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About This Blog
Welcome to the Snell & Wilmer real estate litigation blog. Check back here often for useful news and information about current topics involving real estate litigation. We hope that you will find the blog both timely and helpful, and we invite you to join the discussion by posting comments about the articles and contacting the authors with your thoughts about the posts.
Real Estate Litigation Group Members and Blog Contributors
- Bob Henry
- Kevin Parker
- Matt Fischer
- Richard Herold
- Adam Lang
- Robert Kethcart
- Cory Braddock
- Benjamin Reeves
- Erica Stutman
- Patrick Paul
- Rick Erickson
- Ginny Olmstead
- Neal McConomy
- Michael E. Lindsay
- Bob L. Olson
- Nathan G. Kanute
- Sean M. Sherlock
- Lyndsey Torp
- Anthony Carucci
- Luke Mecklenburg
- Jon Frank
- Kevin Walton
- Lauren Munsell
- Lauren Podgorski
- Addy Colton
- John Sarager
- Jenna Le
- Ian Douglas
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Recent Posts
- CCP 998 Does Not Confer an Independent Right to Attorneys’ Fees
- Is a Bankruptcy Plan that Violates Federal Criminal Law Proposed in Bad Faith?
- That’s Common Knowledge! Failure to Designate an Expert Witness in a Professional Negligence Case is Not Fatal Where “Common Knowledge” Exception Applies
- Arizona, Meet RON!
- Appellate Court Affirms Medical Marijuana Variance in Phoenix
Topics
- Anti-deficiency Statute
- Bankruptcy
- Commercial Real Estate Industry
- Construction and Development
- Environmental
- Evictions
- Foreclosures
- Guaranty Contracts
- Judgment Liens
- Medical Marijuana
- Real Estate and Bankruptcy
- Real Estate Appraiser Litigation
- Real Estate Broker Litigation
- Real Estate Purchase/Sale Transaction Litigation
- Real Estate Receivers
- Statutes Affecting Real Estate
- Title Insurance
- Uncategorized
- Zoning
Is a Bankruptcy Plan that Violates Federal Criminal Law Proposed in Bad Faith?
By: Ben Reeves
Although legal in many states, marijuana remains illegal under federal criminal law. See 21 U.S.C. § 856(a)(1). One would think that engaging in illegal activity under federal criminal law would preclude relief under federal bankruptcy law. And, in fact, several bankruptcy courts have reached that exact conclusion. See, e.g., In re Rent-Rite Super Kegs West, Ltd., 484 B.R. 799 (Bankr. D. Colo. 2012) (“[A] federal court cannot be asked to enforce the protections of the Bankruptcy Code in aid of a Debtor whose activities constitute a continuing federal crime.”). That bright-line rule, however, may now be subject to some debate.… Read More »
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Ben Reeves
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Tagged Garvin v. Cook, Medical Marijuana, Ninth Circuit Marijuana Case
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Attorneys’ Fees Are Available in Arizona Eviction Actions
By: Ben Reeves
The Arizona Court of Appeals recently held that any successful plaintiff in a forcible detainer action (i.e., an eviction action) may recover an award of its attorneys’ fees and costs incurred at trial under A.R.S. § 12-1178(A). See Bank of New York v. Dodev, 1 CA-CV 17-0652 (Ct. App. Nov. 20, 2018). Prior to this decision, caselaw held that fees were only awardable in actions arising out of the termination of a residential lease. RREEF Mgmt. Co. v. Camex Prods., Inc., 190 Ariz. 75, 945 P.2d 386 (Ct. App. 1997). Changes to the statute, however, rendered the prior caselaw obsolete.… Read More »
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Ben Reeves
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Tagged Arizona, Eviction Action, real estate litigation
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Everyone Wins When a Foreclosure Sale Generates Excess Proceeds
By: Ben Reeves
Introduction
When a foreclosure sale generates more money than needed to pay off the lien, the excess proceeds usually go first to creditors in the order of their priority, and second to the owner after creditors are paid in full. So, in truth, not everyone wins when a foreclosure sale brings in too much money. Amusingly, in Steinmetz v. Everyone Wins, the court awarded excess sale proceeds to….you guessed it…Everyone Wins, despite the owner’s argument that Arizona’s anti-deficiency statutes barred it from recovering anything.
In addition to supplying a clever title for this post, Steinmetz v. Everyone Wins provides an important analysis of how Arizona’s anti-deficiency statutes, homeowner’s assessment lien statutes, and foreclosure statutes apply when determining who “wins” when it comes to excess sale proceeds.… Read More »
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Ben Reeves
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Tagged Excess Sale Proceeds, foreclosure, real estate litigation
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Not so Fast! How Does Revoking Acceleration of a Note Impact the Statute of Limitations?
By: Ben Reeves
Introduction
Lenders routinely accelerate notes after a default occurs, calling the entire loan due immediately. Less regularly, a lender may change its mind and unilaterally revoke the acceleration. Rarely, however, does a lender fail to foreclose on its real property collateral before the statute of limitations expires. In Andra R. Miller Designs, LLC v. U.S. Bank, N.A., 244 Ariz. 265, 418 P.3d 1038 (Ct. App. 2018), a unique set of facts involving these issues led the Arizona Court of Appeals to hold that proper revocation of acceleration resets the statute of limitations.
The Facts
In Miller, a lender made a $1,940,000 loan evidenced by a promissory note and secured by a deed of trust against a home in Paradise Valley, Arizona. … Read More »
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Ben Reeves
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Tagged Acceleration, Andra R. Miller v. U.S. Bank, Deed of Trust, Promissory Note, Revocation
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What Types of “Damages Claims” Survive a Trustee’s Sale?
By: Ben Reeves
Introduction
Arizona’s trustee’s sale statutory scheme provides for the waiver of all defenses and objections to a trustee’s sale that: (i) are not raised prior to the sale, and (ii) do not result in an injunction against the sale going forward. See A.R.S. § 33-811(C). In other words, if you have an objection to a trustee’s sale, you must seek and obtain an injunction prior to the sale or your objection will be waived.
Arizona’s Court of Appeals previously held that notwithstanding this statutory waiver, “common law” defenses to repayment of the debt survive a non-judicial foreclosure even in the absence of an injunction prior to the sale. … Read More »
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Ben Reeves
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Tagged ARS 33-811, foreclosure sale, real estate litigation, trustee's sale, wrongful foreclosure
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Oregon and Nevada Adopt the Uniform Commercial Real Estate Receivership Act
By: Ben Reeves
Nevada and Oregon join Utah in adopting the Uniform Commercial Real Estate Receivership Act (the “Act”) promulgated by the Uniform Law Commission. We have been following the development of the Act since its drafting stages. If you want more information about the Act, check out our prior posts about the drafting process, what the Act is and does, and Utah’s enactment of the Act.… Read More »
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Ben Reeves
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Tagged Commercial Real Estate Receivership Act, real estate litigation, uniform law commission
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The Contributors to This Blog Are Pleased to Announce That….
Snell & Wilmer’s Real Estate Litigation Group, which provides the content for The Real Estate Litigation Blog, is pleased to announce that it has been recognized in both the national and metropolitan rankings by U.S. News Media Group and Best Lawyers for the 2018 edition of “Best Law Firms.” We achieved the following rankings:
• National Tier 1: Litigation – Real Estate
• Phoenix (AZ) Tier 1: Litigation – Real Estate
• Utah Tier 1: Litigation – Real Estate
• Colorado Tier 1: Litigation – Real Estate
• Reno (NV) Tier 1: Litigation – Real Estate
• Tucson (AZ) Tier 1: Litigation – Real Estate
The rankings are determined through an evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process. … Read More »
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Ben Reeves
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Tagged Best Lawyers, National Tier 1, real estate litigation, U.S. News Rankings
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Arizona Supreme Court Clarifies Area Variance Standard; Property Owners May Obtain an Area Variance When Special Circumstances Existed at Purchase
By: Nick Wood, Adam Lang, Noel Griemsmann, and Brianna Long
In Pawn 1st v. City of Phoenix, the Arizona Supreme Court rejected a Court of Appeals rule that would have unduly restrained alienation of property in Arizona. The Court of Appeals found that the City of Phoenix Board of Adjustment acted beyond its authority when it granted an area variance to a pawn shop where the special circumstances causing a need for the variance existed before the pawn shop purchased the property. Under Arizona law, boards of adjustment cannot grant an area variance where the special circumstances requiring the variance are self-imposed.… Read More »
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Ben Reeves
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Tagged LLC v. Phoenix, Pawn 1st, real estate litigation, variance, zoning
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What Happens When a Secured Creditor Files a Late Claim in an Equity Receivership?
By: Ben Reeves
Pitting a receivership court’s inherent equitable powers against pre-existing property rights can lead to some pretty interesting questions. In SEC v. Wells Fargo Bank, N.A., 848 F.3d 1339, 1343-44 (11th Cir. 2017), the Eleventh Circuit recently examined whether a district court’s inherent authority to establish a claims submission process allowed the court to extinguish a security interest in real property based solely upon an untimely proof of claim. Much to the relief of secured creditors, the Eleventh Circuit held that the district court erred, as a matter of law, by extinguishing the creditor’s pre-existing property rights under those circumstances.… Read More »
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Ben Reeves
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Tagged equity receivership, real estate blog, receivership claims, SEC v. Wells Fargo
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RICO Madness: The Nuisance of Owning and Operating a Marijuana Facility
By: Bob Henry
On June 7, 2017, the Tenth Circuit Court of Appeals issued its opinion in Safe Streets Alliance, et al. v. Hickenlooper, et al., (No. 16-1048), an opinion that could open the doors to property use litigation involving marijuana facilities. One of the issues in Safe Streets was whether a property owner can use the federal RICO statutory scheme to obtain relief arising out of a neighboring property owner using property for the cultivation of marijuana in a manner that causes an impact to the value, use, and enjoyment of one’s property.
The pertinent factual allegations in Safe Streets (on the federal RICO issue) were straightforward. … Read More »
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Ben Reeves
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Tagged Federal RICO, Medical Marijuana, nuisance, Safe Streets
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Conflicts of Laws, Deficiency Actions, and Statutes of Limitations – Oh My!
By: Ben Reeves
What law governs a deficiency action if the choice-of-law provisions in the note and deed of trust conflict? The Arizona Court of Appeals answered that very question in ZB, N.A. v. Hoeller, No. 1 CA-CV 16-0071 (Ct. App. April 15, 2017). It turns out, the note controls.
The Facts
In ZB, ZB, N.A. (ZB), a Utah bank, lent money to the Hoellers to purchase a commercial property in Missouri. The note included a choice-of-law provision stating that Utah law governed the debt. The deed of trust securing the commercial property, however, provided that Missouri law controlled “procedural matters related to the perfection and enforcement of [ZB’s] rights and remedies against the [p]roperty.” In 2012, the Hoellers defaulted, and the bank recovered the property through a trustee’s sale.… Read More »
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Ben Reeves
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Tagged choice-of-law provisions, deficiency action, real estate litigation, Statute of Limitations
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What is the Effect of an Untimely Challenge to the Timeliness of a Trustee’s Sale?
By: Ben Reeves
Ever wonder what happens if a person challenges the timeliness of a trustee’s sale after the sale already occurred? Waiver of the argument of course! And, in the case of Wells Fargo Bank, N.A. v. Waltner, the affirmance of an eviction judgment.
In the Waltner case, Wells Fargo Bank, N.A., as Trustee for WaMu Mortgage Pass-Through Certificates, Series 2005-PR4 Trust (the “Bank”), purchased a residential property at a trustee’s sale in September 2015. The Bank gave the occupant of the house, Sarah Waltner (“Waltner”), notice to vacate the property, but she did not do so. Accordingly, the Bank filed a summary action to evict Waltner, which the trial court ultimately granted.… Read More »
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Ben Reeves
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Tagged A.R.S. 33-811(C), Statute of Limitations, trustee's sale, waiver
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Utah Becomes First State to Enact the Uniform Commercial Real Estate Receivership Act
By: David Leta
On March 25, Utah became the first state to enact the Uniform Commercial Real Estate Receivership Act (“UCRERA”) which was drafted by the National Conference of Commissioners on Uniform State Laws (the “Conference”) and adopted by the Conference at its annual meeting in July 2015. The Utah Uniform Commercial Real Estate Receivership Act, (the “Utah Act”) mirrors UCRERA and applies to all commercial real property receiverships that are filed in the Utah District Courts on and after May 9, 2017.
The Utah Act provides both substantive and procedural guidance in an area of law that historically has been marked by inconsistency and uncertainty.… Read More »
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Ben Reeves
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Washington Answers the Question of Whether Title Companies Owe a Duty of Care to Third Parties…
By: Ben Reeves
Last year (as we blogged about here and wrote a more in depth Law360 article about here), the Ninth Circuit certified to the Washington Supreme Court the question of whether title companies owe a duty of care to third parties when they record legal instruments. We finally have an answer…
“We answer the certified question no and hold that title companies do not owe a duty of care to third parties in the recording of legal instruments. Such a duty is contrary to Washington’s policy and precedent, and other duty of care considerations.”
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Ben Reeves
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Tagged Centurion, duty, gratuitous recording, real estate litigation, title company liability
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Guarantors’ “Lost Profits” Completely Offset Lender’s Deficiency Claim
By: Ben Reeves
Believe it or not, lenders can breach loan agreements too…and when they do, there can be significant consequences. In Great Western Bank v. LJC Dev., LLC, 726 Ariz. Adv. Rep. 21 (Ariz. Ct. App. Nov. 10, 2015), the Court of Appeals affirmed that guarantors’ “lost profits” resulting from the lender’s breach of a loan agreement completely offset the amount owed under the guaranty. Much can be learned from this unusual outcome, so please continue reading for an analysis of the facts and legal principles of this case.
The Loan Agreements
In Great Western Bank, the bank entered into an acquisition and development loan (the “A&D Loan”) with Cedar Ridge Investments, LLC (“Borrower”) to allow Borrower to acquire and begin the development of infrastructure for a fifty-home subdivision in Flagstaff, AZ to be known as Cedar Ridge.… Read More »
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Ben Reeves
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Tagged deficiency action, Guarantor, lost profits, offset, real estate litigation
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The Uniform Law Commission Approves the Uniform Commercial Real Estate Receivership Act
By: Ben Reeves
As we previously reported here, several years ago the Uniform Law Commission (the “ULC”) (the organization that drafted such favorites as the Uniform Commercial Code and the Uniform Arbitration Act) determined that states would benefit from a model act that would govern the powers, rights, and duties of receivers appointed over commercial real property. Since that time, a drafting committee has worked diligently to prepare a comprehensive statute that would address this unique area of law. The ULC recently approved the drafting committee’s final version, and the result is the Uniform Commercial Real Estate Receivership Act (the “Act”).… Read More »
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Ben Reeves
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Tagged model receivership act, real estate litigation, receiver, Uniform Commercial Real Estate Receivership Act
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It just got a little bit easier to enforce judgment liens
By: Ben Reeves
Last year, we posted It just got a little bit harder to enforce judgment liens, which analyzed a Court of Appeals decision that invalidated a judgment lien against third-party purchasers due to the judgment creditors’ failure to record an information statement along with the judgment. Lewis v. Debord, 236 Ariz. 57, 335 P.3d 1136 (Ct. App. 2014). In that case, even though the Court of Appeals found that the judgment lien remained valid, the opinion concluded that the failure to record the information statement affected the “priority” of the judgment lien and rendered the third-party purchasers’ ownership interest superior to the judgment creditors’ lien interest. … Read More »
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Ben Reeves
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Tagged judgment lien, Lewis v. DeBord, real estate litigation
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Does a title company owe a duty of care to third parties in the recording of legal instruments?
By: Ben Reeves
This is precisely the question that the Ninth Circuit recently certified to the Washington Supreme Court in Centurion Properties III, LLC v. Chicago Title Ins. Co.
Facts of the Case
In this case, Centurion Properties III, LLC (the “Borrower”) purchased a tract of real property in Washington with a loan from General Electric Capital Corporation (the “Senior Lender”), and secured the loan with a first position lien against the property. The loan documents and lien instruments specifically prohibited further encumbrance of the property without the Senior Lender’s prior written consent. Chicago Title served as the escrow agent, closing agent, and the title insurer for this transaction.… Read More »
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Ben Reeves
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Tagged Centurion Properties v. Chicago Title, duty to third-party, real estate law, title insurance
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HOA Super Priority Legal Battles Continue in the Silver State: What Senate Bill 306 Means for Nevada HOAs, Lenders and Homeowners
By: Aaron D. Ford and Karl O. Riley
In 1991, the Nevada Legislature enacted the Uniform Common-Interest Ownership Act (UCIOA) which had been promulgated by the National Conference of Commissioners on Uniform State Laws (NCCUSL) (the Statute).[1] This law provides that a homeowners association (HOA) may record a lien on each home in the community it governs and in enacting this law, the Legislature authorized an HOA to foreclose its lien through a nonjudicial foreclosure process.[2] When the lien attaches or comes into existence continues to be a dispute issue in the ongoing litigation. Under this law, the HOA’s lien is prior to the first mortgage lien to the extent of certain maintenance and abatement charges and either six or nine months of assessments for common expenses, depending on the circumstances.… Read More »
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Ben Reeves
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Tagged HOA Liens, Nevada, real estate litigation, SB 306, Super-Priority Liens
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Are Short-Term Vacation Rentals Legal?
By: Ben Reeves
The recent explosion in popularity of short-term vacation rentals through services such as Airbnb.com and VRBO.com not only provides terrifying horror stories about problem renters (google it if you’re interested), but also raises serious questions about the legality of the practice.
Many cities are currently struggling with this very issue. Opponents to short-term rentals argue that transient renters disrupt otherwise peaceful neighborhoods and negatively impact local business like traditional hotels. Proponents of the practice contend that they have a constitutionally protected property right to use their private property without governmental interference. In Jerome, Arizona, the City recently grappled with this very issue, and ultimately decided to inform a few of its citizens that they could no longer rent their homes on a short-term basis—much to the chagrin of the affected property owners.… Read More »
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Ben Reeves
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Tagged real estate litigation, short-term rentals, zoning
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If Receiver’s Sales Aren’t Foreclosures, What Are They?
By: Ben Reeves & Bob Olson
When no statute specifically authorizes a court-appointed receiver to sell real property, what type of sale is it? The Supreme Court of Nevada recently addressed this question, holding that “a receiver sale of real property that secures a loan is a form of judicial foreclosure.” U.S. Bank v. Palmilla Dev. Co., 131 Nev. Adv. Op. 9 (2015).
Facts
In U.S. Bank v. Palmilla, U.S. Bank made a $20.15 million loan to Palmilla Development Company secured by a development of townhomes. Palmilla defaulted, and U.S. Bank applied for, and obtained, the appointment of a receiver over its real property collateral.… Read More »
Author:
Ben Reeves
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Tagged anti-deficiency, NRS 40.455, real estate litigation, receiver sales, U.S. Bank v. Palmilla
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Are Vacant Lots Protected Under Arizona’s Anti-deficiency Statutes?
By: Ben Reeves
No, of course not. Arizona’s anti-deficiency statutes only prohibit deficiency judgments after a trustee’s sale of a “dwelling”.[1] Under no definition can a vacant lot constitute a “dwelling”. This was the Arizona Supreme Court’s holding in BMO v. Wildwood Creek Ranch, LLC.
In BMO, Shawn and Kristina Rudgear (through their company Wildwood Creek Ranch, LLC) borrowed $260,000 to fund construction of a home on a vacant 2.26-acre lot. This loan was secured by a deed of trust against the lot.
Construction of the home never began, the Rudgears defaulted, and BMO Harris Bank foreclosed via trustee’s sale.
… Read More »
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Ben Reeves
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Tagged A.R.S. 33-814, anti-deficiency, BMO v. Wildwood Creek, M&I v. Meuller, MidKansas v. Dynamic
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Can an Unsigned Minute Entry Create a Judgment Lien?
By: Ben Reeves
It appears that 2014 was a banner year for Arizona law on judgment liens. Indeed, we recently posted about the Lewis v. DeBord decision, which invalidates judgment liens vis-à-vis third-party purchasers if the judgment creditor fails to record an “information statement” with the judgment. The Court of Appeals has again tackled the question of judgment liens under Arizona law.
In Sysco Arizona, Inc. v. Hoskins, the Court of Appeals held that a recorded unsigned minute entry (which awarded judgment in the amount of $395,598.00) did not create a judgment lien. The reason for this ruling is simple – under Arizona law, an unsigned minute entry (even if it awards a money judgment) is not a formal “judgment” and the statutes require the recordation of a formal “judgment” to create a “judgment lien”. … Read More »
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Ben Reeves
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Tagged judgment lien, Lewis v. DeBord, real estate litigation, Sysco v. Hoskins
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Update – Prospective Waivers of “Fair Market Value” Hearings are Definitely Void.
By: Ben Reeves
In 2013, we blogged about the Arizona Court of Appeals’ determination that prospective contractual waivers of “fair market value” hearings are unenforceable as a matter of public policy. The link to our prior blog post is here. Although we noted some deficiencies in the Court of Appeals’ reasoning, we recognized that the holding reached a defensible legal result. On review, the Arizona Supreme Court reached the same outcome…but with a more robust legal analysis. See CSA 13-101 Loop, LLC v. Loop 101, LLC, et al., No. CV-14-0029 (Ariz. Dec. 31, 2014).[1]
The Arizona Supreme Court held that although Arizona’s anti-deficiency statutory scheme did not expressly prohibit contractual waivers of “fair market value” hearings, Arizona’s overall public policy behind the trustee’s sale process entitled borrowers and guarantors to the protection afforded by a “fair market value” hearing.… Read More »
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Ben Reeves
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Tagged A.R.S. 33-814, anti-deficiency, CAS 13-101 v. Loop 101, fair market value hearing, waiver
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It just got a little bit harder to enforce judgment liens
By: Ben Reeves
Introduction
As everyone knows, the enactment of the Statute of Westminster II in 1285 ushered the concept of a “judgment lien” into English law. The statute – for the first time in English legal history – authorized a judgment creditor to obtain a writ of elegit (as opposed to a writ of fieri facias) to take possession of the judgment debtor’s land to pay for the judgment debtor’s debts. 1285 was indeed a very good year for judgment creditors. Nearly three-quarters of a millennium later, the judgment lien remains an important remedy for judgment creditors.
Judgment Liens in Arizona
Although Arizona law has (for the most part) abandoned the use of fanciful Latin phraseology, Arizona does provide for a “judgment lien” – which (despite the plain, uninspired name) creates a lien against all of the real property then owned or later acquired by the judgment debtor. … Read More »
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Ben Reeves
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Tagged byers v. wik, judgment enforcement, judgment lien, Lewis v. DeBord, real estate litigation
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Vendees’ Liens—Construction Lenders Beware!
A recent Arizona Court of Appeals decision highlights a lien priority risk for secured construction lenders when the financed project fails. The problem—known as a “vendee lien”—is most likely to arise when up-front deposits are paid by buyers of units in condominiums or similar projects.
The case, Rigoli v. 44 Monroe Marketing, LLC, involved a construction loan made by Corus Bank in 2006 for the development of the 44 West Monroe condominium tower in downtown Phoenix. As a condition to the loan, the developer was required to have presales of at least 100 units and earnest money deposits of approximately $4.5 million.… Read More »
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Ben Reeves
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Tagged 44 Monroe, construction lending, quiet title, vendee lien
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Lenders Beware: the Nevada Supreme Court Holds That Foreclosures of Homeowners’ Association Liens May Extinguish First Priority Deeds of Trust
By: Bob L. Olson
Nevada has adopted the Uniform Common Interest Ownership Act of 1982 (the “Act”) which governs homeowners’ associations (“HOA”). One particular provision of that Act, enacted by Nevada in 1991 and later amended, and codified as NRS 116.3116 (the “Statute”), states that HOA liens are “prior to all other liens and encumbrances on a unit” except for, among other liens:
(b) A first security interest on the unit recorded before the date on which the assessment sought to be enforced became delinquent . . . :
NRS 116.3116(2)(b) (emphasis added).
At first glance the Statute unconditionally subordinates the HOA’s lien to a first priority mortgage or deed of trust (hereinafter “first priority lien” and the holder, the “mortgage holder”) recorded against the unit before the date on which the assessment sought to be enforced became delinquent.… Read More »
Author:
Ben Reeves
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Tagged HOA Lien, Nevada, NRS 116.3116, real estate litigation, SFR Investments v. U.S. Bank
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A Subsequent Developer has no Ability to Force a Public Body to Call an Abandoning Developer’s Performance Bonds for Infrastructure Improvements.
The Arizona Court of Appeals decided on July 22, 2014 that a developer cannot compel a public entity to call its performance bonds to complete infrastructure improvements on a construction project that a prior developer abandoned due to bankruptcy. Ponderosa Fire Dist. et al. v. Coconino County et al., 1 CA-CV 13-0545.
– See more on this case from our blogger Rick Erickson at: http://www.swlaw.com/blog/construction-ally/2014/07/23/a-subsequent-developer-has-no-ability-to-force-a-public-body-to-call-an-abandoning-developers-performance-bonds-for-infrastructure-improvements/#sthash.3iBSqIC1.dpuf… Read More »
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Tagged developer, performace bonds, Ponderosa Fire v. Coconino County, real estate litigation
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Guarantors Remain Liable for “Carve-out” Obligations, Despite Non-recourse Loan
By: Ben Reeves
Introduction
Believe it or not, guaranty contracts mean what they say. If a guarantor agrees to reimburse a lender for misappropriated security deposits, unpaid taxes, and the cost of enforcement, then – not surprisingly – courts will hold the guarantors liable for these expenses.
In Investors Warranty of America, Inc. v. Arrowhead Business Center, L.P., the guarantors signed a limited guaranty contract obligating them to pay up to $350,000 if the borrower defaulted on the $5,250,000 commercial loan secured by an office building in Peoria. In addition to this capped amount, the guarantors agreed to pay for certain “carve-out” expenses, including misappropriated security deposits, unpaid taxes, and costs of enforcement. … Read More »
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Ben Reeves
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Tagged bad-boy guaranty, carve-out, investors warranty v. arrowhead, non-recourse, real estate litigation
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Borrowers Can Avoid Liability Even After a Trustee’s Sale
By: Ben Reeves
Since a lender must have a valid debt and valid lien to conduct a trustee’s sale, a borrower that allows the foreclosure sale to occur impliedly agrees that the debt and lien are valid. In Madison v. Groseth and BT Capital, LLC v. TD Serv. Co. of Arizona, 229 Ariz. 299, 301, 275 P.3d 598, 600 (2012), Arizona appellate courts reached that exact conclusion, holding that under A.R.S. § 33-811(C), a borrower that does not obtain an injunction stopping a trustee’s sale waives all defenses to the validity of the sale and all defenses related to the sale. … Read More »
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Ben Reeves
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Tagged A.R.S. 33-811(C), anti-deficiency, BT Capital, Moran AZ Financial v. Gotses
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Unmitigated Waivers: Guarantors Remain Liable Despite 4-Year Delay in Foreclosure Sale
By: Ben Reeves
If a lender delays foreclosure allowing years of default interest to accrue such that a guarantor’s obligation increases from $6 million to $12 million, should the guarantor remain on the hook for the full $12 million? In Pi’ikea, LLC v. Williamson, 683 Ariz. Adv. Rep. 32 (Ct. App. 2014), the Arizona Court of Appeals recently confirmed that if the guarantor waived the “mitigation of damages” or “impairment of collateral” defense in its guaranty contract, then the answer is an unmitigated YES.
The Facts
In 2004, TBM Equities, LLC borrowed $5,922,000 to build an apartment complex in Tucson, AZ. … Read More »
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Ben Reeves
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Tagged Guarantor, guaranty, impairment of collateral, mitigation of damages, Pi'ikea v. Williamson, waiver
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Amendments to Arizona’s Anti-deficiency Statute Exclude Homebuilders from Anti-Deficiency Protection
By: Ben Reeves
Last Tuesday, April 20, 2014, Arizona’s Governor, Jan Brewer, signed HB 2018 into law. This bill closes a long-standing loophole that allowed commercial homebuilders to take advantage of Arizona’s anti-deficiency statute, even though the statute was originally enacted to protect only homeowners. In sum, for loans secured by residences that are originated after December 31, 2014, commercial homebuilders will no longer be able to avoid liability based on Arizona’s anti-deficiency statute, A.R.S. § 33-814(G).
A.R.S. § 33-814(G) provides that after a trustee’s sale, a lender cannot sue to recover the difference between the value of a “dwelling” and the amount owed on the loan (i.e., the “deficiency”). … Read More »
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Ben Reeves
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Tagged A.R.S. 33-814, anti-deficiency, HB 2018, MidKansas v. Dynamic
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A Section 363 Sale Does NOT Transfer Property Free and Clear of an Equitable Servitude
By: Ben Reeves
Sales in bankruptcy court under 11 U.S.C. § 363 (called “363 Sales”) are often used to sell property during a bankruptcy case. The 363 Sale process provides an efficient procedure to liquidate estate property and offers several advantages to sales outside of bankruptcy – including the highly desirable ability to sell property “free and clear” of interests. The procedure is used so regularly and with such great success that parties often expect 363 Sales to transfer property free and clear of all interests as a matter of course. That result, however, is not always the case.
In re Hassen Imports Partnership reminds us that a 363 Sale does not automatically transfer title free and clear of all interests in real property. … Read More »
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Ben Reeves
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Not All Property Acquired Post-Petition is Safe from Creditors
By: Ben Reeves
Although property obtained by a debtor after filing for bankruptcy is usually safe from creditors, a recent case from the Ninth Circuit Bankruptcy Appellate Panel allowed a Chapter 7 Trustee to sell real property obtained by the debtors post-petition.
In In re Jones, a debtor’s grandmother signed and recorded a “Beneficiary Deed” that transferred certain real property to the debtor effective upon the grandmother’s death. A year and a half after the grandmother recorded the deed, the debtor filed for bankruptcy. Three days after he filed for bankruptcy, the grandmother passed away.
The Chapter 7 Trustee attempted to sell the inherited property, but the debtor objected. … Read More »
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Ben Reeves
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Tagged bankruptcy, beneficiary deed, property of the estate, real estate litigation
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Mortgage Lenders Can’t Jump Ahead of Mechanic’s Liens
By: Ben Reeves
In Weitz Co., LLC v. Heth, 223 Ariz. 442, 314 P.3d 569 (Ct. App. Nov. 26 2013), the Arizona Court of Appeals held that the plain language of Arizona’s mechanic lien statute, A.R.S. § 33-992(A), does not allow a lender to jump ahead of a mechanic’s lien under the doctrine of “equitable subrogation.”
In Weitz, First National Bank of Arizona lent a developer $44,000,000 to build a 165-unit, mixed-use commercial/residential project in downtown Phoenix. The bank secured repayment of the construction loan by recording a deed of trust against the project.
The developer hired The Weitz Company as its general contractor. … Read More »
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Ben Reeves
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Tagged equitable subrogation, mechanic's lien, real estate litigation, Weitz v. Heth
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The EPA Approves New Environmental Due Diligence Standard
By: Patrick Paul
On December 30, 2013, the United States Environmental Protection Agency (EPA) issued its final rulemaking recognizing the newly amended ASTM standard practice for Phase 1 Environmental Site Assessments, E 1527-13 as satisfying the agency’s All Appropriate Inquiries (AAI) rule at 40 C.F.R. Part 312. Curiously, EPA did not remove the existing reference to the prior E1527–05 standard. In fact, EPA specifically provided that “today’s rule does not require that any party use this standard.” Rather, the new rule at least temporarily provides an additional method to achieve AAI without altering the existing requirements or otherwise mandating new requirements. … Read More »
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Ben Reeves
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Tagged 40 CFR 312, ASTM standards, Environmental standards, EPA, Phase 1
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California Amends its Anti-Deficiency Statute
By: Ben Reeves
As of January 1, 2014, California amended its anti-deficiency statute to stop mortgage lenders from “collecting” from homeowners on post-foreclosure debts. Although the amendments were designed to tackle a purely consumer / residential real estate issue, only time will tell if the changes have unintended consequences beyond the consumer / residential realm.
Prior to the amendment, California’s anti-deficiency statute, Cal. Civ. Proc. Code § 580d, only barred lenders from obtaining a judgment against homeowners to recover the difference between the value of the home after foreclosure and the amount of the debt owed on the mortgage (i.e.… Read More »
Guarantors Beware! A.R.S. § 33-814 May Not Save You from a Deficiency Judgment
By: Ben Reeves
In First Credit Union v. Courtney, 309 P.3d 929, 669 Ariz. Adv. Rep. 18 (Ct. App. 2013), the Arizona Court of Appeals rejected three creative arguments that A.R.S. § 33-814 protected the guarantors from paying on their guaranty. The opinion provides a stark reminder that Arizona courts will usually enforce a guarantor’s contractual obligation to repay a debt.
In 2006, First Credit made a $3.56 million construction loan to Orange Grove I, L.L.C. (the “Borrower”). First Credit secured the loan with a lien against commercial real property called the Appian Estates. The Courtneys guaranteed repayment of the loan. … Read More »
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Ben Reeves
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Tagged anti-deficiency, ARS 33-814, First Credit Union v. Courtney, Guarantor
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The Uniform Law Commission Makes Progress Drafting a Model Act on the Appointment and Powers of Real Estate Receivers
By: Ben Reeves
If all goes as planned, the Uniform Law Commission will finalize and promulgate a model act dealing with the appointment and powers of commercial real estate receivers at some point in 2015. Last month, the Drafting Committee for this model act met in Minneapolis, MN to discuss and revise the latest draft. Since a significant part of my practice is devoted to real estate receiverships in Arizona, I flew up to Minnesota to participate in the meeting as an Observer.
Led by Chair, Tom Hemmendinger, and Reporter, Wilson Freyermuth, the committee meticulously analyzed every aspect of the draft act, including the grounds for appointment, the receiver’s powers upon appointment, the rights of third-parties affected by a receivership, and – by far the most provocative issue – whether a receiver should have the power to sell real property. … Read More »
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Ben Reeves
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Tagged model act, power to sell, real estate receiver, uniform law commission
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Can You Waive the Right to a “Fair Market Value” Hearing?
By: Ben Reeves
We finally have an answer to the question of whether parties can contractually waive the right to a “fair market value” hearing under Arizona law – and the answer, according to the Court of Appeals – is “no.”
In CSA 13-101 Loop, LLC v. Loop 101, LLC et al., No. 1CA-CV 12-0167 (Ariz. Ct. App. September 10, 2013), the Arizona Court of Appeals held that Arizona’s deficiency statute, A.R.S. § 33-814(A), prohibits a party from waiving the right to a “fair market value” hearing. This statute generally entitles borrowers and guarantors to an evidentiary “fair market value” hearing to determine the value of foreclosed property that should be applied towards repayment of the debt that was secured by the foreclosed property. … Read More »
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Ben Reeves
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Tagged A.R.S. § 33-814, CSA 13-101 Loop LLC v. Loop 101 LLC, fair market value hearing, real estate litigation, waiver
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A Non-Purchase Money Second Deed of Trust is Not Protected by Arizona’s Anti-deficiency Statute
By: Ben Reeves & Julie Maurer
Arizona anti-deficiency laws do not prohibit a non-purchase money lender from suing on its note after foreclosure by a senior lender. In Wells Fargo Bank, N.A. v. Brewer, No. 1CA-CV 12-0383 (Ariz. Ct. App. May 21, 2013 unpublished), the Arizona Court of Appeals held that Arizona’s anti-deficiency statute, A.R.S. § 33-814, did not prevent Wells Fargo from suing on its note after a senior lender foreclosed on the borrowers’ multi-million dollar home.
In 2007, Wells Fargo agreed to lend the Brewers up to $1,000,000 and secured the loan with a second position deed of trust recorded against the Brewers’ home. … Read More »
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Ben Reeves
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Tagged Arizona, ARS 33-814, Helvitica Servicing v. Pasquan, real estate litigation, Wells Fargo v. Brewer
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A Lender Holding Two Liens Can Foreclose on the Senior Lien and Sue on the Junior Lien
By: Ben Reeves
In Wells Fargo Bank, N.A. v. Riggio, No. 1CA-CV-12-0430 (Ariz. Ct. App. June 4, 2013), the Arizona Court of Appeals held: (i) that the “merger of rights” doctrine does not “merge” a lender’s first and second lien into a single unitary interest upon the foreclosure of the first lien, and (ii) A.R.S. § 33-814 does not apply to an action on a junior loan. In other words, Arizona law permits a lender holding two liens against the same property to foreclose on the senior lien, and then sue on the second loan outside of Arizona’s anti-deficiency statutory scheme.… Read More »
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Ben Reeves
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Tagged merger of rights, Mid Kansas v. Dynamic Development, real estate litigation, Wells Fargo v. Riggio
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Arizona’s Anti-deficiency Statute, A.R.S. 33-814(G), Cannot be Prospectively Waived Says the Court of Appeals
By: Ben Reeves
In Parkway Bank & Trust Co. v. Zivkovic, 662 Ariz. Adv. Rep. 26 (Ct. App. 2013), the Arizona Court of Appeals held that provisions in loan documents purporting to waive the applicability of A.R.S. § 33-814(G) violate Arizona public policy and, therefore, are not enforceable under Arizona law.
A.R.S. § 33-814(G) provides that if a lender has a trustee’s sale foreclose of a “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 . . . [then] 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.” This statute is generally referred to as the “anti-deficiency” statute as it generally prevents lenders from suing homeowners for the difference between the amount owed on their mortgage and the value of their home.… Read More »
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Ben Reeves
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Tagged A.R.S. § 33-814, anti-deficiency, Parkway Bank v. Zivkovic, real estate litigation, waiver
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A Person Owning a Fractional Interest in a Vacation Home is Protected by Arizona’s Anti-deficiency Statute
By: Ben Reeves
In Independent Mortgage v. Alaburda, the Arizona Court of Appeals held that Arizona’s anti-deficiency statute, A.R.S. § 33-814(G), precluded a lender from suing its borrowers for a deficiency after foreclosing on the borrowers’ fractional interest in a vacation home. 230 Ariz. 181, 281 P.3d 1049 (Ct. App. 2012).
If a lender conducts a trustee’s sale of “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,” then A.R.S. § 33-814(G) bars a lender from suing a borrower to recover any difference between the value of the property and the amount of debt owed (i.e.… Read More »
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Ben Reeves
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Tagged A.R.S. 33-814, anti-deficiency, dwelling, Independent Mortgage v. Alaburda
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Green construction sounds great, but…
It isn’t always easy being green. Snell & Wilmer partner Marc Erpenbeck talks about emerging litigation issues generated by the proliferation of green construction projects in this informative article entitled “Understanding LEEDigation, The fast-growing trend of GREEN building spurs new issues for the commercial real estate industry” published in the May/June issue of AZRE Magazine. Click on the link to check it out.… Read More »
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Ben Reeves
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Tagged AZRE Magazine, Green Construction, LEEDigation, real estate litigation
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A.R.S. § 33-814(A) and Bankruptcy Proofs of Claim: To File or Not to File…Conflicting Cases Leave Creditors With No Clear Answer
By: Ben Reeves
Under Arizona law, does a secured creditor need to file a deficiency action within 90 days after a trustee’s sale to preserve the unsecured portion of its claim in a bankruptcy case? Or is filing (or amending) a proof of claim sufficient? Two recent cases out of Arizona provide conflicting answers.
The two cases reached the issue based on a similar fact pattern. In both cases, the debtors stipulated to relief from the automatic stay to allow a trustee’s sale to occur. In both cases, the sales resulted in substantial, unsecured deficiencies. In both cases, the trustees objected to the unsecured portion of the unsecured claims based on the lenders’ alleged failure to comply with A.R.S.… Read More »
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Ben Reeves
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Tagged A.R.S. § 33-814, bankruptcy, In re Rader, In re Wright, Proof of Claim, trustee's sale, unsecured claim
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Arizona Residential Landlords in Foreclosure – Expanding the Duty to Notify Tenants
By: Bob Henry
The Arizona Residential Landlord Tenant Act, A.R.S. § 33-1301 et seq., already requires landlords to provide written notice (with specific language) to tenants of a “potential foreclosure” on the property if a “foreclosure action” has been “initiated” at the time the parties enter into the rental agreement. A.R.S. § 33-1331. This obligation was added by the Arizona Legislature in 2010 in reaction to the flurry of foreclosures arising out of the recent real estate crash to protect tenants from entering into leases on properties that were already in significant financial distress and, indeed, in the process of being foreclosed on.… Read More »
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Ben Reeves
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Tagged A.R.S. § 33-1331, Arizona residential properties, foreclosures, landlord, lease, residential, tenant
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Introducing the Snell & Wilmer Real Estate Litigation Blog
The Snell & Wilmer Real Estate Litigation Group is proud to announce the launch of its new blog. After decades of handling commercial disputes and trials involving real estate, the Group was officially formed in 2008. The firm’s real estate litigation and trial attorneys formed the Group to maximize expertise, efficiency and results for the benefit of the firm’s clients.
Through the launch of its blog, the Group is excited about the opportunity to share its collective insight on timely issues affecting real estate litigation. Each blog post will be written by one or more of the attorneys of the Group, with the aim of providing a forum for the timely discussion and analysis of issues impacting real estate litigation.… Read More »
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Ben Reeves
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Tagged blog, real estate litigation, Snell & Wilmer
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