Advertising Lists of Properties For Sale Must Contain the Name of the Brokerage

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AZ Court of Appeals Looks at Independent Contractor Status of RE Agents

Do Arizona’s real estate statutes and regulations establish that the relationship between real estate brokers and their salespersons is one of employer and employee?

At a time when the United State Congress and Department of Labor continue to focus on workers that are misclassified as independent contractors, this was the question presented to the Arizona Court of Appeals in the case of Santori v. MartinezRusso, LLC. dba RE/MAX Professionals (CA1 8/23/16).

Regrettably, this case stems from a tragic automobile accident that resulted in a wrongful death lawsuit. The accident occurred when an agent licensed with Defendant was returning from a real estate sales appointment. As part of the lawsuit, Plaintiffs allege that Defendant was vicariously liable for its agent’s negligence. The trial court disagreed, granting summary judgment in Defendant’s favor based on its conclusion that the agent was an independent contractor, not an employee of the Defendant. Plaintiffs appealed in part on the basis of A.A.C. R4-28-1103(D), which provides that “[a]n employing broker is responsible for the acts of all…salespersons…acting within the scope of their employment.”

An examination of Arizona real estate law, A.R.S. § 32-2153(A)(21), provides that a broker must supervise the activities of their salespersons. Similarly, as noted above, A.A.C. R4-28-1103(D) renders an employing broker responsible for the acts of its salespersons. But do these obligations render a salesperson an employee? To answer this question, the Court needed to determine the scope of these laws.

Upon close examination, the Court noted that the regulations are narrowly tailored, applying only to the broker’s responsibility to supervise agents in: 1) their real estate transactions; 2) the use of disclosure forms and contracts; and 3) the filing, storing and maintaining of real estate transaction documents. This is of great significance due to the fact that a salesperson’s driving “does not relate in any way to documenting a transaction.” The Court’s interpretation of these real estate laws is of further significance as the limited scope of the regulations led the Court to conclude that a broker’s responsibilities do not arise to the level of supervision required by an employer over an employee.

Continuing with its analysis, the Court cited Arizona case law in support of the proposition that “[w]hether an individual is an employee or an independent contractor is fundamentally a question of control.”

In this case, the salesperson maintained near total discretion in the “time, manner, and means” in which he traveled as part of his business. He was not required to maintain specific hours and was free to choose the territory in which he worked, the clients he represented, as well as the manner in which he serviced his clients. Paid strictly by commission, the level of control exercised by an employer was simply not present in this case, especially considering that the conduct at issue involved driving, a task unrelated to the “substance and documentation of the real estate transaction itself.”

It is this analysis that led the Court to conclude that Arizona’s real estate laws do not establish the requisite control over aspects of a salesperson’s activities such as driving a car and, as such, do not dictate an employer-employee relationship as a matter of law.

The case of Santori v. MartinezRusso, LLC. dba RE/MAX Professionals represents a positive step in maintaining the independent contractor relationship enjoyed by salespersons and the brokerages with whom they are affiliated. Nonetheless, brokers should continue to monitor and evaluate their policies and procedures to ensure that the brokerage does not assume control over the time, manner and method of an agent’s job performance.


Scott Drucker  Scott M. Drucker, Esq., a licensed Arizona attorney, is General Counsel for the Arizona Association of REALTORS®   serving as the primary legal advisor to the association. 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.

When a Contingency is Met, No Addendum is Needed

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Acceptance Cannot be Performed Before an Offer

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Move-In Condition Checklist Within Five Days of Occupancy

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Tenant’s Personal Property Does Not Convey in Sale

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Escrow is Opened When Commercial Contract is Delivered to Title

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BINSR May Continue on Additional Pages

FACTS:                 

After entering into a Residential Resale Real Estate Purchase Contract (the “Contract) with a seller, the buyer hired a home inspector to perform a home inspection. After reviewing the inspection, the buyer had a list of requested repairs, all of which would not fit on page 1 of the Buyer’s Inspection Notice and Seller’s Response (“BINSR”). The buyer’s agent continued the list on an addendum, incorporating the addendum into the BINSR. The seller now refuses to sign the addendum because he does not agree to make all of the requested repairs.

ISSUE:                  

Does the seller have to sign the addendum?

ANSWER:                           

Probably not.

DISCUSSION:    

An addendum is a mutual agreement to amend the Contract. Here, the seller does not agree to all of the repairs and, by signing the addendum, it may represent that the seller agrees to all of the repairs on the addendum.

Practice tip: To avoid confusion, the buyer’s agent should have used a blank word document incorporated into the BINSR to continue the list of requested repairs to submit to the seller.

Appraisal Contingency May Begin Again

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