On January 1, 2015, Arizona’s amended anti-deficiency laws became effective. The previous law contained in Arizona Revised Statute §33-814 (G) held that “If trust property of two and one-half acres or less which is limited to and utilized for either a single one-family or a single two-family dwelling is sold pursuant to the trustee’s power of sale, no action may be maintained to recover any difference between the amount obtained by sale and the amount of the indebtedness and any interest, costs and expenses.” Basically, this breaks down to be, as long as a loan is secured by property of 2.5 acres or less, and used for a one or two family residence, the owner is not responsible for the difference if the fair market value of the property is less than the outstanding balance of the loan when the house is foreclosed and sold at auction.
The changes to the law, which took place January 1, 2015, apply to all loans, secured by deed of trust, after December 31, 2014. So if a loan occurred before that, the amended law is not applicable. The amended law is now contained in Arizona Revised Statute §33-814 (H) which states that the amended law applies if any of the following are true; “(1) Trust property owned by a person who is engaged in the business of constructing and selling dwellings that was acquired by the person in the course of that business and that is subject to a deed of trust given to secure payment of a loan for construction of a dwelling on the property for sale to another person. (2) Trust property that contains a dwelling that was never substantially completed. (3) Trust property that contains a dwelling that is intended to be utilized as a dwelling but that is never actually utilized as a dwelling.”
The amended law largely stems from an Arizona court of Appeals decision in M & I Marshall & Ilsley Bank v. Mueller, (App. Div.1 2011) 228 Ariz. 478, 268 P.3d 1135. Prior to Mueller, to qualify under the old law, the property must have had a livable structure and someone must have lived in the structure. However, in Mueller the Court ruled that mere intent to inhabit the home was sufficient for protection under that statute. In Mueller, the property in question was a partially constructed house that was uninhabitable.