October 14, 2009

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Arizona Anti-Deficiency Changes Repealed

On September 4, 2009, Governor Jan Brewer signed a repeal of the new amendment to the anti-deficiency law. This move comes weeks before the new amendment was to take effect.

The amendment had changed Arizona's anti-deficiency law to restrict residential real estate investors and developers from availing themselves of anti-deficiency protection. It would have allowed lenders to pursue deficiency actions against borrowers or guarantors if no certificate of occupancy had been issued for the property, or if the borrower or guarantor had not utilized the property as a one or two family home for at least six consecutive months. Importantly, the new amendment put the burden of proving these conditions on the borrower or guarantor.

The repeal of the amendment has left Arizona's anti-deficiency law unchanged. Now, as before, a lender cannot recover a deficiency following a trustee's sale if the trust property consists of two and one-half acres or less and is limited to and utilized for either a single one-family or single two-family dwelling.

For questions regarding the impact and application of the repeal of the new anti-deficiency legislation, please contact a member of our Bankruptcy, Creditors' Rights, and Real Estate Lending group
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