2.3 Arizona Licensee Duties (R4-28-1101)

The Core Rule: R4-28-1101, Duties to Client

Arizona Administrative Code R4-28-1101 is the conduct backbone of the State exam. It states that a licensee owes a fiduciary duty to the client and must protect and promote the client's interests, while still dealing fairly and honestly with all other parties to the transaction.

Mandatory Written Disclosure

R4-28-1101 requires a licensee to disclose in writing to all parties any information the licensee possesses that materially or adversely affects the consideration to be paid. That expressly includes:

The "Known" Standard

A material defect is a condition that affects the value or desirability of the property and would influence a reasonable buyer's decision. The duty applies only to defects the licensee actually knows about—Arizona imposes no duty to investigate or affirmatively discover hidden problems. You disclose what you know; you do not become a home inspector.

Worked scenario: A listing agent overhears the seller mention a recurring sewer backup. Even if the seller wants it kept quiet, the agent must disclose this known material defect in writing to the buyer. Obeying the seller here would violate R4-28-1101—obedience never covers concealment of material facts.

Offer Presentation

Licensees must present all offers and counteroffers:

• Promptly — without unreasonable delay.
• In writing — every offer is documented.
• To the represented party — the client decides, not the agent.

A licensee may withhold presentation only when the client has directed in writing not to receive certain offers (for example, a seller already under contract who instructs in writing to stop receiving offers). Always document that written direction; an undocumented "the seller told me not to bother" is a frequent complaint.

R4-28-701: Compensation Sharing Disclosure (the 3-Day Rule)

Under R4-28-701, a broker must disclose to all parties, in writing at least 3 calendar days before closing, the name of each employing broker who represents a party and will receive compensation from the transaction.

ADRE clarified on December 12, 2025 that broker compensation amounts do not have to be revealed to the other party—only the names of the employing brokers and whom they represent. If a broker is paid by a party not named in the purchase contract (such as a co-listing arrangement), that relationship must still be disclosed to all parties 3 calendar days before closing.

December 13, 2025 Rule Revisions

ADRE updated its rules effective December 13, 2025. Two changes show up on current exams:

Expanded Record Retention

Brokers must retain all disclosures and all documents signed by the parties as part of the permanent transaction file. Arizona's general broker record-retention period remains 5 years. Failing to keep signed disclosures is now its own violation, not just an audit nuisance.

Bankruptcy Disclosure

Any licensee, officer, director, or controlling person of a licensed entity who files for bankruptcy must notify ADRE in writing within 10 calendar days of the filing. Watch the number: it is 10 calendar days, not 30, and not "at renewal."

Prohibited Practices and Enforcement

ADRE investigates consumer complaints, conducts audits, and can impose fines, license suspension, or revocation. Nondisclosure of material facts and conflicts of interest are among the most common reasons Arizona licensees are disciplined, which is exactly why this section is so heavily tested. When in doubt, disclose in writing and keep the record.

How These Duties Get Tested

State-portion questions rarely quote the rule number; they hand you a fact pattern and ask what the licensee must do. Map each scenario to one duty:

A reliable test heuristic: when a client's instruction conflicts with a disclosure duty or fair-housing law, the disclosure or the law wins. Obedience and confidentiality protect the client's lawful, private bargaining interests—never the concealment of material facts or illegal conduct.