Archive for July, 2010

If HOA Will Not Enforce CC&Rs Then Individual Homeowners Can

July 20, 2010

A Peoria neighborhood has a Covenants, Conditions, and Restrictions (“CC&R’s”) code that prohibits basketball goals in the front yard. Due to many foreclosures & mortgage defaults in this Peoria neighborhood the homeowner’s association (“HOA”) has no funds to enforce the CC&R’s. Two neighbors on a street have now installed basketball goals in their front yard, and at a recent barbeque in the community park, it was overheard that several other neighbors said they were planning on installing basketball goals in their front yards. An elderly couple in the neighborhood does not want children playing basketball in the streets. If the HOA will not enforce the CC&R’s restricting basketball goals in the front yard, is it possible for individual homeowners enforce the CC&R’s?

The general rule is that, if a specific provision in the CC&R’s is not enforced, this specific provision will be deemed invalid. In fact, if there are numerous provisions in the CC&R’s not being enforced, the entire CC&R’s could be deemed abandoned. If the HOA will not enforce the CC&R’s for whatever reason, e.g., lack of funds, individual homeowners under the CC&R’s are generally entitled to enforce the CC&R’s. Therefore, the elderly couple should notify the residents in this Peoria neighborhood that they intend to enforce the CC&R’s prohibiting basketball goals in the front yard, and they should contact an attorney to seek injunctive relief in court requiring the two homeowners that have installed basketball goals in their front yard to remove those basketball goals.

Can Arizona Homestead Exemption Protect Homeowner from Foreclosure

July 19, 2010

A home was purchased in Gilbert with a $240,000 mortgage and after the home was purchased the homeowners borrowed $100,000 on a home equity line of credit (“HELOC”). The home is now worth less than $200,000 now. The homeowners are trying to get a loan modification on the first mortgage loan of $240,000, even if they do get the loan modification agreement they will probably not be able to stay current with the monthly mortgage payments. Additionally they have not made any payments on the $100,000 HELOC for the past two months. They do now want to lose their house to foreclosure and the husband recently started a new job, and in the next year or so they may be able to get out of their current situation. Can the homestead exemption under Arizona law protect them from foreclosure by either the first mortgage lender or by the HELOC lender?

The Arizona homestead exemption protects equity up to $150,000 in the principal residence of a homeowner, but this protection only applies to non-consensual judgment liens of creditors, e.g., collection judgments for credit card bills or medical bills. The homestead exemption does not protect a homeowner from consensual liens, e.g., liens on the home consented to by the homeowner at the time that the homeowner borrowed funds for a loan such as a mortgage loan, a HELOC, or a swimming pool loan. A.R.S. §33-1101. Additionally, even if the homestead exemption did apply, they do not have any equity to protect. Therefore, this couple should consult an Arizona bankruptcy lawyer to discuss possible bankruptcy protection to protect their home, including “stripping” of the HELOC as a second lien on your home, especially in light of the potential for improvement of your financial circumstances because the husband is employed again.

Seller and Agent Must Disclose Mortgage Default Sale to Prospective Buyers

July 19, 2010

A man was in a car accident last summer, and has been unable to work since the accident and as a result, could not make the payments on his Flagstaff home and has defaulted on the mortgage. A foreclosure sale has now been scheduled in three months. A real estate agent has listed the home, is afraid that if they disclose to potential buyers that the home is subject to a foreclosure sale in three months, that they will only get buyers that are “bottom feeders” because the seller is desperate, and that buyers will want to “grind” on the purchase price. Do the seller and agent have to disclose the foreclosure sale of the home to buyers? And if so, when does the agent have to disclose this information?

Both the seller and the listing broker are required to disclose to a buyer any information that would affect the ability of the seller to close the transaction. If a buyer signs a purchase contract for the home in the next three months, the transaction may not close before the foreclosure sale, even if the buyer does qualify for financing that would pay off you’re the sellers mortgage loan. As a practical matter, the title commitment issued to the buyer should show the foreclosure sale, and the buyer during escrow should be able to cancel the transaction within five days after receiving the title commitment. At that time, however, the buyer may have incurred costs such as the home inspection and loan application fees. The buyer would probably have a claim against the seller and agent for these costs because of non-disclosure of the foreclosure sale. Furthermore, the buyer could file a complaint with the Arizona Department of Real Estate against the real estate licensee for failing to disclose the Arizona foreclosure sale. Therefore, it is recommended that the foreclosure sale is disclosed to prospective buyers as soon as possible, including a disclosure in the “Remarks” section of your local Multiple Listing Service.

Arizona Real Estate Law Requires Notice to Enter Home, Tenant Must Allows

July 19, 2010

A home was recently purchased in Surprise from a California investor. The investor had leased the home to a tenant under a lease which now has a few months left. The plan is to sell the home as soon as possible, and hopefully close on the sale to the buyer at the same time as the tenant’s lease expires. At least three different times the new owner gave the required two days notice to the tenant to show the home to a prospective buyer. On previous visits, the tenant had an excuse such as sickness and refused to let me in the home. However the last time the new owner went to the home with a prospective buyer, the tenant slammed the door in my their face and understandably, that prospective buyer is not interested in purchasing the house. Is it necessary for the owner of the home to get a court order to get access to the home?

According to Arizona real estate law, the owner of the home is required to give at least two days notice to the tenant of the intent to enter the home (A.R.S. §33-1343), and the owner of the home is required to enter the home only at reasonable times, e.g., 2:00 p.m. If the owner of the home has complied with these two requirements, the tenant is in breach of the lease. Under A.R.S. §33-1376(A) the landlord is entitled to get a court order to allow access, or is entitled to terminate the lease and get a court order to evict the tenant. Therefore, the new owner should contact an attorney to get a court order either to allow access or to evict the tenant.