§ 8.11 Deficiency Judgments. A lender generally has the ability to obtain a judgment personally against the borrower or an accommodating party, unless restricted by statute.
Arizona’s anti-deficiency statutes are found in A.R.S. § 33-729(A) (re: mortgages) and A.R.S. § 33-814(D) (re: deeds of trust). Essentially, anti-deficiency concerns will be implicated on any purchase money debt secured by a property of 2½ acres or less used as a single one-family or two-family dwelling.
Many of the key protections afforded under these anti-deficiency statutes are non-waivable, at least pre-default. See Parkway Bank & Trust Co. v. Zivkovic, 232 Ariz. 286, 304 P.3d 1109 (Ct. App. 2013) (citing the public policy concerns underlying Arizona’s anti-deficiency statutes, the court held that permitting a prospective waiver, at least one done pre-default, by the borrower of anti-deficiency protections would violate public policy); CSA 13-101 Loop, LLC v. Loop 101, LLC, 236 Ariz. 410, 341 P.3d 452 (2014), affirming in relevant part, 233 Ariz. 355, 312 P.3d 1121 (Ct. App. 2013) (statutory scheme did not permit a borrower or guarantor to contractually waive the right to a determination of fair market value in a deficiency action). But see Arizona Bank & Trust v. James R. Barrons Trust, ___ P.3d ___, 237 Ariz. 401 (Ct. App. 2015)(while noting that, under Parkway Bank, above, a borrower may not prospectively waive the protection of certain of the provisions of the anti-deficiency provisions, the appellate court held that the anti-deficiency provisions-apart from the fair market value determination under CSA 13-101, above-could be waived by express agreement of a guarantor).
The dwelling does not have to constitute the debtor’s residence for the anti-deficiency provisions to apply. Northern Arizona Properties v. Pinetop Properties Group, 151 Ariz. 9, 725 P.2d 501 (Ct. App. 1986) (vacation home) . Even a fractional interest in the residence will qualify. Independent Mortgage Co. v. Alaburda & Warner, 230 Ariz. 181, 281 P.3d 1049 (Ct. App. 2012) (lenders could not collect a post-trustee’s sale deficiency judgment against the borrowers because the definition of a dwelling under the anti-deficiency statutory protections included a 1/10th fractional interest in a vacation accommodation; the court said the statutes do not require that the dwelling constitute someone’s permanent or even normal place of abode).
Prior case law already held that the anti-deficiency statutes do not apply to loans secured by houses owned by a developer which have not yet been used as a dwelling and are not yet susceptible to being used as a dwelling. Mid Kansas Federal Savings & Loan Ass’n v. Dynamic Development Corp., 167 Ariz. 122, 804 P.2d 1310 (1991) .
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