Gottlieb Law, PLC provides this article for informational purposes only. Nothing herein creates an attorney-client relationship. Do not take action based on this article without consulting qualified legal counsel. Laws change, and only a licensed attorney can provide advice tailored to your specific situation.
Arizona property managers face new compliance expectations following Senate Bill 1171 (2024), which amended A.R.S. §§ 32-2101 through 32-2197.16.
A.R.S. § 32-2151 requires brokers to perform monthly three-way reconciliations comparing the trust-fund bank statement, client ledgers, and the trust-account ledger, and to explain any variance. Designated brokers must complete property-management compliance education as part of their required continuing education before engaging in property management. A.R.S. § 32‑2130.
Three-way reconciliation accuracy will be an area of audit focus going forward. Failure to perform the reconciliation or maintain supporting documentation is now a defined statutory violation under § 32-2151(C)(5).
Record retention. Under A.R.S. § 32-2151.01(A), brokers must retain required transaction and employment records for at least five years. For property-management firms, A.R.S. § 32-2175(C) separately requires retention of client financial records for at least three years. Incomplete or missing documentation can trigger an ADRE audit deficiency. Always confirm with ADRE or legal counsel before implementing.
Property-management agreements. While no statute mandates specific “close-out” deadlines, ADRE audit practice and forms expect clear written terms covering accounting/reporting cadence and turnover of funds/records at termination—best practices that reduce disputes and audit exposure.
ADRE’s audit checklist emphasizes trust-account reconciliations, ledger accuracy, and compliance with retention timelines
Who Needs a License
Under A.R.S. § 32-2101 et seq., anyone who manages real property for another and receives compensation must hold an active Arizona real-estate license. Both employing brokers and supervised salespersons may engage in property-management services.
Exemptions are narrow:
- Owners managing their own property are exempt.
- If ownership and management are separated — for example, when an LLC or corporation manages property for other entities or individuals — a license is required.
Unlicensed activity under A.R.S. § 32-2165 can result in administrative penalties, cease-and-desist orders, and potential civil liability. Owners should always verify a manager’s ADRE license status before signing a management agreement.
Trust Accounts: The Non-Negotiables
Arizona law imposes detailed trust-accounting duties on brokers who handle client funds. The governing provisions appear in A.R.S. § 32-2151 (as amended by SB 1171) and A.A.C. R4-28-802.
Key requirements (2025 edition of the Arizona Real Estate Law Book):
- Trust-account designation: Each account must be titled as a trust account in the broker’s records.
- Timely deposits: Non-contingent funds must be deposited within three banking days after receipt.
- Broker responsibility: The employing broker remains responsible for all trust-account activity, even when signatory authority is delegated.
- Monthly three-way reconciliation: A broker must reconcile the bank statement, trust-account ledger, and client ledgers each month and explain any variance (A.R.S. § 32-2151(B)(3)).
- Separate ledgers: Maintain a distinct ledger for each property or client; commingling beyond a nominal balance is prohibited (§ 32-2151(C)(2)).
- Record retention: Keep all records for five years (§ 32-2151.01(A)).
Your Property Management Agreement Checklist
Arizona law (ARS 32-2173) does require specific content in property-management agreements. At a minimum, agreements must: state material terms; be signed by the owner and the designated broker (or authorized licensee); specify beginning/ending dates and cancellation provisions; describe how monies (including tenant deposits) are handled; state report type/frequency; identify operating reserves; state how interest is allocated; state compensation; and bar assignment without the owner’s written consent. Arizona Department of Real Estate
Termination Deliverables & Deadlines
When the agreement ends, the statute sets clear close-out timelines:
- Within 5 days: provide the owner a list of all tenant security obligations.
- Within 35 days: reimburse all remaining monies in the property accounts (except amounts needed for unpaid obligations incurred during the term).
- Within 75 days: provide (i) a final accounts receivable/payable list and (ii) a final bank-account reconciliation. Arizona Department of Real Estate
Tip: Mirror these deadlines verbatim in your PM agreement and your offboarding checklist.
Record Retention Made Simple
Arizona creates three retention buckets (ARS 32-2175):
- 1 year: Residential leases and related lease documents (unless delivered to the owner at termination). Arizona Department of Real Estate
- 3 years: Property-management financial records (bank statements, canceled checks or images, deposit slips/receipts, journals, owner statements, ledgers, invoices) and finder-fee records.
- 5 years: Broker transaction and employment records (general broker requirement). ARS 32-2151.01
Auditors and litigators will ask for these files. Keeping an audit-ready folder structure that maps to 1/3/5-year buckets speeds production and lowers risk.
Delegation and Supervision
A designated broker may authorize a licensee or an unlicensed person in the broker’s direct employ to be a signer on PM trust accounts or transfer funds—but delegation does not lessen the broker’s responsibility or liability. Put the delegation in writing and keep it in the broker’s file. ARS 32-2174
Also remember the three-banking-day deposit rule for non-contingent funds: deposit into the owner’s direct account (if so directed) or into the firm’s PM trust account within 3 banking days after receipt.
Common Failure Modes
Unexplained variances in the monthly three-way reconciliation (bank statement – trust-account ledger – client ledgers).
Missing property/client ledgers.
Late handling of tenant security-deposit obligations at termination.
Commingling beyond the nominal amount allowed to keep an account open.
These issues are all tied to statutes amended or reinforced by the statutes.
Owner Directives and Out-of-State Banks
If an owner directs deposits to the owner’s own account, you may do so—but document that directive and remember the 3-day deposit rule. The broker may not have access to the owner’s account. ARS 32-2174
If funds are held in an out-of-state depository, the agreement is valid only with specific disclosures/authorizations—including notice that ADRE protections may be hampered and that the owner’s access is limited to audit/review—plus an addendum from the depository agreeing to ADRE/owner examination. ARS 32-2151
Action Plan for Arizona Property Managers
License check: confirm all personnel doing PM work are properly licensed/engaged.
Agreement review: ensure clauses required by § 32-2173(A) are present; add a termination checklist tracking the 5/35/75 dates in § 32-2173(C).
Trust-account health: title accounts as trust, verify 3-day deposit workflow, and maintain monthly three-way reconciliations with explanations for any variance.
File architecture: organize records into 1/3/5-year buckets (PM §§ 32-2175(A)–(C); broker § 32-2151.01(A)).
Delegations: maintain signed delegation letters that match actual signatory practice; remember liability stays with the broker.
How Gottlieb Law Can Help
Trust fund handling, reconciliations, and record retention are often the pressure points in both audits and lawsuits. Gottlieb Law brings extensive Arizona real estate law experience to property managers, brokers, and owners who rely on management firms.
Whether you are a property manager seeking to stay audit-ready, or an owner making sure your management firm is meeting legal requirements, Gottlieb Law can provide guidance that reduces risk and strengthens your position.
Take the Next Step with Gottlieb Law
Property management in Arizona is more complex than ever before. Licensing rules, trust account mandates, and record retention timelines leave no room for error. Gottlieb Law is here to help property managers and owners protect their investments and remain compliant with state law.
Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.
Gottlieb Law, PLC provides this article for informational purposes only. Nothing herein creates an attorney-client relationship. Do not take action based on this article without consulting qualified legal counsel. Laws change, and only a licensed attorney can provide advice tailored to your specific situation.