Arizona Real Estate: Ethics and Property Management

State regulated fund used to pay purchasers of real estate who have suffered a loss due to actions or inactions of liscensee
Recovery fund
Act that prohibits discrimination against race and color
Civil Rights Act of 1866
Act that prohibits discrimination against race, color, religion, national origin, familial status, and handicap
Federal Fair Housing Act 1968
Act that ensures fairness in the marketplace
Sherman Antitrust Act
Act which requires full disclosure of all cost involved in obtaining financing and closing on a property
Real Estate Settlement Procedures Act (RESPA)
Advertisements placed by a sales agent that do not include the employing broker’s name
Blind Ads
Making the sale of the first product contingent on the sale of second
Tie in arrangement – prohibited by the Sherman Antitrust Act
Penalties for Sherman Antitrust Act
Maximum $100000 fine and 3 years prison
Recovery Fund payments
$10 sales agent $20 broker paid in when license obtained; additional $10 sales agent $25 broker upon renewal if fund goes below $600000
Recovery Fund benefits
Licensee or spouse cannot gain from fund. Intended for purchaser.
Recovery Fund time limit
5 years to file claim
Recovery Fund monetary limits
$30,000 max an individual can collect
$90,000 max paid out for licensee
Recovery Fund Penalty
Loss of license. If commissioner approves license can be returned if fine plus interest is paid.
Realtor Code of Ethics
17 articles and standards of practice required by members of NAR to follow. Determined by RE industry
Process for Violations of RE Code
1. File complaint within 180 days of known violation – general public or Realtor
2. Reviewed by Grievance Committee
3. Professional Standards Hearing
Arbitration
Article 17 of Code requires Realtors to arbitrate rather than litigate. Usually regarding commission disputes between brokers.
Use of terms “team or group” in ads
Broker may use either term if ad does not refer to a trade name. Must refer to real estate agents or broker. All employed by same broker. List of members available for ADRE.
Subdivision Ads
Must never say “recommended by RE Commissioner” or “no risk”
Comprehensive Loss Underwriting Exchange (Clue Report)
Allows insurance company 5 years of property history. Allowed access by Fair Credit Reporting Act. Only insurance and owners can order report.
New Home Builder Warranties
Required to provide 1 year. 2 year on mechanical equipment.
Responsibility of New Homes Agent
Homes built without contractor license may not be listed for 1 year.
Must disclose knowledge of latent defects – up to four years from close.
Must use due diligence and disclose red flags.
Created for regulating the relationship between landlord and tenant in residential leases
Uniform Residential Landlord and Tenant Act of 1973
A contract between a lessor and a lessee that transfers the right to exclusive possession and use of the property for a specified period of time in exchange for rent
lease
Landlord
lessor
tenant
lessee
Transferring part of a lessee’s interest to another for a portion of the term of the lease
subletting
The legal process that results in the tenant being physically removed from the leased premises
Actual eviction
Actions of a landlord that disturb or impair a tenant’s enjoyment of the leased premises and causes him to leave
Constructive eviction
When the right and interest in a property is transferred to another for the entire term
assignment
The landlord’s legal right to seize a tenant’s belongings for damages or rents in arrears under court order
Distraint (illegal in AZ)
A privately owned entity that provides services or accommodations to the public
Public accomodation
The right to take back possession of a property if lease ends
Reversionary rights
Property Manager
Must hold license if managing 2 or more properties for someone else.
Certified Property Manager (CPM)
Designation given by Institute of RE Management
Property Manager Duties
Achieve owner’s objectives: generate income, preserve value of property, secure suitable tenants, collect rents, care for premises, payments and disbursement funds, monthly reports of income and expenses
Rental Agreements
Must be kept for 1 year from expiration date
Property Management Classifications
Residential, Industrial, Commercial, Special Purpose
Commercial Property Managers
Must comply with ADA. If property has < or = 25 employees, ADA covers hiring employees interviewing potential tenants.
Management Contract
Between owner and broker. Names parties involved, street address – informal reference.
Terms of Management Contract
Specify terms of management; specify agents power to hired, fire and supervise; specify authority to rent, operate and manage the premises; beginning and end date; contain termination provision; frequency of profit, loss, and reporting.
Finder’s fee
Can’t exceed $200, can’t exceed 5 x in a 12 month period, credit toward rent.
Termination of Property Manager
Immediately provide copies of all rental agreements. Within 5 days provide list of tenant security deposits. Within 35 days provide reimbursement of all monies remaining in property accounts except unpaid obligations, within 75 days provide final accounting of all monies including bank reconciliation.
PM Financial records
Kept for 3 years from execution date
PM agreements
Kept for 5 years from termination
Residential leases
Kept for the earlier of 1 year from termination of the lease or until turned over to the owner at termination of the property management agreement.
Nonresidential leases
Kept in individual folders and must contain documented trail of money and lease agreement.
Fully executed residential lease agreements
Not required to be reviewed and initialed by broker
Records kept
On site or off site if ADRE is notified in writing of address
Uniform Residential Landlord and Tenant Act of 1973
48 hours notice to enter premises, tenants liable for guests actions, no more than 2 persons per bedroom, tenant must know rules at signing, reversionary rights retained by landlord.
Rental Properties
80% or more of income is from dwelling units, must be registered with county, Non-resident owners must appoint statutory agent
Lease
Statute of Frauds applies except for 1 year or less
Contract Rent
The rental amount on the lease contract
Economic Rent
The rental amount that the current market is demanding
Gross Lease
Tenant pays fixed rent; landlord pays taxes, insurance, mortgage, repairs etch. Most commonly used for residential properties
Net Lease
Tenant pays rent and most of all property charges. Generally used for commercial or industrial properties and long term
Ground Lease
Also called land lease; leasing land alone; used to separate ownership of land from building; usually 99 year lease
Percentage Lease
Lessee pays a percentage of his income in addition to gross or net lease; usually retail operation
Lease Option (unilateral contract)
First right of refusal – gives tenant right to purchase property. Runs with land, no extension beyond term of lease, consideration can be rent, delinquent rent payment can result in end of option, can be assigned separately
Sale and Leaseback
Owner sells property on market and then leases it back
Graduated Lease
Rent payments start at a fixed rate but increase at set intervals during lease term – often used for commercial or tough economy.
Index Lease (escalation)
Rent adjusts according to changes in price index – often consumer or wholesale price index
Valid Lease Components
Legal ability to enter contract, legal purpose, offer and acceptance, signatures or lessor and lessee, consideration – rent, property description, term of lease clearly labeled
Divorce
Spouse does not need to sign lease
Month to month lease
30 day notice to cancel agreement
Landlord can change property rules
30 day notice to tenants
Exemptions from Landlord and Tenant Act
Mobile Homes, public housing, hotels, fraternity, sorority, dormitory
Move in inspection notice
Tenant has 5 days after occupancy to fill out return to landlord.
Upon move in tenant must be given
Name and address of property, notice where to obtain Landlord Tenant Act, Inspection form, Pool safety notice, Lead based paint disclosure, bed bug ed materials
Bedbug Ed materials
Disclose w/in 3 business days, inspect within 7 business days, 7 business days within evidence to start treatment, 3 days notice before treatment at landlords expense
Move out inspection
May apply deposit to rent or damages, itemized list of damages, remaining deposit returned within 14 business days. If not returned tenant has right to recover up to twice amount wrongfully held.
Breach
violation of any of the terms of the agreement without legal excuse
Constructive eviction
Landlord has 10 days from notice to fix problems unless affecting health and safety and then 5 days. Tenant can repair property and be reimbursed up to $300 or half rent whichever is greater.
Actual Eviction
5 day notice, tenant forced to move out, distraint illegal
Skip/Abandonment
Tenant moves out w/out notice or payment of rent, destruction or condemnation, death does not terminate, mutual agreement, expiration of lease, tenant convicted of a crime or is victim of domestic violence.
Security Deposits
One and one half month’s rent
Security Deposits as trust money
Can be interest bearing, must identify where interest goes, broker may have up to $3,000 of own money in account, signers can be any employee/agent under the broker
Lessor Defaults/Foreclosure
Non disturbance clause, assignment of rents clause
Non disturbance clause
Tenant cannot be disturbed if there is foreclosure on lessor
Assignment of rents
Allows lender to collect rent if lessor defaults on loan.