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.
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%.
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:
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.