New Changes to Arizona’s Anti-Deficiency Statutes with Passing of HB 2018

Article By Arizona Bankruptcy Attorney Whitney G. Coats

On April 22, 2014, the Arizona legislature passed HB 2018, which created some significant changes to the Arizona anti-deficiency statutes outlined in Arizona Revised Statute (“A.R.S.”) §33-729, which pertains to purchase money mortgages and limitation of liability and A.R.S. §33-814, which pertains to actions to recover balance after foreclosure or sale of property under trust deed. Essentially the amendments to the above referenced statutes further expand and define which type of property owners are not protected under the Arizona anti-deficiency statutes for all loans that originate after December 31, 2014.

The amendment to A.R.S. §33-729 added Subsection C and Subsection D, which sets forth the following new guidelines:

C.  For mortgages that are originated after December 31, 2014, Subsection A of this Section does not apply to real property as follows:

1.  Real property owned by a person who is engaged in the business of constructing and selling dwellings that was acquired by the person in that course of that business and that is subject to a mortgage given to secure payment of a loan for construction of a dwelling on that property for sale to another person.

2.  Real property that contains a dwelling that was never substantially completed.

3.  Real property that contains a dwelling that is intended to be utilized as a dwelling but that is never actually utilized as a dwelling.   

D.  For the purpose of this Section, a dwelling is substantially completed if either of the following occurs:

1.  Final inspection is completed, if required by the government body that issued the building permit for the dwelling.  

2. If a final inspection is not required by the governmental body that issued the building permit, the dwelling has been completed in all material respects as prescribed in the applicable ordinances and regulations of the governmental body that issued the building permit for the dwelling.

The amendment to A.R.S. §33-814, added Subsection H which coincides with the newly added Subsection C and Subsection D in A.R.S. §33-729, further defining what type of property owners have no protection under the Arizona anti-deficiency statutes:

H. For the deeds of trust that originated after December 31, 2014, Subsection G of this Section does not apply to trust property as follows:

 1.      Trust property owned by a person who is engaged in the business of constructing and selling dwellings that was acquired by the person in the course of that business and that is subject to a deed of trust given to secure payment of a loan for construction of a dwelling on the property for sale to another person.

2.      Trust property that contains a dwelling that was never substantially completed.

3.      Trust property that contains a dwelling that is intended to be utilized as a dwelling but that is never actually utilized as a dwelling.

I.  For the purpose of this Section, a dwelling is substantially completed if either of the following occurs:

1.   Final inspection is completed, if required by the government body that issued the building permit for the dwelling.

2.   If a final inspection is not required by the governmental body that issued the building permit, the dwelling has been completed in all material respects as prescribed in the applicable ordinances and regulations of the governmental body that issued the building permit for the dwelling.

The full version of HB 2018 may be viewed at the following link:

http://www.azleg.gov/legtext/51leg/2r/bills/hb2018s.pdf

Whitney G. Coats, J.D., Of Counsel, is a bankruptcy attorney who works with Dana Law Firm’s Consumer Bankruptcy Department.

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