Arizona Anti-Deficiency Law and the new SB 1271 Legislation
A couple of months ago we held a tele-seminar with attorney Bill Kozub out of Phoenix, AZ.
Bill talked about the anti-deficiency law in the state of Arizona and how it is quite generous in protecting the borrowers against deficiencies in many cases when it relates to single family homes on regular sized lots (under 2.5 Acres).
We were very surprised to hear that about 30 days ago, the Arizona governor has approved a legislation called SB 1271 that severely reduces this protection, especially for investors.
Rather than try to describe the vagaries of the new language involved with SB 1271, I would say it’s worthwhile doing a search for “SB 1271” to read the details for yourselves.
If this is truly final, it will greatly reduce the anti-deficiency protection in Arizona. It is supposed to start to take effect as of 9/30/2009. This begs the question – what does that mean? Does it mean it will apply to a foreclosure that occurred past 9/30/2009 on a loan taken out in the past? Think about it – if this is really the case then it is retroactively “pulling the rug” from someone who may well have taken their loan in the past knowing about the Arizona anti-deficiency laws and counting on them. I wonder how it will hold up legally (I am not a lawyer so the great legal minds can chime in here for their feedback).
It seems quite clear the AZ government was not aware of the full unintended consequences of this legislation. Needless to say many real estate organizations are fighting it tooth and nail and I read that the person who had actually brought this piece of legislation up in the first place has now “seen the light” and he himself is asking for its repeal (sources only from the net so it’s only hearsay).
There is no doubt that if passed, this legislation could also hamper Arizona’s real estate market recovery. Before SB 1271 Arizona held a clear edge over many other states and thus would be a magnet for investors and others to choose to buy in it over other states. With SB 1271 investors and others may distribute their buying over many states, hurting Arizona’s special edge and thus possibly its recovery.
Let’s stay tuned to see the final results of this drama. It could affect many owners of Arizona real estate dramatically.
3 Comments on this post
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Alan said:
Just wondering what is the effect of the “other” anti-deficiency statute discussed by Mr. Kozub (AZ 33-729), which applies to purchase-money mortgages and appears to be independent of AZ 33-814, which was amended by SB 1271. See http://www.azleg.state.az.us/FormatDocument.asp?inDoc=/ars/33/00729.htm&Title=33&DocType=ARS.
It would appear that AZ 33-729 is, perhaps, still in effect. I’d like to say this was my idea, but I saw this mentioned on another blog. See the comment from “Scott” on July 29, 2009 at 9:46 AM. http://www.azlifestyleteam.com/blogs/christie_thompson/archive/2009/7/20/sb-1271-serious-changes-to-arizona-s-anti-deficiency-statute.aspx.
Adiel, I wonder if Mr. Kozub has a comment on this. (Sorry in advance if the links don’t work, but I think you’ll get the gist anyway.)
August 10th, 2009 at 6:41 pm -
Adiel Gorel said:
Alan,
Here is what Mr. Kozub replied to me when we exchanged emails:
“Adiel, The new law, which changes everything we discussed, has passed and been signed by the governor. But it is possible it will be repealed in the next week or two. I can prepare a comment now, but I have been telling my clients to wait until the end of August so we will have a better idea of whether we are facing a real problem, or have just been temporarily scared by poor legislative drafting. Let me know how you would like to proceed. “
I then asked a few more questions regarding the application of this law if it remains, but I believe it is wise to wait a few weeks until things are settled and then re-visit.
Best,
AdielAugust 12th, 2009 at 5:04 pm
[...] these laws may affect them as investors or potential investors. Well, as Adiel Gorel suggested in his post, I googled the term “SB 1271“, and came up with this post by Christie Giannetto [...]