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Arizona’s real estate market is experiencing a legal shift with the implementation of Senate Bill 1218 (SB 1218). Designed to combat predatory Exclusive Property Engagement Agreements, this legislation introduces new protections for homeowners. Under the new rules, Exclusive Property Engagement Agreements must meet specific guidelines, ensuring fair and transparent terms while safeguarding homeowners’ rights.
Some real estate contracts have historically included unfair or deceptive clauses, particularly those attempting to tie a property to long-term agreements or impose burdensome restrictions on its sale. SB 1218 directly addresses these issues, preventing predatory practices and offering homeowners more control over their property transactions.
It’s crucial for Arizona homeowners to get up to speed on the new rules governing real estate to navigate their property transactions effectively. This article breaks down the details of SB 1218, its implications for homeowners, and what steps you should take before signing an Exclusive Property Engagement Agreement.
What Is an Exclusive Property Engagement Agreement?
An Exclusive Property Engagement Agreement is a “contract or agreement that provides an exclusive right to a person to list or sell residential real estate, including a contract or agreement to enter into any listing agreement or arrangement in the future or any memorandum recognizing the existence of an exclusive property engagement agreement.”
While these contracts are common and beneficial in most cases, some versions have exploited loopholes to include unreasonable restrictions. Examples of predatory agreements include excessively long durations, binding future property owners to previous contracts, and even clouding property titles with recorded claims.
The enactment of SB 1218 introduces limits and new regulations to ensure Exclusive Property Engagement Agreements serve their intended purpose without infringing on homeowner rights.
Key Provisions of SB 1218
Arizona’s new law establishes clear boundaries for Exclusive Property Engagement Agreements. Here’s what SB 1218 covers and how it protects homeowners:
1. Duration Limits
Exclusive Property Engagement Agreements now have a maximum term of 12 months. This provision prevents the homeowner from being locked into long-term contracts that may hinder their ability to sell or manage their property effectively.
Predatory agreements often included clauses that extended the contract indefinitely, sometimes without the homeowner’s clear understanding. Under SB 1218, any Exclusive Property Engagement Agreement exceeding 12 months will be considered void and unenforceable.
2. No Covenants Running with the Land
Covenants running with the land—clauses that bind future owners to an agreement—are no longer allowed. Previously, real estate professionals could make agreements that ran with the land, impacting future owners as well as the current one. For example, a new buyer might unknowingly inherit a binding contract.
SB 1218 ensures that Exclusive Property Engagement Agreements apply only to the original homeowner who signed the contract. Future buyers are not obligated to honor previous Exclusive Property Engagement Agreements.
3. Recording Restrictions
Real estate professionals are now prohibited from recording Exclusive Property Engagement Agreements with the county recorder’s office. Recording these agreements created a situation where these contracts could cloud property titles, causing delays or complications in future sales.
This restriction protects homeowners from unexpected encumbrances that could devalue or complicate the sale of their property.
4. Prohibition of Liens or Encumbrances
Exclusive Property Engagement Agreements cannot authorize the placement of liens or other encumbrances on the property. SB 1218 prohibits the recording of Exclusive Property Engagement Agreements, ensuring they do not create encumbrances on a home’s title. This practice often surprised homeowners when attempting to sell or refinance their homes.
Under the new law, such liens are prohibited, ensuring the property remains unencumbered by unfair claims.
5. No Unauthorized Assignments
Exclusive agreements can’t be transferred or assigned to anyone else without the homeowner’s explicit approval. Unauthorized assignments were a common issue in predatory contracts, leaving homeowners in agreements they had no prior relationship with.
Homeowners now have full control over selecting who represents them when selling their property.
Why Were These Changes Necessary?
Predatory real estate contracts have become a growing concern in Arizona and other states. Unscrupulous real estate professionals often took advantage of legal loopholes to lock homeowners into restrictive and long-term agreements. These contracts frequently included:
- Excessively Long Terms: Some agreements lasted decades.
- Recorded Encumbrances: Recorded agreements that operated as liens, clouding property titles and making it difficult to sell or refinance homes.
- Hidden or Misleading Clauses: Homeowners sometimes unknowingly signed contracts with unreasonable terms.
The result was frustration, financial loss, and unnecessary complications for Arizona homeowners. SB 1218 addresses these issues, providing stronger protections and ensuring real estate transactions remain transparent and fair.
Implications for Homeowners in Arizona
SB 1218 introduces a range of benefits and protections that will have a significant impact on how homeowners engage with real estate professionals. Here’s what you need to know:
1. Greater Control Over Contracts
Homeowners can now feel more confident when entering into Exclusive Property Engagement Agreements, knowing the law limits their duration and scope. Exclusive Property Engagement Agreements must adhere to the 12-month limit, providing homeowners with more flexibility.
2. Clean Property Titles
Preventing the recording of Exclusive Property Engagement Agreements ensures property titles remain free of unwanted encumbrances. Homeowners won’t encounter unexpected surprises when trying to sell or refinance their homes.
3. Protection Against Long-Term Liability
Future property owners are no longer affected by prior exclusive agreements. Homeowners selling their homes can offer clean transfers without concerns about lingering obligations.
4. Improved Transparency
The law promotes greater fairness and transparency in real estate transactions. Homeowners now have a clear understanding of what to expect in Exclusive Property Engagement Agreements, reducing the risk of hidden or deceptive terms.
Steps Homeowners Should Take Before Signing an Exclusive Property Management Agreement
While SB 1218 introduces significant protections, homeowners must still exercise caution when signing real estate contracts. Here are key steps to ensure you enter a fair and legal agreement:
1. Read the Contract Thoroughly
Carefully review every detail of the Exclusive Property Engagement Agreement, including the duration, obligations, and any fees involved. Make sure the contract complies with SB 1218’s provisions.
2. Ask Questions
Don’t hesitate to require an explanation of any part of the agreement. Ensure you understand all terms before signing.
3. Consult a Real Estate Attorney
Legal counsel can provide invaluable guidance when reviewing real estate contracts. An Arizona real estate attorney will help you identify potential issues and confirm the agreement aligns with the law.
4. Negotiate Terms
If you’re uncomfortable with specific terms, negotiate changes. Remember, you have the right to modify the agreement to suit your needs.
5. Avoid Signing Under Pressure
Take your time when reviewing contracts. You should not be pressured into signing an agreement on the spot.
How Real Estate Professionals Must Adapt
Violating SB 1218 can result in contracts being declared void, legal penalties, and damage to professional reputations.
Legal Recourse for Violations
Homeowners who encounter Exclusive Property Engagement Agreements violating SB 1218 have legal options. The law declares non-compliant agreements void and unenforceable, meaning homeowners are not bound by their terms.
If you believe your rights have been violated under SB 1218:
- Consult a Real Estate Attorney: Legal professionals can review the agreement, confirm its validity, and help you take appropriate action.
- Report the Violation: File a complaint with the Arizona Department of Real Estate or the Attorney General’s Office. These agencies can investigate and hold violators accountable.
Final Thoughts
These new laws represent a significant step forward in protecting homeowners from predatory practices. SB 1218 establishes clear limits on contract duration, eliminates harmful clauses, and ensures property titles remain clean and unencumbered.
Homeowners now have greater control, transparency, and peace of mind when engaging with real estate professionals. It’s important to understand these new protections if you’re considering signing an Exclusive Property Engagement Agreement.
Protect Your Real Estate Rights with Gottlieb Law
Understanding real estate laws can be complex, especially when navigating new legislation like SB 1218. Gottlieb Law focuses on Arizona real estate law and is committed to protecting homeowners from unfair or predatory contracts.
Whether you’re reviewing an Exclusive Property Engagement Agreement, disputing a contract, or simply seeking advice, our experienced attorneys are here to help. Contact our team today at 602-899-8188 to schedule a consultation or use the Contact Us page of our site.
The following links provide access to blogs and articles that contain general legal information. The information provided in the blogs and articles is not specific legal advice, does not create an attorney-client relationship, and you should not take any actions in reliance on the information without first retaining an attorney and establishing an attorney-client relationship. Laws change over time and you should seek legal counsel if you have a specific legal situation that you need advice on.