The What, Where and Why of The Arizona Real Estate Recovery Fund

By Ben Bhandhusavee, Esq.

What is the Recovery Fund?

The Recovery Fund (“Fund”) is the source of last resort for repayment of losses resulting from a real estate transaction caused by the conduct of a licensed real estate agent or  broker. The Fund is administered under the direction of the Arizona Real Estate Commissioner and collects money from a surcharge on real estate license fees.

Who can apply for money from the Fund?

In order to be able to apply for the Fund you must be able to show that:

1)      you (a) bought, sold or leased real property (or a cemetery plot) in Arizona with the professional assistance of an Arizona licensed real estate agent and/or broker, or

2)      you hired a licensed agent, broker or property management company to manage your property in Arizona;

3)      you have been awarded a court judgment (civil or criminal) or an arbitration award against the agent and broker (not just the brokerage company);

4)      you were unable to collect the judgment or award; and

5)      that the judgment or award included a finding that the conduct of your agent and/or broker violated any of the duties found under Title 32, Chapter 20, Arizona Revised Statutes (A.R.S.) or under Department of Real Estate rules (See Arizona Administrative Code R4-28-101 through R4-28-1313).

What losses are covered by the Fund?

The following types of losses are eligible for coverage under the Fund:

1)      Misappropriated earnest money deposit or the down payment on a house

2)      Misappropriated security deposit, rent income, or money fraudulently withheld that was intended for mortgage payments or other expenses on a property managed by the licensee

3)      Repair costs required for defects when a real estate agent has materially misrepresented the condition of a property

4)      Losses caused in a transaction when the licensee has actively misrepresented the financial condition of the parties or property involved

5)      Reasonable attorney’s fees and court costs

The following types of losses are ineligible for coverage:

a)      Lost profits and speculative losses

b)      Investment in notes, mortgages, limited partnerships or other securities, regardless of whether it is secured by real property, where the licensee was not engaged in the transaction as an agent of the applicant

c)      Repair costs for defects when the purchaser was aware of, or notified about, the defect

d)      Punitive damages or post-judgment interest

e)      Undocumented transactions or losses

f)        Money spent on lodging, meals, travel, photocopies or long-distance phone calls

g)      Losses exceeding out-of-pocket losses

Eligible losses must be actual money lost in a real estate (or cemetery plot) transaction, and the value of any payment, settlement, tax credit, or other type of offset received or recovered must be deducted.

If eligible, how much can an injured party recover under the Fund?

The Fund is limited to up to $30,000 per transaction, with a cap of $90,000 per licensee.

If you have a current or anticipated real estate dispute and would like to schedule a consultation with an attorney, please e-mail or call our office at (602) 678-2970.

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