Key Takeaways
- ADRE Rule R4-28-1101 specifies duties all Arizona licensees owe to parties in transactions
- Licensees must disclose material defects in property condition they know about
- Licensees must present all offers promptly and in writing unless directed otherwise
- Recent rule changes (December 2025) require brokers to retain all disclosures and signed documents
- Compensation sharing disclosures must be provided at least 3 calendar days before closing
Arizona Licensee Duties (R4-28-1101)
Arizona Administrative Code R4-28-1101 establishes specific duties that all licensees owe in real estate transactions.
Key Licensee Duties Under R4-28-1101
Disclosure Requirements
Licensees must disclose to all parties:
| Disclosure | Requirement |
|---|---|
| Material defects | Known defects in property condition |
| Liens and encumbrances | Existence of liens on property |
| Seller performance requirements | What seller must do |
| Buyer performance requirements | What buyer must do |
Material Defect Disclosure
A material defect is a condition that:
- Affects the value of the property
- Affects the desirability of the property
- Would influence a buyer's decision
- Is not readily observable
Licensees must disclose material defects they know about. There is no duty to investigate or discover unknown defects.
Offer Presentation
Prompt Presentation Required
Licensees must present all offers:
- Promptly - Without unreasonable delay
- In writing - Document all offers
- To the client - Present to the represented party
When Presentation Not Required
A licensee may skip presentation only if:
- The client has previously directed in writing not to receive certain offers
- The property is already under contract and seller directed not to receive more offers (with written direction)
Caution: Always document any direction from clients to not present offers.
December 2025 Rule Changes
ADRE revised rules effective December 13, 2025:
New Record Retention Requirements
Brokers must now retain:
- All disclosures signed by parties
- All documents signed by parties
- These become part of the permanent transaction file
Bankruptcy Disclosure
New requirement: Any licensee or controlling person who files for bankruptcy protection must disclose to ADRE within 10 calendar days.
Compensation Sharing Disclosure (R4-28-701)
Three-Day Disclosure Rule
At least 3 calendar days before closing, brokers must disclose in writing:
| Disclosure | Requirement |
|---|---|
| Names of employing brokers | All brokers receiving compensation |
| Who each broker represents | The party represented |
What Is NOT Required
- The specific amount of compensation
- The percentage of commission
- The split between brokers
ADRE Clarification: Brokers do not need to disclose the exact dollar amount or percentage of commission to the other party.
Prohibited Practices
R4-28-1101 and related rules prohibit:
| Prohibited Act | Description |
|---|---|
| Misrepresentation | False statements about property |
| Commingling | Mixing trust funds with personal |
| Self-dealing | Undisclosed personal interest |
| Discrimination | Fair housing violations |
| Inducements | Undisclosed compensation to parties |
Enforcement
ADRE actively enforces these rules:
- Complaints investigated
- Audits conducted
- Sanctions imposed for violations
- Fines, suspension, or revocation possible
Nondisclosure and conflict of interest violations are among the most common reasons for disciplinary action.
When must Arizona licensees provide the compensation sharing disclosure?
Under Arizona rules, what must a licensee disclose about a bankruptcy filing?