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Homebuilders no longer protected by Arizona anti-deficiency law

| May 21, 2014 | Real Estate Disputes |

Real estate law is complex and ever-changing. Bills are constantly being amended, with new provisions being added to existing laws and the nature of certain laws being changed altogether. Keeping up with the fluid, ever-shifting landscape of real estate law can be challenging. However, it is often necessary for those who hope to avoid a real estate dispute or circumvent foreclosure to be aware of these changing laws.

For example, starting January 1st, 2015, commercial homebuilders will no longer be protected under Arizona’s anti-deficiency law. Prior to the passing of the bill, commercial homebuilders were able to claim protection from deficiency judgments. Deficiency refers to the difference between the amount at which a foreclosed house is sold and the amount a borrower still owes a lender on a mortgage. Now, speculative homebuilders will no longer be able to protect themselves from being sued by lenders when they undergo foreclosure for deficiency.

Subsection C of House Bill 2018 closes the loophole that at one point allowed homebuilders to protect themselves under Arizona’s anti-deficiency law. Subsection C states that any real property owned by someone involved in the business of constructing and selling dwellings who purchased the real property in the course of that business is excluded from protection.

Also under Subsection C, real property that contains a dwelling that was never substantially completed is excluded from protection, along with real property that, even if it was intended to be used as a dwelling, is never used as a dwelling. These changes effectively remove any protection homebuilders could claim under Arizona’s anti-deficiency law.

Being aware of certain changes in real estate law is vital in protecting a homebuilder’s interests. Knowing what real estate litigation they could potentially face can help homebuilders prepare to protect themselves against such actions. If faced with litigation, making decisions that are informed by legal expertise can go a long way in helping to successfully navigate the court system and fight for a favorable outcome.

Source: State of Arizona, “Chapter 129 House Bill 2018

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