By Jeffrey Messing
February 20, 2015
In a decision last month the Arizona Supreme Court clarified the scope of Arizona’s anti-deficiency statute which applies to limit a lender’s ability to collect a deficiency following a sale of residential property “;utilized for either a single one-family or a single two-family dwelling.”; BMO Harris Bank, N.A. v. Wildwood Creek Ranch, LLC, CV-14-0101-PR, __ P.3d__, 2015 WL 292458 (1/23/2015). The statute was amended last year “;to clarify that [the anti-deficiency provision] does not apply to trust property that was (1) developed for commercial resale to a third party, (2) never substantially completed, or (3) never used as a dwelling. A.R.S. § 33-814(H). The amendment, however, does not apply to deeds of trust that originated on or before December 31, 2014…”; Wildwood at footnote 1. The Court’s decision will therefore apply to all existing deeds of trust put in place before December 31, 2014.
Essentially the decision clarifies that the anti-deficiency statute does not apply to vacant land or partially constructed dwellings and thus eliminates some of the recurring arguments in residential debt collection cases. (Note the new statute, as amended last year would still apply the anti-deficiency rule to a completed dwelling, not developed for commercial re-sale, even if the house were not currently occupied).