Mesa / Phoenix Law Firm Helps Home Investors Understand Major Changes in Arizona Law

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Mesa / Phoenix law firm of Gibson Ferrin & Riggs, PLC explains how Arizona legislators have taken steps to hold residential property investors to a higher standard.

In other words, these changes are clearly intended to put the brakes on the out-of-control investor market and cause them to use more caution before purchasing property

With the addition of just a few words, Arizona legislators narrowed the once broad coverage of the state's anti-deficiency statute.

On July 10, 2009, Arizona Governor Jan Brewer signed bill SB 1271, which amends the existing state anti-deficiency law (A.R.S. § 33-814(G), making it more difficult for investors of residential property to qualify for the safe harbor they once relied on. No longer will they be able to just walk away from property without fear of lenders coming after them to collect on the loan.

The bill, one of more than 200 that were pushed through at the end of the 2009 legislative session, may have far-reaching ramifications for home-buyers.

"Previously, the anti-deficiency statute provided residential property owners, whether as their primary residence or as investment property, security from personal liability for loans on foreclosed property sold in a trustee sale," says attorney Charlotte Johnson of Gibson Ferrin & Riggs, PLC. "As long as the property was under two-and-one-half acres of land and used as a single one- or two-family unit, lenders had no legal recourse in Arizona to collect a deficiency amount, which is the difference between the balance of the loan and the amount the property was sold for in foreclosure through a trustee sale."

However, that will no longer be the case, explains Johnson.

Effective September 30, 2009, only borrowers who have been issued a certificate of occupancy and lived in the property for at least six months will be provided anti-deficiency protection should the property be foreclosed through a trustee sale.

"Unless investors can prove they have occupied the completed residence for at least six consecutive months, the statute, in most cases, will not protect them from collections," says Johnson.

This may account for drastic changes in how investors do business in Arizona.

"In other words, these changes are clearly intended to put the brakes on the out-of-control investor market and cause them to use more caution before purchasing property," Johnson adds. "Investors who have not met the six-month standard cannot escape responsibility for the amount they owe the lender just by abandoning it."

For the multitudes of troubled investment property owners who many be panicked, Johnson points out that although the new bill does not specify whether it applies to existing loans, it is likely that these changes would apply only to recourse loans entered into after September 30, 2009, and not retroactively to existing loans.

However, the issue is far from over.

On July 22, 2009, the Arizona Association of REALTORS® called on Governor Brewer to amend her call for a special session of the legislature, which is needed to discuss pending state budget issues, to also address issues pertaining to the passage of SB 1271.

"SB 1271 dramatically alters well settled Arizona law on the relationship between Arizona residential real estate owners and their lenders," the letter to the governor stated. "The bill has far reaching effects…None of those effects are positive or helpful to restart the Arizona economy."

"Undoubtedly, those who voted in favor of this legislation could not have known about its far reaching legal and practical impacts," stated the letter, which was signed by CEO Tom Farley. He listed that results of the amended statute could include a dramatic increase in foreclosures, litigation, falling real estate prices and a prolonged recession in the state.

Call attorney Charlotte Johnson at 480-633-8100 with any questions concerning Arizona's anti-deficiency law or to schedule a confidential and comprehensive consultation. For more information, see SB 1271 or Arizona Revised Statutes § 33-814(G).

The attorneys at Gibson Ferrin & Riggs, PLC concentrate their practice on serving individuals, families and small business owners with business-related issues, family law and estate planning. They can help identify and assess the interests that matter most to their clients and work to preserve, promote and protect them. Visit their website at and their blog at The firm's expertise in commercial litigation and business, family and estate law is recognized throughout the Phoenix / Mesa area.
As of July 27, 2009, Governor Brewer had not responded to the request.

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