Real Estate Tales from the Courtroom: The Designated Broker’s Initials

Does the Designated Broker’s Failure to Initial the Listing Agreement Prevent a Commission Claim?

The sellers owned a house in Chandler and signed a listing agreement with the listing agent to sell the house. When the house sold, the sellers refused to pay the $89,700.00 commission because the listing agent’s broker did not review and initial the listing agreement within ten business days as required by statute ARS 32-2151.01.G.   As might be expected, the agent filed a lawsuit against the sellers for the unpaid commission.    

As discussed in the article about the case of Young v. Rose, a court ruled that a real estate agent who does not sign a buyer’s broker employment or listing agreement may not sue to collect a commission under that agreement due to ARS 32-2151.02.  

However, this case addresses a different issue: whether an agent can sue to collect a commission under a listing agreement signed by the agent, but not initialed by the designated broker within ten business days after it was signed by the parties.  The court in this case decided that the agent was entitled to pursue the claim. 

The court stated that a designated broker's failure to initial the listing agreement within ten business days of the parties signing it as required by subsection ARS 32-2151.01.G “poses no impediment to a civil action for unpaid commissions.”  The statute requires a “licensed employing broker” to keep certain records and to exercise specified controls over the broker's trust fund account.  But the statute does not address an agent’s right to recover a commission. 

Of course, the Arizona Department of Real Estate (ADRE) may sanction a broker who fails to initial the listing agreement within ten days as required by statute.  But ARS 32-2151.01.G has a different purpose than ARS 32-2151.02. The statute requiring the broker’s initials (ARS 32-2151.01.G) is regulatory in nature and exposes the broker to sanctions by ADRE, but the statute does not affect the validity and enforceability of the listing agreement itself.

Therefore, the Court found that a designated broker’s failure to initial a listing agreement within ten business days of the parties signing it as required by statute posed no barrier to the agent’s lawsuit for the unpaid commissions. As a result, the listing agent was entitled to her commission under the listing agreement.

CK Family Irrevocable v. My Home, et al., 249 Ariz. 506

 

Michelle Lind is Of Counsel to the Arizona REALTORS® and the author of Arizona Real Estate: A Professional’s Guide to Law and Practice.  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.  8/2/22