Part One of Two: Designated Brokers and Branch Managers

INTRODUCTION

The Arizona Administrative Code (Code) is a set of rules drafted by administrative agencies governing procedural rights and duties.  The rules are in addition, but subservient, to substantive rights and obligations that were passed into law by the Arizona legislature.  In other words, the Code is meant to compliment and provide clarity to Arizona law by its regulatory agencies.  The Code section pertaining to the Arizona Department of Real Estate is Title 4- Professions and Occupations, Chapter 28- State Real Estate Department (cited to as R4-28). 

Over a year ago, the ADRE proposed revisions to its section of the Code.  Per law, the ADRE sought stakeholder and public comment on its draft proposals, including comment from the Arizona REALTORS®.  As a result of these discussions, the ADRE changed and eliminated a number of its proposed rule revisions.  The final rules package was recently approved by the Governor’s Regulatory Review Counsel on October 7^th, and the revised Code will become effective on December 13, 2025.

The new ADRE rule revisions are massive.  That section of the Code includes thirty-one (31) pages of rules and each rule, and almost every subsection of each rule, has been revised.  Furthermore, some rule revisions are not clear.  The Arizona REALTORS® has requested guidance from the ADRE on a number of specific rule revisions, and their responses will be published when received.  To view the list of the questions posed to the ADRE click HERE.

This two-part series is not a treatise on each rule revision.  Instead, it hopes to identify and explain the most consequential rule revisions to ensure that REALTORS® are prepared for these changes.  Part-one focuses on revisions that will have the greatest impact on designated brokers and branch managers.  Part-two focuses on revisions that will have the greatest impact on real estate agents.

The Arizona REALTORS® encourages all of its members to read the entire rule revisions themselves, a copy of which can be found by clicking HERE.

OVERVIEW

There are several significant rule revisions that will affect designated brokers and branch managers which will likely necessitate updates to their policy manuals.  Brokers will need to provide updates to the ADRE sooner, keep more transaction documents, and hold themselves and their licensees more accountable.  This article does not address rule revisions in sequential order but instead groups revisions by topic area and importance.  First, the rule revision is provided in blue [underline is new language, and strikethrough is removed language].  Next, analysis is provided in black to help interpret the intended objective of the revision and provide guidance on how to comply. 

BROKERS, BRANCH MANAGERS AND LICENSEES ARE HELD MORE ACCOUNTABLE

R4-28-502(G). The designated broker shall supervise all advertising, for real estate, cemetery, or membership camping brokerage services is responsible for the advertising of all real estate activity.

Supervision implies a designated broker is not liable should a licensee fail to obey policies and procedures of the broker.  However, the term “responsible” implies the broker is liable even if they took all reasonable steps to ensure their licensees comply with regulatory requirements.  Designated brokers, and potentially branch managers, are encouraged to bolster their advertising supervision based on this change. Although dependent upon the way this revised rule is enforced, brokers could now be deemed guarantors of all advertising produced by the brokerage.

R4-28-304(B). Branch office manager. A designated broker may authorize in writing an associate broker or salesperson to act as a branch office manager to perform any of the following duties of the designated broker at the branch office. A designated broker must maintain any letters of authority required under R4-28-303(E)(7) specifying which duties the branch manager is permitted to perform. Any associate broker or salesperson with delegated duties becomes responsible, in addition to the designated broker, for the supervision of licensees licensed through the branch for those duties. This designation does not relieve the designated broker from any responsibilities.  cont.

Branch managers who have been delegated specific duties to carry out supervisory roles are now responsible, in addition to the designated broker, if they fail to carry out those duties competently.  Branch managers are encouraged to identify specific duties they are proficiently able to conduct on behalf of the designated broker and ensure only those duties are delegated to them in any letters of authority filed with the ADRE.

R4-28-1103(1)(a) – Broker Supervision and Control

1. Review and manage:
a. Transactions of all licensees requiring a salesperson’s or broker’s license; and

Previously, a broker was only required to review and manage transactions that required a license.  For example, the act of a licensee selling their own home “for sale by owner” does not require a license and their broker was not required to review and manage the transaction.  Now, the broker is required to review and manage all transactions of their licensees regardless of whether the licensee could do so without a real estate license.  Designated brokers, and potentially branch managers, are encouraged to review and modify their policies and procedures to ensure all transactions of their licenses are reviewed and managed.

R4-28-1103(B).  A designated broker shall establish a system for monitoring compliance with statutes, rules, and the employing broker’s policies, procedures, and systems. The established system is not limited to but must include a progressive disciplinary policy for managing violations of the employing broker’s policies which would also represent a violation of any statutory requirement or prohibition related to real estate activity and failure of an employing broker to enforce the disciplinary policy would be a violation of subsection (D).

Progressive discipline is now required should a licensee violate Arizona law or the employing broker’s policies and procedures.  Policy manuals should include this requirement.

ADVERTISING REVISIONS

R4-28-502(I). Before placing or erecting a sign or publishing to an electronic medium giving notice that specific property is being offered for sale, lease, rent, or exchange, a licensee salesperson or broker shall secure the written consent of the property owner, and the sign or publication shall be promptly removed upon request of the property owner.

All licensees must obtain an owner’s permission to erect a sign or advertise a property for sale.   Although licensees were previously required to promptly remove the sign upon request, this revised rule requires them to also promptly remove all advertising upon request.  Presumably, if the licensee makes all reasonable efforts to remove the advertisement they will be in compliance with this new Rule even if the advertisement cannot be physically removed (e.g., published in a magazine) or if the advertisement continues to be displayed by third parties.  REALTORS® are encouraged to notify the owner of the steps taken to remove the advertisements and explain why some advertisements may continue to be displayed by third parties in such circumstances to set good expectations for the owner.

R4-28-502(J). The provisions of subsections (E) and (G) do not apply to advertising that does not refer to specific property.

and

R4-28-502(K). The use of an electronic medium, such as the Internet, Artificial Intelligence, or web site technology, that targets residents of this State state with the offering of a property interest or real estate brokerage services pertaining to property located in this state constitutes the dissemination of advertising as defined in A.R.S. § 32-2101(2). All advertising using an electronic medium must comply with Subsection E of this Section and if advertising online, all requirements of advertising set forth above must be satisfied on the advertisement without the need to scroll.

Previously, advertisements that did not refer to a specific property did not need to include the employing broker’s name and the designated broker was not required to supervise the advertisement.  Now, all advertisements must include the employing broker’s name(s) without the need to scroll.  Designated brokers, and potentially branch managers, are encouraged to bolster their advertising supervision as they are now seemingly guarantors of all advertising produced by the brokerage.

R4-28-502(E). A licensee salesperson or broker shall ensure that all advertising identifies in a clear and prominent manner the employing broker’s legal name or the dba name(s) contained on the employing broker’s license certificate.

Employing brokers can now register multiple dba(s) or trade names with the ADRE.  The Arizona REALTORS® has requested the ADRE provide more guidance on the requirement to display the dba(s) on advertisements. For example, must all advertisements contain each and every dba(s) of the employing broker?

R4-28-502(F). A licensee who advertises property that is the subject of another person’s real estate employment agreement shall display the name of the listing broker in a clear and prominent manner make a disclosure in the advertisement that indicates the properties featured are not representative of the licensee’s transaction history and includes information of the other licensee’s transactions.

When advertising property of another licensee, the advertisement must state it is not representative of the advertiser’s transaction history and it must include information of the other licensee’s transactions.  The Arizona REALTORS® has requested the ADRE provide more guidance on the requirement of providing the other licensee’s transactions (e.g., Does this mean their current listings nationwide?  Current listings in Arizona?  All past sales?).

R4-28-502(B). Any licensee salesperson or broker advertising their own or another licensee’s the salesperson’s or broker’s own property for sale, lease, or exchange in Arizona shall disclose they are licensed the salesperson’s or broker’s status as a salesperson or broker, and as the property owner by placing the words “owner/agent” in the advertisement.

Previously, only licensees who advertised their own property for sale were required to include “owner/agent” in the advertisement.  Now, brokers who list another licensee’s property for sale must also disclose the owner/seller is licensed and use the words “owner/agent” must appear in the advertisement.  Brokers are encouraged to clarify that the owner/seller is the “owner/agent” and not the listing broker in the advertisement so as not to confuse the public.

NEW BROKER REQUIREMENTS

R4-28-802(C). Transaction statements. In addition to the requirements of A.R.S. §§ 32-2151.01 and 32-2174, the broker shall retain true copies of all receipts and disbursements, or copies of the executed and delivered escrow closing statements that evidence all receipts and disbursements in the transaction and any transaction documents signed by parties to the transaction or any disclosures made as part of the transaction.

Brokers must now retain all disclosures and all documents signed by the parties as part of their transaction file.

R4-28-302(I). The Department shall not license an employing broker under more than one dba name Prior to an employing broker adding a dba or trade name, evidence of the employing broker entity holding at least a 10% ownership of the dba or trade name must be provided and a person. An individual shall not conduct or promote real estate business under any name other than the name under which the person individual is licensed.

Previously, an employing broker was limited to one (1) dba.  Now, employing brokers may obtain multiple dba(s) or trade names by evidencing it owns at least ten percent (10%) ownership of the dba or trade name.  The Arizona REALTORS® has requested the ADRE to provide more guidance on how an employing broker can evidence any ownership interest in a dba or trade name.

R4-28-102(B). In computing any period of time allowed by these rules or by an order of the Commissioner, the day of the act, event, or default from which the designated period of time begins to run is not included.  The last day of the period is included unless it is Saturday, Sunday or a legal State holiday in which even the period runs until the end of the next day is not a Saturday, Sunday or legal State holiday. Unless the time period is specified as calendar days, when the period of time allowed is less than 11 days, intermediate Saturdays, Sundays, and legal holidays are excluded from the computation.

Brokers have less time to notify the ADRE of changes to their licensing, contact information, etc.  Previously, any requirement to notify the ADRE within ten (10) days excluded weekends and holidays (the broker had 10 business days).  Now, brokers have only 10 calendar days to comply (unless the last day falls on a weekend or holiday).

R4-28-303(E). If disclosing information required under R4-28-301 such as an adverse judgment, bankruptcy, denial, or restriction of or disciplinary action against a professional or occupational license, or recovery fund payment on the person’s own behalf or on behalf of any officer, director, member, manager, partner, owner, trust beneficiary holding 10 percent or more beneficial interest, stockholder owning 10 percent or more stock, or other person exercising control of the employing broker, file with the Department a written statement within 10 days of the occurrence, providing detailed information and, upon request by the Department, the supporting documentation identified in R4-28-301(A)(2).

Although not specifically required in an original license entity application (R4-28-301), any officer, director, member, manager, partner, owner, or other person exercising control of the entity who files for bankruptcy protection must now disclose the bankruptcy to the ADRE within ten (10) calendar days.  The same disclosure of a bankruptcy is required of any licensee.

R4-28-1101 – Licensee Duties to Client
C. A licensee shall expeditiously perform all acts required by the holding of a license. A licensee shall not delay performance, either intentionally or through neglect. If a licensee is unable to perform any act as required by rule or statute, they must expeditiously notify their designated broker of their inability to perform.

Licensees must expeditiously notify their designated broker if they are unable to perform the duties required by their license.  It is unclear whether this requirement must be met if the licensee is only temporarily unable to perform (e.g., an afternoon) or if the licensee has made arrangements for another licensee within the brokerage to cover the performance of their duties. The Arizona REALTORS® has requested the ADRE provide more guidance on how to comply with this revision.    

R4-28-1102 – Property Negotiations

Except for owner listed properties, negotiations shall be conducted exclusively through the principal’s broker or the broker’s representative unless:

1. The principal waives this requirement in writing, and
2. No licensed representative of the broker is available for 24 hours.

and

R4-28-1102(A). Real estate licensees may not contact a principal represented by another licensee unless the principal’s Designated Broker, broker representative with delegated authority, and the licensee are unavailable for 24 hours. A principal may waive or alter this requirement by issuing written instructions.

Sellers and buyers can now waive the requirement for all contact with them be made through their licensed broker at any time.  Otherwise, a licensee must attempt communications through the principal’s broker unless their designated broker, branch manager and agent are all unavailable for 24 hours.

R4-28-301(A)(3)

1. An applicant for any Department-issued license or license renewal…shall submit the following information to the Department:
   3. A valid fingerprint clearance card full set of fingerprints as prescribed in A.R.S. § 32-2108.01

Although this change appears nothing more than technical in nature, the ADRE has stated the revision to this Rule has somehow authorized it to require new valid fingerprint clearance cards for all license renewals.  For the Arizona REALTORS® position on this matter, please click HERE.

NEW TEAM REQUIREMENTS

R4-28-302(I). The Department shall not license an employing broker under more than one dba name Prior to an employing broker adding a dba or trade name, evidence of the employing broker entity holding at least a 10% ownership of the dba or trade name must be provided. and a person An individual shall not conduct or promote real estate business under any name other than the name under which the person individual is licensed.

The ADRE has stated that this Rule revision authorizes it to require the registration of teams and team members with the ADRE.  The Arizona REALTORS® has requested the ADRE provide more guidance on how teams and team members must comply with the new requirement and when compliance must be made.

Aaron M. Green, Esq., a licensed Arizona attorney, is the General Counsel for the Arizona Association of 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.

---