A.R.S. § 33-729 Extends The Anti-Deficiency Protections of A.R.S. § 33-814
The Arizona Statutes include two sections affording significant liability protections to homeowners who are unable to continue paying their mortgage. A.R.S. § 33-814(G) precludes a lender who forecloses on a deed of trust from filing suit to collect a deficiency from the homeowner/borrower. But what if the lender chooses not to foreclose on the deed of trust, or what if the lender's security interest is inferior to another lender who forecloses first? A.R.S. § 33-729(A) offers protections to such homeowners as long as the borrowed money was used for the purchase of the qualifying real estate.
A.R.S. § 33-729 states:
A. Except as provided in subsection B, if a mortgage is given to secure the payment of the balance of the purchase price, or to secure a loan to pay all or part of the purchase price, of a parcel of real property of two and one-half acres or less which is limited to and utilized for either a single one-family or single two-family dwelling, the lien of judgment in an action to foreclose such mortgage shall not extend to any other property of the judgment debtor, nor may general execution be issued against the judgment debtor to enforce such judgment, and if the proceeds of the mortgaged real property sold under special execution are insufficient to satisfy the judgment, the judgment may not otherwise be satisfied out of other property of the judgment debtor, notwithstanding any agreement to the contrary.
B. The balance due on a mortgage foreclosure judgment after sale of the mortgaged property shall constitute a lien against other property of the judgment debtor, general execution may be issued thereon, and the judgment may be otherwise satisfied out of other property of the judgment debtor, if the court determines, after sale upon special execution and upon written application and such notice to the judgment debtor as the court may require, that the sale price was less than the amount of the judgment because of diminution in the value of such real property while such property was in the ownership, possession, or control of the judgment debtor because of voluntary waste committed or permitted by the judgment debtor, not to exceed the amount of diminution in value as determined by such court.
The Effect Of This Arizona Anti-Deficiency Statute
The effect of A.R.S. § 33-729 is that if money is borrowed to finance the purchase of a single or two-family dwelling situated on two and one-half acres of land or less, a lender is barred from seeking a judgment to recover the deficiency balance. If the property does not qualify, however, the lender may pursue a deficiency judgment. Moreover, the statute expressly allows for a deficiency judgment and collection from the borrower's other assets if the lender can show that the value of the property was diminished due to voluntary wase committed or permitted by the borrower.
The application of and interplay between Arizona's anti-deficiency statutes and other relevant laws can be complicated. If you are facing foreclosure and are concerned about your potential liability, you should discuss the details of your situation with an experienced Arizona foreclosure lawyer.