State of Arizona
House of Representatives
First Regular Session
HOUSE BILL 2673
amending title 18, Arizona Revised Statutes, by adding chapter 6; amending section 41‑1506, Arizona Revised Statutes; relating to real estate products and services.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 18, Arizona Revised Statutes, is amended by adding chapter 6, to read:
PROPERTY TECHNOLOGY SANDBOX
ARTICLE 1. GENERAL PROVISIONS
In this chapter, unless the context otherwise requires:
1. "Applicable agency" means a department or agency of this state established by law to regulate certain types of business activity in this state and persons engaged in such business, including types of authorization, that the chief executive officer determines would regulate a sandbox participant.
2. "Chief executive officer" means the chief executive officer of the Arizona commerce authority.
3. "Consumer" means a person that purchases or otherwise enters into a transaction or agreement to receive an innovative property product or service that is being tested by a sandbox participant.
4. "Innovation" means, with respect to providing a property product or service or a substantial component of a property product or service, the use or incorporation of new or emerging technology or the reimagination of uses for existing technology to address a problem, provide a benefit or otherwise offer a product, service, business model or delivery mechanism that is not known by the chief executive officer to have a comparable widespread offering in this state.
5. "Innovative property product or service" means a property product or service that includes an innovation.
6. "Property product or service":
(a) Means a product or service that includes a business model, delivery mechanism or element that may otherwise require an authorization to act as a property institution or enterprise or other entity or an action not yet contemplated by statute.
(b) does not include a product or service that is related to the physical new construction of improvements to real property.
7. "Property technology sandbox" means the program established by this chapter that allows a person to temporarily test innovative property products or services on a limited basis without otherwise being authorized to act under the laws of this state.
8. "Sandbox participant" means a person whose application to participate in the property technology sandbox is approved pursuant to this chapter.
18-602. Program purpose
The chief executive officer shall establish a property technology sandbox program in direct consultation with the department of administration, the state real estate department and other applicable agencies of this state to enable a person to obtain limited access to the market in this state to test innovative property products or services without obtaining authorization that otherwise might be required.
18-603. Application process and requirements; fee
A. Any person may apply to enter the property technology sandbox to test an innovation.
B. The chief executive officer must accept and review each application for entry into the property technology sandbox on a rolling basis.
C. An application must demonstrate that an applicant both:
1. Is an entity or individual who is subject to the jurisdiction of this state.
2. Has established a location, whether physical or virtual, that is adequately accessible to the chief executive officer, from which testing will be developed and performed and where all required records, documents and data will be maintained.
D. Persons that already possess an authorization under state laws that regulate a property product or service must file an application with the chief executive officer to test an innovation within the property technology sandbox for a property product or service outside the scope of the authorization.
E. Applications must contain sufficient information to demonstrate that an applicant has an adequate understanding of the innovation and a sufficient plan to test, monitor and assess the innovation while ensuring that consumers are protected from a testing failure.
F. Applications must contain the information required by a form that is developed and made publicly available by the chief executive officer. The information required by the form may include:
1. Relevant personal and contact information for the applicant, including full legal names, addresses, telephone numbers, e-mail addresses, website addresses and other information that the chief executive officer deems necessary.
2. Disclosure of any criminal convictions of the applicant or key personnel, if any.
3. A description of the innovation desired to be tested, including statements regarding all of the following:
(a) How an innovation is subject to regulation outside of the property technology sandbox.
(b) How the innovation would benefit consumers.
(c) How the innovation is different from other property products or services available in this state.
(d) Any risks to consumers.
(e) How entering the property technology sandbox would enable a successful test of the innovation.
(f) A description of the proposed testing plan, including estimated time periods for market entry, market exit and the pursuit of necessary licensure or authorization.
(g) How the applicant will wind down the test and protect consumers if the test fails.
(h) How the applicant will use cybersecurity measures to avoid breaches and protect consumer and transaction data.
G. The chief executive officer shall collect a nonrefundable processing fee from each applicant in an amount determined by the Arizona commerce authority. Monies collected pursuant to this subsection shall be deposited in the Arizona commerce authority fund established by section 41‑1506.
H. A person shall file a separate application for each innovation sought to be tested.
I. After the applicant submits the information required by subsection F of this section, the chief executive officer may seek additional information that the chief executive officer deems necessary. Not later than ninety days after an application is initially submitted, the chief executive officer shall notify the applicant whether the application is approved for entry into the property technology sandbox. The chief executive officer and an applicant may mutually agree to extend the time period for the chief executive officer to determine whether an application is approved for entry into the property technology sandbox.
J. The chief executive officer may deny applications in the chief executive officer's discretion, and a denial is not an appealable agency action for the purposes of title 41, chapter 6, article 10.
18-604. Consultation with applicable agencies; admission authority; state properties available for use
A. The chief executive officer must consult with an applicable agency before admitting an applicant into the property technology sandbox. This consultation may include seeking information about:
1. Whether the applicable agency previously has either:
(a) Issued a license or other authorization to the applicant.
(b) Investigated, sanctioned or pursued legal action against the applicant.
2. Whether the applicant could obtain authorization from an applicable agency after exiting the property technology sandbox.
B. Notwithstanding subsection A of this section, the chief executive officer has sole authority to make the final decision whether to admit an applicant into the property technology sandbox, except that the chief executive officer may not admit an applicant whose innovation should be regulated pursuant to title 41, chapter 55 or whose innovation involves physical construction that requires a contractor license pursuant to title 32, chapter 10.
C. The department of administration shall provide to the Arizona commerce authority a list of state‑owned buildings and PROPERTIES that are AVAILABLE for a sandbox participant to use.
A. If the chief executive officer approves an application for entry into the property technology sandbox, the applicant is deemed a sandbox participant and both of the following apply:
1. The sandbox participant has twenty‑four months after the date of approval to test the innovation described in the sandbox participant's application.
2. The chief executive officer must issue the sandbox participant a registration number.
B. This section does not restrict a sandbox participant that holds an authorization in another jurisdiction from acting pursuant to and in accordance with that authorization.
C. A sandbox participant is deemed to possess an appropriate authorization under the laws of this state for purposes of any provision of federal law requiring state authorization.
D. Except as otherwise provided in this chapter, a sandbox participant is not subject to state laws that establish requirements pursuant to an authorization issued by an APPLICABLE agency that otherwise would or may regulate a property product or service.
E. The chief executive officer may determine that certain state laws that regulate a property product or service apply to a sandbox participant. If the chief executive officer makes this determination and approves an application for entry into the property technology sandbox, the chief executive officer must notify the sandbox participant of the specific state property technology laws that apply to that sandbox participant.
F. A sandbox participant may obtain, record, provide or maintain in an electronic form, including as provided in section 44‑7601, any information, writing, signature, record or disclosure that is required by this chapter or may substitute any substantially similar equivalent information, writing, signature, record or disclosure that is approved by the chief executive officer.
18-606. Consumer protection
A. Before providing an innovative property product or service to consumers, a sandbox participant must disclose to consumers all of the following:
1. The name and contact information of the sandbox participant, including the registration number provided by the chief executive officer pursuant to section 18‑605.
2. That the innovative property product or service is authorized pursuant to the property technology sandbox and, if applicable, that the sandbox participant does not have authorization to generally provide products or services under state laws that regulate a property product or service that is outside the property technology sandbox.
3. That this state does not endorse or recommend the innovation.
4. That the innovative property product or service is a temporary test that may be discontinued at the end of the testing period, including the expected end date of the testing period.
5. That complaints may be filed with the chief executive officer regarding the innovative property product or service being tested and the chief executive officer's telephone number and website address where complaints may be filed.
B. The disclosures prescribed by subsection A of this section must be provided to consumers in a clear and conspicuous form in both English and Spanish. For internet or application-based innovative property products or services, consumers must acknowledge receipt of these disclosures before completion of a transaction.
C. The chief executive officer may require that a sandbox participant make additional disclosures to consumers. If the chief executive officer approves an application for entry into the property technology sandbox, the chief executive officer shall notify the sandbox participant of the additional disclosures.
18-607. Exit requirements
A. At least thirty days before the end of the twenty‑four‑month property technology sandbox testing period, a sandbox participant must Notify the chief executive officer that the sandbox participant will exit the property technology sandbox, wind down its test and cease offering any innovative property products or services in the PROPERTY technology sandbox within sixty days after the twenty‑four‑month testing period ends.
B. If the chief executive officer does not receive notification pursuant to subsection A of this section, the property technology testing period ends at the end of the twenty‑four‑month testing period and the sandbox participant must immediately cease offering innovative property products or services.
C. If a test includes offering products or services that require ongoing duties, the sandbox participant must continue to fulfill those duties or arrange for another person to fulfill those duties after the date the sandbox participant exits the property technology sandbox.
18-608. Recordkeeping and reporting requirements
A. A sandbox participant must retain records, documents and data produced in the ordinary course of business regarding an innovation tested in the property technology sandbox.
B. If an innovation fails before the end of the testing period, the sandbox participant must notify the chief executive officer and report on actions taken to ensure consumers have not been harmed as a result of the innovation's failure.
C. A sandbox participant is subject to the requirements of section 18‑552 and must notify the chief executive officer of any breach as defined in section 18‑551.
18-609. Records; disclosure; evidentiary effect
A. Records that are submitted to or obtained by the chief executive officer in administering this chapter are not public records or open for inspection by the public.
B. Records and information that are submitted or obtained pursuant to this chapter may be disclosed to any of the following:
1. State and federal agencies.
2. Representatives of foreign countries that have property technology or supervisory authority over the activities of the sandbox participant.
3. A federal, state or county grand jury in response to a lawful subpoena.
4. The auditor general for the purpose of conducting audits authorized by law.
C. The chief executive officer and any applicable agency consulted by the chief executive officer pursuant to section 18‑604 are not liable for the disclosure of records, information or data received or obtained pursuant to this chapter.
D. The disclosure pursuant to subsection B of this section of a complaint or the results of an examination, inquiry or investigation of a sandbox participant does not make that information a public record, and the sandbox participant or the sandbox participant's holding company may not disclose that information to the general public unless the disclosure is required by law. A sandbox participant or the sandbox participant's holding company may not disclose, use or reference in any form comments, conclusions or results of an examination, inquiry or investigation in any type of communication to a customer or potential customer.
E. This section does not prevent the disclosure of information that is admissible in evidence in a civil or criminal proceeding brought by a state or federal law enforcement agency to enforce or prosecute civil or criminal violations of the law.
18-610. Reporting requirements; monitoring; enforcement; agreements
A. The chief executive officer may establish periodic reporting requirements for sandbox participants.
B. The chief executive officer may request records, documents and data from sandbox participants. On the chief executive officer's request, sandbox participants must make such records, documents and data available for inspection by the chief executive officer.
C. If the chief executive officer has reasonable cause to believe that a sandbox participant was admitted into the property technology sandbox in violation of this chapter or has engaged in, is engaging in or is about to engage in any practice or transaction that violates this chapter, that constitutes an unlawful practice under section 44-1522 or that violates a state or federal criminal law, the chief executive officer may remove a sandbox participant from the property technology sandbox or order a sandbox participant to exit the property technology sandbox pursuant to section 18‑607.
D. Removal from the property technology sandbox is not an appealable agency action for the purposes of title 41, chapter 6.
E. Sandbox participants are subject to the consumer fraud provisions under title 44, chapter 10, article 7.
F. The chief executive officer may enter into agreements with state, federal or foreign regulators that allow sandbox participants to operate in other jurisdictions and allow entities authorized to operate in other jurisdictions to be recognized as sandbox participants in this state.
This chapter does not apply to a profession that is regulated pursuant to title 32, chapter 20.
18-612. Program termination
The program established by this chapter ends on July 1, 2029 pursuant to section 41-3102.
Sec. 2. Section 41-1506, Arizona Revised Statutes, is amended to read:
41-1506. Arizona commerce authority fund
A. The Arizona commerce authority fund is established consisting of:
1. Withholding tax revenues allocated to the fund from the job creation withholdings clearing account pursuant to section 43‑409, subsection B, paragraph 1. Monies credited to the fund may be deposited in the state treasury or in a bank or other depository approved by the board of directors pursuant to section 41‑1504, subsection D, paragraph 5.
2. Monies deposited pursuant to section 18‑603.
B. The chief executive officer shall administer the fund. On notice from the chief executive officer, the state treasurer shall invest and divest any monies in the fund deposited in the state treasury as provided by section 35‑313, and monies earned from investment shall be credited to the fund. Monies in the fund are exempt from the provisions of section 35‑190 relating to lapsing of appropriations.
C. The chief executive officer shall use the monies in the fund as follows:
1. Monies described in subsection A, paragraph 1 of this section shall be used exclusively for the purposes of this chapter without further legislative authorization.
2. Monies described in subsection A, paragraph 2 of this section shall be used exclusively for the purposes of title 18, chapter 6.
APPROVED BY THE GOVERNOR MARCH 20, 2019.
FILED IN THE OFFICE OF THE SECRETARY OF STATE MARCH 20, 2019.