Did you know that certain states require that an attorney be retained in a real estate transaction?  Are you aware that some states have a tax on the transfer of real estate, usually based on the price of the home being sold?  Or that other states have a professional services tax, which is a direct tax on real estate commissions and other real estate services?  These types of fees and taxes adversely affect the affordability of real estate. 

Arizona has faced such threats to the real estate industry.  And the Arizona REALTORS® has responded to these threats by successfully using ballot initiatives.  Running a ballot initiative is a costly and complex task that demands a tremendous amount of work.  Valid signatures from 15% of qualified electors are required to place an initiative proposing a constitutional amendment on the ballot. Petitions must be circulated to obtain these signatures from eligible voters and those signatures must be verified. Then, the voters must be educated on the issues through media ads and grassroots efforts, such as speaking at town halls and other meetings.  The Arizona REALTORS® did all of this and more. 

FACING THE UNAUTHORIZED PRACTICE OF LAW THREAT

In 1962, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 103 with the slogans “Protect Your Pocketbook” and “Protect Your Right to Choose.” Proposition 103 was necessary to overturn an Arizona Supreme Court decision that real estate licensees and title companies were practicing law without a license by preparing purchase contracts and other legal documents.  Arizona REALTORS® 1962-63 President Stewart M. Winter was quoted as saying “[t]his was a moment wherein to be a REALTOR^® gave one a warm glow of pride.”  Despite vigorous opposition by the Arizona State Bar, the voters overwhelmingly approved Prop 103 by a 4-to-1 margin.[1]

As a result, the Arizona Constitution contains a clause that states: 

Article 26, Section 1.  Powers of real estate broker or salesman

Section 1. Any person holding a valid license as a real estate broker or a real estate salesman regularly issued by the Arizona State Real Estate Department when acting in such capacity as broker or salesman for the parties, or agent for one of the parties to a sale, exchange, or trade, or the renting and leasing of property, shall have the right to draft or fill out and complete, without charge, any and all instruments incident thereto including, but not limited to, preliminary purchase agreements and earnest money receipts, deeds, mortgages, leases, assignments, releases, contracts for sale of realty, and bills of sale.

FACING THE REAL ESTATE TRANSFER TAX THREAT

In 2008, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 100 and “Protect Our Homes,” which constitutionally prohibited imposing any new tax, fee, or other assessment on the sale, purchase, or other conveyance of real estate after December 31, 2007. Arizona REALTORS® 2007 Past President Frank Dickens, Chairman of the “Protect Our Homes” initiative, was quoted as explaining that a transfer tax or fee would equate to “double taxation” because homeowners already pay property taxes.  Proposition 100 was approved by the voters by 76.75%.

As a result, the Arizona Constitution contains a clause that states: 

Article 9, Section 24. Prohibition of new real property sale or transfer taxes

The state, any county, city, town, municipality or other political subdivision of the state, or any district created by law with authority to impose any tax, fee, stamp requirement or other assessment, shall not impose any new tax, fee, stamp requirement or other assessment, direct or indirect, on the act or privilege of selling, purchasing, granting, assigning, transferring, receiving, or otherwise conveying any interest in real property. This section does not apply to any tax, fee, or other assessment in existence on December 31, 2007.

FACING THE PROFESSIONAL SERVICES TAX THREAT

In 2018, the Arizona REALTORS® drafted and ran a ballot initiative entitled Proposition 126 and “Protect Arizona Taxpayers,” which constitutionally prohibited the state, county, city, town, district, or other political subdivision in Arizona from imposing a new or increased tax on services that was not already in effect on December 31, 2017. Arizona REALTORS® 2018 President Lori Doerfler was quoted as explaining that the “ballot initiative filed over 400,000 petition signatures at the Arizona Secretary of State’s office in support of the Protect Arizona Taxpayers Act because Arizona voters agree we are already taxed enough.”  Proposition 126 was approved by the voters by 64.09%. 

As a result, the Arizona Constitution contains a clause that states: 

Article 9, Section 25. Prohibition of new or increased taxes on services

The state, any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law with authority to impose any tax, fee, stamp requirement, or other assessment, shall not impose or increase any sales tax, transaction privilege tax, luxury tax, excise tax, use tax, or any other transaction-based tax, fee, stamp requirement or assessment on the privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in this state.  This section does not repeal or nullify any tax, fee, stamp requirement, or other assessment in effect on December 31, 2017.

The passage of these initiative Propositions was good for business, good for the people of Arizona, and good for the economic growth of the state.  The Arizona REALTORS® will continue to work to protect private property rights, advocate for balancing laws and regulations that impact both property owners and renters at all levels of government, and address threats to the industry as they arise. For more information, go to: https://www.aaronline.com/voice-at-the-capitol/

K. Michelle Lind, Esq. is an attorney who currently serves Of Counsel to the Arizona REALTORS®.  She is also the author of the newly revised book – Arizona Real Estate: A Professional’s Guide to Law and Practice, Fourth Edition, which is available at all major booksellers.

 For more real estate related articles, visit Michelle’s Blog at Arizona Real Estate – A Professional’s Guide to Law & Practice. (arizonarealestateprofessionalguide.blogspot.com)

This article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.  10/18/23

[1] The title companies and the State Bar entered a “treaty” regarding document preparation and the unauthorized practice of law in 1977. See Arizona State Bar Committee on Unauthorized Practice of Law Opinion 76-13.