Legal Alert - Arizona Court of Appeals Holds That Certain Residential Developers Are Not Protected by Arizona’s Anti-Deficiency Statute


by Eric H. Spencer

Nearly three years ago, the Arizona Court of Appeals held that the Arizona anti-deficiency statute protects a borrower who never completed construction of a single-family dwelling before defaulting on its loan. This week, however, the same appellate court held in BMO Harris Bank vs. Wildwood (2014) that a developer of vacant land cannot invoke the anti-deficiency statute as a matter of law, regardlessof the borrower’s professed intent to eventually reside on that property.

The new decision is significant beyond just the fact that lenders may seek a deficiency judgment against borrowers who default very early-on before construction commences. Perhaps more significant, a concurring opinion broke new ground by indicating that even when construction is well underway, courts should not simply take the borrower’s word that he or she intends to eventually occupy the property.

[Read the full alert.]