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Scope of Arizona's anti-deficiency statute is still murky

Ranch LLC, Arizona's anti-deficiency law applies to a "single one-family dwelling or a single two-family dwelling." However, the court also mentioned that Arizona Revised Statute § 33-814(G) does not provide protection from deficiency judgments for vacant lots that have been foreclosed upon and where no construction or development had taken place.

While all three justices joined in upon the decision, the concurring opinion authored by Judge Kessler suggests that there may some gray area when it comes to this matter. Judge Kessler seemed concerned about whether the beginnings of construction of a home would allow for the anti-deficiency statute to be put into play.

Judge Kessler cited the case of Mid Kansas Federal Savings and Loan Association of Wichita v. Dynamic Development Corporation, 167 Ariz. 122, 804 P.2d 1310 (1991), where it was held that commercial residential developers could be included in protection under the anti-deficiency statutes. On the other hand, the case cited by the judge did hold that "property is not utilized as a dwelling when it is unfinished, has never been lived in, and is being held for sale to its first occupant by an owner who has no intent to ever occupy the property."

Judge Kessler mentions that the primary purpose of the anti-deficiency statute is to protect homeowners from losing their nonexempt property in addition to their home due to a deficiency judgment. The judge felt that takes a number of pre-construction steps may provide the former owners a level of protection. However, a straight line rule could create a "blurry and artificial line" and therefore judges instead would need to look at the totality of the circumstances to determine whether the level of construction could entitle those facing a deficiency judgment this protection.

There are many distinctions made when it comes to real estate law. Some disputes involve residential or commercial real estate. There may be planning and zoning factors that will need to be taken into account. All matters are dependent upon unique set of facts and will thus require experienced handling by attorneys when they are representing their clients.

Source: Court of Appeals of Arizona, Division 1, "BMO Harris Bank v. Wildwood Creek Ranch LLC," No. 1 CA-CV 12-0728, January 16, 2014

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