Does a Broker Forfeit His or Her Commission for Technical Non-Compliance with Department of Real Estate Statutory Requirements?

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In a recent Arizona Court of Appeals case, CK Revocable Trust v. My Home Group Real Estate LLC, 2020 WL 4306183 (7/28/2020), the Court of Appeals addressed the distinction between “substantive” and “technical” statutory requirements for real estate broker commission agreements.

The Court explained that failure to comply with a substantive requirement would preclude the broker from recovering a commission, but failure to comply with a technical requirement would not. As examples of such substantive requirements, the Court identified the statutory requirement that the broker be licensed at the time the claim for commission arose, and the statutory requirement that the listing agreement be signed by both the broker and the client.

The non-compliance issue addressed by the Court was the failure of the designated broker (under whom the real estate agent was working) to initial the listing agreement within 10 business days of execution by the real estate agent and the client, as required by statute. The Court held that this was a technical requirement, not a substantive requirement for collection of a commission. The Court explained that failure to comply with technical requirements was grounds for disciplinary action by the Department of Real Estate; but was not grounds for forfeiture of an earned commission.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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