreement benefits the buyer by spelling out in a clear and concise manner the terms of the buyer-broker relationship. On the other hand, the Agreement benefits the buyer broker by assuring that the broker will be compensated an agreed upon amount if the buyer purchases a property during the term of the Agreement.

But what happens if the Agreement fails to identify the compensation the buyer’s broker is capable of earning?

Lines 29 through 33 of the Agreement state in part:

With increasing frequency, brokers are choosing to leave blank the fillable field on line 30 of the Agreement, under the mistaken belief that doing so is not required. Unfortunately, this practice has the potential to deprive a buyer broker of a commission they would otherwise be entitled to.

A.R.S. § 32-2151.02 requires that all real estate employment agreements “fully set forth all material terms, including the terms of broker compensation.”

With this in mind, imagine a scenario in which a buyer and buyer broker execute a Buyer-Broker Exclusive Employment Agreement but fail to identify the amount of compensation on line 30 of the form. Thereafter, during the term of the Agreement, the buyer employs a different broker and uses that broker to purchase a property. Is the original buyer broker that’s identified on the top of the Agreement entitled to a commission? The answer is “no”.

There are nonetheless instances in which the buyer broker argues otherwise and asserts that they are entitled to the commission earned by the second broker. Let’s therefore examine the merits of this argument.

Lines 30-31 of the Agreement state “The amount of compensation shall be: _____________ or the compensation Broker receives from seller or seller’s broker, whichever is greater.” In this case, the term “Broker” refers to the buyer broker that executed the Agreement as identified on line 2. It does not refer to the second broker. Therefore, even if the second broker received a commission of X%, that does not represent the amount to which the buyer broker that executed the Agreement is entitled. With no compensation set forth on line 30, the Agreement fails to “fully set forth all material terms, including the terms of broker compensation” as required by Arizona law.

While the above result is unfortunate, the solution is simple. To avoid being deprived of a commission under this scenario, buyer brokers should ensure that line 30 of the Agreement specifically identifies the amount of compensation to be earned. For example, a buyer broker could insert any of the following on the fillable portion of line 30:

• X% of the price of the Property purchased, exchanged, optioned or leased by Buyer;
• $X (a specific dollar amount); or
• The amount of the listing broker’s offer of compensation in the multiple listing service for the Property purchased, exchanged, optioned, or leased by Buyer. 

If in doubt about how to complete the Agreement, consult with your employing broker or manager.

Scott M. Drucker, Esq., a licensed Arizona attorney, is CEO of the Arizona REALTORS®. 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.