Arizonas Anti-Deficiency Law – SB 1271 – Law as it’s written

I’ve had a lot of requests lately for updates on SB 1271 and I’ll be sending out up-to-the-minute information as I receive it.   If you’d like to be put on that list Email Me.

I will also be putting information regarding this bill as well as HB 2008 (the bill that IF signed will fully repeal the anti-deficiency law) on our Az Short Sale website so feel free to check in there as well.

Also, here is the law as was slipped behind the public’s back…whoops, excuse me, I mean passed through the senate…!!

SB 1271 requires a trustor to have lived in a trust property for at least six consecutive months in order for a deficiency judgment against that trustor to be prohibited.

History

Arizona Revised Statutes (A.R.S.) § 33-801 defines a deed of trust as a deed conveying trust property to a trustee or trustees to secure the performance of a contract or contracts. A trust property is any legal, equitable, leasehold or other interest in real property which is capable of being transferred, whether or not it is subject to any prior mortgages, trust deeds, contracts for conveyance of real property or other liens or encumbrances.  If a trust property is sold at auction for less than the lender is owed, the difference between the owed amount and the amount received in the trustee’s sale is called the “deficiency”.  In some cases, the lender may be permitted to seek a judgment in the amount of the deficiency against the trustor, called a “deficiency judgment”.

Arizona Revised Statutes (A.R.S.) § 33-814 states that within 90 days after the date of sale of a trust property under a trust deed, an action may be maintained to recover a deficiency judgment against any person directly, indirectly, or contingently liable on the contract for which the trust deed was given as security. The deficiency judgment must be for an amount equal to the sum of the total amount owed the beneficiary as of the date of the sale either by the fair market value of the trust property as determined by the court or the sale price at the trustee’s sale, whichever is higher.  However, that section prohibits a lender from seeking a deficiency judgment against a trustor if the trust property is 2.5 acres or less and is used as a single one-family or single two-family dwelling.

Provisions

• Prohibits a deficiency judgment against a trustor pursuant to a trustee’s sale of a trust property that is 2.5 acres or less and is used as a single one-family or single two-family dwelling if both of the following apply:

The trustor has lived in the trust property for at least six consecutive months.

A certificate of occupancy has been issued for the property.

Places the burden of proof on the trustor to demonstrate that the statutory requirements to prohibit a deficiency judgment are met.

Related posts:

1. Arizona Anti Deficiency Law – SB 1271 – Explained
2. SB 1271 Arizona Anti Deficiency Law Repealed!!!
3. Anti-Deficiency Update for Nov 23, 2009
4. Trying to Beat the Anti-Deficiency Law SB 1271?
5. Arizona Anti Deficiency Law & How It Affects a Short Sale