Real Estate Recovery Fund May Be an Option if You’ve Been Harmed

If you have been harmed by a salesperson or broker in a real estate or cemetery transaction, you may be eligible for pay­ment from the Real Estate Recovery Fund.

The Fund is administered under the direction of the Arizona Real Estate Commissioner, for the benefit of any person who has been injured by the misconduct of a licensed real estate or cemetery salesperson or broker. The money in the Fund comes from a surcharge on real estate license fees.

The Fund is liable to pay for damages arising out of a transaction in which the salesperson or broker performed acts for which a license was required, or when the salesperson or broker, while acting as the principal in the purchase or sale of real property, engaged in fraud or misrepresentation and someone was harmed due to reliance on the salesperson’s or broker’s licensed status.

The Department of Real Estate offers the following examples of losses that are covered by the Fund:

Misappropriated earnest money deposit or down payment on a house.

Misappropriated security deposit, rental income, or money withheld that was intended for mortgage payments or other expenses managed by the salesperson or broker.

Repair costs required for defects when a salesperson or broker materially mis­represented the condition of the property.

Loss caused in a transaction when the salesperson or broker actively misrepre­sented the financial condition of the property and parties involved.

To get paid from the Fund, a person must file a lawsuit against the salesperson or broker, and all other persons who may be responsible for the loss. The lawsuit cannot be started later than five years from the accrual of the cause of action. If a person obtains a judgment against a salesperson or broker for prohibited conduct, that person may apply to the Recovery Fund Administrator for payment from the Fund. The payment application must be made within two years after the termina­tion of all proceedings, reviews and appeals connected with the judgment.

The Department of Real Estate will supply the payment application form that includes detailed instructions with respect to the information and documents that are necessary for payment. The Recovery Fund Application may be downloaded from the Department’s Web site, www.azre.gov. The completed application and supporting docu­ments should be hand-delivered or sent by certified mail to the Recovery Fund Administra­tor at:

Department of Real Estate
2910 North 44^th Street, Suite 110
Phoenix, AZ 85018

The person submitting the application (sometimes referred to as the “claimant”) must also mail a copy to the salesperson or broker, together with a notice form that should be supplied by the Department.

A claimant will be entitled to recover from the Fund the money actually lost in the real estate or cemetery transaction, including reasonable attorney’s fees and costs, but he must deduct the value of any property recovered, payments, settle­ment amounts, insurance proceeds, tax benefits or deductions, or other offsets. Prior to getting paid from the Fund, a claimant will be required to show that he exhausted all attempts to collect the lost money from the salesperson or broker, and any other person responsible for the loss.

The Fund’s liability is limited to $30,000 per transaction, or $90,000 per license. The spouse of a salesperson or broker cannot file a claim.

The Commissioner is generally required to make a decision on a claim within 90 days after receiving a completed application for payment. If the application is approved, payment will be made on the claim. If it is denied, the claimant may pursue the application in court. To do so, he must file a verified application in the court within six months after receiv­ing notice of the denial. Other procedural rules also apply to the appeal process.

If a payment is made from the Fund, the licenses and license rights of the responsible salesperson or broker will be terminated.

For more information, the reader may wish to contact the Recovery Fund Administrator, recovery_fund@azre.gov, or visit the Department of Real Estate’s Web site, www.azre.gov.