Pub. 8 2018 Issue 1

20 www.azbankers.org or single two-family residential structure, such as four condo- minium units, does not fit within the statutory definition and is not a Qualified Property. • A 1/10th fractional interest in a single-family residential con- dominium is a “dwelling” within the anti-deficiency statutes definition and is a Qualified Property. • The type of borrower and their intent concerning use of the real property can be the determining factor of whether or not it is a “qualified property” protected by the anti-deficiency statutes. • A completed single-family or single two-family residential structure is a “dwelling” as defined by the anti-deficiency statutes. If an individual homeowner borrower, or borrowers, intend to occupy the structure as their primary residence, regardless of whether they have ever actually occupied the structure, it is being “utilized as” a dwelling and, thus, is a Qualified Property. • A completed single-family condominium is a “dwelling” as defined by the anti-deficiency statutes. If the condominium is owned by investment borrowers who occasionally occupy and rent it out, it is “utilized as” a dwelling and, thus, the condo- minium is a Qualified Property. • A partially constructed single-family residence owned by a commercial builder-developer borrower who is holding the res- idence for eventual sale to its first occupant and does not intend to occupy the residence is not “utilized” as a single one-family dwelling and, as such, the partially constructed residence is not a Qualified Property. This rule has been extended to apply to fully constructed and never occupied single-family homes owned by a commercial builder-developer as well. Concerning Loans Originated after 12/31/2014. On April 22, 2014, Governor Jan Brewer signed into law House Bill 2018, which amended Arizona’s anti-deficiency statutes to add identical new subsections located at A.R.S. § 33-729(C) and (D) (applicable to judicial foreclosures) and § 33-814(H) and (I) (applicable to non-ju- dicial trustee’s foreclosure sales). The amendments apply to loans originated after December 31, 2014, and clarify and expand the circumstances in which deficiency judgments are allowed. New subsections (H) and (I) added to supplement A.R.S. § 33- 814(G), the non-judicial trustee’s foreclosure sale anti-deficiency statute, are set forth in their entirety below: H. For deeds of trust that are originated after December 31, 2014, subsection G [the anti-deficiency definition subsection] of this sec- tion does not apply to trust property as follows: 1. Trust property owned by a person who is engaged in the busi- ness 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 substan- tially 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. I. For the purposes of this section, a dwelling is substantially com- pleted if either of the following occurs: 1. Final inspection is completed, if required by the governmental body that issued the building permit for the dwelling. 2. If a final inspection is not required by the governmental body that issued the building permit, the dwelling has been completed in all material respects as prescribed in the applicable ordinanc - es and regulations of the governmental body that issued the building permit for the dwelling. Subsections (C) and (D) added to A.R.S. §33-729, the anti-defi- ciency statute applicable to judicial foreclosures, include the same language. The statutory amendments clarify that: a lender may obtain a deficiency judgment against a builder or developer con- cerning a construction loan that the builder or developer obtained in the ordinary course of business to construct a home and sell it to a third-party; and a lender may obtain a deficiency judgment against any borrower if (i) a dwelling was never substantially completed upon the property which secures the mortgage loan; or (ii) the struc - ture upon the property which secures the mortgage loan was never actually utilized as a dwelling. These amendments were intended to overrule the aforementioned Mueller Arizona Court of Appeals decision. The amendments include a specific definition of a substantially completed dwelling to mean either (i) that a final inspection has THE TYPE OF BORROWER AND THEIR INTENT CONCERNING USE OF THE REAL PROPERTY CAN BE THE DETERMINING FACTOR OF WHETHER OR NOT IT IS A “QUALIFIED PROPERTY” PROTECTED BY THE ANTI-DEFICIENCY STATUTES.