Arizona Court of Appeals Division One Holds That An Unlicensed Real Estate Broker May Not Recover for Performing Services That Require a Real Estate License, But May Recover in Unjust Enrichment for Non-Broker Services When the Contract Is Not Divisible.

In 2004, Plaintiff Samir Mousa contracted with Defendants Arizona Funds, LLC and its members (collectively “Arizona Funds”) to perform services in connection with the purchase, resale, and management of property in Arizona.  In 2005, Arizona Funds purchased property (“the Property”) through Mousa’s efforts, and later put the Property up for sale.  Arizona Funds granted Mousa a power of attorney to perform services in connection with selling the Property. Mousa managed the Property while it was for sale.  In 2006, Mousa filed suit alleging breach of contract, unjust enrichment, and other claims, claiming that he did not receive compensation for his services.  Arizona Funds moved to dismiss on the ground that the services for which Mousa was seeking compensation required a real estate salesperson’s or broker’s license under A.R.S. § 32-2152, which Mousa did not have.  The trial court granted this motion with respect to Mousa’s claim for a commission on the purchase of the property, but denied it as to the remainder of his claims.  After discovery, Arizona Funds moved for summary judgment, again arguing that Mousa’s claims were barred because he lacked a real estate license.  The trial court granted the motion, and Mousa timely appealed.

The Arizona Appeals Court affirmed in part and reversed, vacated, and remanded in part.  The Court began by explaining that a person engaging in activities requiring a real estate license may only file an action to recover compensation if the complaint alleges that the person was licensed at the time the claim arose.  A.R.S. § 32-2152(A).  Services performed in connection with the purchase or sale of real estate require a real estate license.  See A.R.S. § 32-2101(47).  Services conducted under a “valid power of attorney . . . used for a specific purpose in an isolated transaction and not as a method of conducting a real estate business” and property management services, do not require such a license.  A.R.S. § 32-2121(A)(2), (8). 

Applying these statutes, the Court held that Mousa could not recover for his services related to the purchase and sale of the Property under A.R.S. § 32-2152 because those services required him to have a license under A.R.S. § 32-2101(47).  The Court rejected Mousa’s argument that he was merely a “middleman,” explaining that the statutes do not except a “middleman” whose conduct otherwise requires a license.  The Court also rejected Mousa’s arguments that he did not hold himself out to be a broker and that it is common in Arizona to pay non-licensed real estate consultants, explaining that the plain meaning of the statutes barred recovery.

The Court also held that Mousa could recover for his claims based on his property management services under A.R.S. § 32-2121(A)(8), but not for services performed under the power of attorney because he was conducting a real estate business.  The Court further held that Mousa could not recover under a breach of contract theory because he was unable to prove that Arizona Funds’ promise to pay him for his non-broker services was separate from its promise to pay him for broker services, and the contract was therefore not severable.  Mousa could, however, recover in unjust enrichment.  See Butch Randolph & Assocs., Inc. v. Int’l Fid. Ins. Co., 212 Ariz. 550, 136 P.3d 232 (App. 2006).

Presiding Judge Johnsen authored the opinion; Judges Barker and Portley concurred.