Q&A: Legal

Howard Weiss is a partner at Nussbaum, Gillis & Dinner, P.C. in Scottsdale.
Howard Weiss is a partner at Nussbaum, Gillis & Dinner, P.C. in Scottsdale.

I’m thinking of transferring my real estate license from my personal name to a P.C. or P.L.L.C. for liability protection.  What do you recommend? 

You should start by speaking with your accountant or C.P.A. to determine the potential tax advantages of holding your license in an entity rather than personally.  Although you are permitted to hold your real estate license in a P.C. (professional corporation) or a P.L.L.C. (professional limited liability company), these entities will not provide you with liability protection for your actions as a licensed salesperson or broker despite what you may have heard to the contrary.  In fact, the Arizona Department of Real Estate will only allow licensees to hold their real estate license in a P.C. or P.L.L.C. because the Arizona Revised Statutes specifically provide that a licensed individual rendering professional services through a P.C. or P.L.L.C. is still personally liable for their actions.   Under A.R.S. §10-2234,  “[a] shareholder of a professional corporation is personally and fully liable and accountable for any negligent or wrongful act or misconduct committed by the shareholder . . . while rendering professional services on behalf of the professional corporation to the person for whom professional services are rendered.”  In addition, A.R.S. §29-846 provides that “[e]ach member, manager or employee performing professional services shall remain personally liable for any results of the negligent or wrongful acts, omissions or misconduct committed by him or by any person under his direct supervision and control while performing professional services on behalf of the limited liability company.”

Therefore, the decision on whether you transfer your license to an entity will generally be based upon tax considerations, rather than liability protection.  You may, however, have personal liability protection against claims resulting from contractual obligations when your entity is the only party to the contract.  For example, if you enter into a business loan and your entity is the borrower, you should have protection from personal liability unless you’ve also signed a guaranty.  If you decide to transfer your license to a P.C. or P.L.L.C., you will first need to form the entity, and then you will need to file the proper paperwork with the Arizona Department of Real Estate.  You will also need to set up a separate bank account under the name of the entity since Arizona law requires the designated broker to pay compensation only through your licensed P.C. or P.L.L.C.  If you have any questions, please feel free to contact me.  I have assisted many clients with this process.

During the down market, I got behind on paying the property taxes for an apartment complex I own in Glendale.  I received a notice from the Maricopa County Treasurer informing me that my property taxes are delinquent and that they will offer at public sale a tax lien on my property.  I don’t want to lose my property, what should I do?

Under Arizona law, the Maricopa County Treasurer can secure payment of unpaid taxes on a property by selling tax liens against the property to third parties.  Under A.R.S. 42-18201, if a tax lien is not redeemed by the owner of the property within three (3) years after the sale of a tax lien, the purchaser of the tax lien may bring an action to foreclose the right to redeem. Therefore, as an owner of the property, you must “redeem” (i.e. payoff”) the tax lien prior to the expiration of such three (3) year period in order to avoid losing your property in a tax lien foreclosure.  To redeem a real property tax lien, you must pay to the Maricopa County Treasurer the following amounts: (a) the amount for which the real property tax lien was sold, with interest at the rate stated in the certificate of purchase; (b) the amount of all taxes accruing on the real property after the sale and paid by the purchaser and endorsed on the certificate of purchase, with interest on the subsequent taxes at the same rate as stated in the certificate of purchase; and (c) any statutory fees paid by the purchaser or the purchaser’s assigns in connection with the certificate, except the processing fee imposed by A.R.S. §42-18116, subsection C, with interest at the rate stated in the certificate of purchase except as otherwise provided by this chapter.

I represent a buyer on the purchase of an office building. The purchase agreement discloses that I’m the buyer’s broker and that I will be receive a three percent (3%) commission upon the close of escrow on the building.  Is that enough to ensure that I get paid?

Although the purchase agreement discloses that you represent the buyer and states the amount of the commission, neither you nor your designated broker are actually parties to the purchase agreement.  While you may assert that you are a third party beneficiary to the agreement, if the seller or the seller’s broker decides not to pay your commission at the closing, you may have a more difficult time prevailing.  As you are probably aware, real estate commissions in Arizona must be paid through a designated broker.  Therefore, I would strongly recommend that your designated broker enter into a written agreement with either the Seller or the listing broker regarding the payment of a real estate commission upon the sale of the property.  In addition, you may want to consider getting a written agreement with your buyer (i.e. a buyer/broker agreement) whereby the buyer agrees to pay your commission in the event that you don’t get paid by the Seller or the listing broker at the closing.

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