2012 Legislative Bills Regarding Short Sale and Foreclosures

Three bills have already been introduced in the 2012 Arizona legislative session regarding short sales and foreclosures. All three bills are pro-borrower, and attempt to reduce or eliminate a borrower’s liability for a deficiency after a short sale or foreclosure.

The first two bills attempt to change the deficiency calculation as it relates to foreclosures of a mortgage loan by a lender that purchased the mortgage loan from the original lender. These two bills require that the starting point for calculating a deficiency is the amount paid to the original lender for the mortgage loan. For example, if a $100,000 mortgage loan on a vacant lot was purchased from the original lender for $40,000, and the vacant lot is now worth only $30,000, the deficiency after foreclosure under these two bills would only be $10,000, not $70,000.

Finally, following in the footsteps of a 2011 California law, the last bill attempts to eliminate any liability of the seller to the lender for a deficiency after a short sale.

Combs Law Group will continue to keep your advised of any new legislation in the areas of short sales, foreclosures and Arizona real estate laws.

Inheritance Issues Can Play Role in Real Estate Title

A couple both have children from previous marriages. When they signed a contract to purchase a Tempe home, their real estate agent said that most spouses at the closing will take title to a home as “community property with right of survivorship.”

Do they need to take title in that manner if they want their children from prior marriages to get the home after they both die?

No. The term “with right of survivorship” used in community property with right of survivorship is a term of art meaning that the surviving spouse acquires the deceased spouse’s one-half interest in the property.Upon the subsequent death of the surviving spouse, only the children of the surviving spouse would have an interest in the home.

In this situation they would not want to hold title to the Tempe home as community property with right of survivorship. An Arizona real estate lawyer would suggest that the couple hold title to their home simply as “community property.” In that event, after the death of the first spouse, the children of the first spouse would own 50 percent of the home, and the surviving spouse would own the other 50 percent.

Furthermore, if they both want the surviving spouse to be able to live in the home during their lifetime after the first spouse’s death, they both should provide that in a revocable living trust or other estate plan that the surviving spouse would have a life-estate interest in the home.

After the surviving spouse dies, the proceeds from the sale of the home can be divided 50/50 among the children of the prior marriages.

Neighbors Must Keep Common Fence

There is a chain-link fence on the property line between two backyards in rural west Phoenix. The neighbor built block walls on the sides of their home and now wants to enclose the backyard with a block wall replacing the chain-link fence between the backyards.

The other neighbor is opposed to the block wall because the chain-link fence is in good condition, and the block walls give the feeling of being in a prison. The neighbor said that he would pay for the cost of tearing down the chain-link fence and building the block wall. Not being familiar with Arizona real estate laws, can the neighbors object to the building of this block wall?

The chain-link fence on the property line is a common wall. Both of people are responsible for the maintenance and repair of the chain-link fence. If the chain-link fence is in good condition, neither has the right to tear down the chain-link fence. Therefore, if the neighbor wants to build a block wall to enclose their back yard, they will have to build the block wall inside their property line.

New HOA Fees Law Effective December 31, 2011

Under this new Arizona real estate law HOAs may charge a homeowner no more than $400.00 as a fee for preparing documents related to the disclosures an HOA must deliver during the sale of a home. Additionally, the HOA may not collect this fee earlier than the close of escrow and may only charge the fee once to a homeowner for a transaction. A.R.S.§ 33-1260 (C, D); A.R.S.§ 33-1806 (C, D); SB1149.

There has been some confusion regarding whether this new law applies to transfer fees charged by an HOA on the sale of a home. Transfer fees can be thousands of dollars, and are frequently a percentage of the sales price of the home. Transfer fees are authorized by A.R.S.§ 33-442, which does not impose a limit on transfer fees.

The new law only specifically limits fees for HOA disclosure documents. Therefore, there is still no limitation on the amount of transfer fees.

Short Sale Contract Can Be Cancelled by Buyer Before Lender Approval

A purchase contract was signed for the short sale of an Arizona home. The closing was scheduled thirty days after approval of the short saleby the lender. The lender approved the short sale the requirement that the closing occur within fourteen days. The buyer was concerned, about qualifying for a new loan within fourteen days and cancelled the purchase contract. Did the buyer have the right to cancel the purchase contract?

A buyer can generally cancel a short sale contract without any reason at any time prior to the receipt of the approval of the short sale contract by the seller’s lender. If there is any condition in the approval received from the seller’s lender, however, such as a shorter closing date or a higher purchase price, the buyer can cancel the short sale contract at that time.

Note: All purchase contracts have contingencies such as home inspection, termite inspection, approval of title report, and the approval of the buyer’s lender for a new loan. A short sale contract simply has one additional contingency, namely, approval of the seller’s lender.

Explaining Adverse Possession Rights In Fence Disagreement

A homeowner’s backyard fence is 8 feet over into his neighbor’s property and the neighbor wants him to move the fence.

The homeowner has only owned my home for six years, and the neighbor is claiming that he has no adverse possession rights to the 8 feet, although his home is more than 20 years old. And while the fence looks more than 20 years old, the homeowner is not exactly sure when it was built.

According to Arizona real estate law, does the homeowner have to tear down the fence?

The answer is probably not. By “tacking on” the adverse possession years of the prior owners of the home, the requirement of 10 years for adverse possession can be met.

Therefore, the homeowner should initially try to contact the individual who sold the home, look at any old photographs or aerial maps of the property, and talk to neighbors in the area to determine when the fence was built. Another place to contact is the city for the date of any building permit for the fence.

If the fence was built more than 10 years ago, the homeowner does own the 8 feet by adverse possession and are not required to tear down the fence.

Remember to Update Your Estate Plan After Changes

While you cannot know what changes the future will bring in your life, you can be certain that change will come. Some of the most common changes in life include the acquisition of money and property, marriage and divorce, the birth of children, and death. An effective estate plan can provide for most of the important decisions related to each of these changes. Even if you already have an estate plan, these changes often necessitate updating your estate plan. Updating your estate plan may include changing how your property will be allocated among your heirs or beneficiaries, changing your personal representative or power of attorney, and selecting or changing a guardian to care for your children in the event of your death. Updating your estate plan can help you effectively address these changes.

In addition to a will and possibly a revocable living trust, a basic estate plan should include a living will, a health care power of attorney, and a financial power of attorney, all of which help you plan for events in which you may still be alive, but not conscious or capable of making decisions. Consideration should also be given to beneficiary deeds and payable on death (P.O.D.) accounts, both of which allow you to transfer property upon death outside of probate.

The Combs Law Group can help you create an estate plan, and can also help you update your existing estate plan to help you plan for the expected and unexpected changes that the future holds. We look forward to meeting your estate planning needs.

Are Smokers Covered Under Fair-Housing Laws?

A couple is moving to England next year so he can teach at the University of Cambridge. Their plan is to return to Arizona after one year so they want to rent their Chandler home while they are gone. They do not want to rent to smokers because they do not want the smell of smoke in their home upon returning home. A potential renter, whose brother is an attorney, says that they must rent to her even though she is a smoker because smokers have equal housing rights. Is this true? What are the Arizona landlord tenant laws regarding smoker’s rights?

The answer is no. When I’m asked about the rights of smokers, I am reminded of Ted Danson’s line in the movie Body Heat when, after everyone else in a conference room lights up a cigarette and he is offered one, he says, “No, thanks. I’ll just breathe the air!” Smokers are not a protected class such as race, sex, or familial status under the Fair Housing laws, and the couple is entitled to refuse to rent to smokers. Likewise, landlords can discriminate against college students, unrelated single adults, and illegal aliens, provided that the real reason for the discrimination is not based on the prospective tenant being a member of a protected class such as race or religion.

CC&Rs Govern Unless Amended by HomeownersIn Arizona

A family’s back yard in a beautiful Ahwatukee subdivision is adjacent to the community park owned by the subdivisions homeowners’ association (“HOA”). Recently, the HOA planted three large ficus trees in the community park without any notice to them. The large ficus trees now obstruct their view of the community park. According to Arizona real estate law, does the HOA have the right to plant these large ficus trees in the community park without any notice to the neighboring homeowners?

The answer is probably. First off, there is no statute or court decision which grants a homeowner a view easement. A view easement, like any other easement, needs to be in writing and recorded. In other words, if the HOA wanted to grant this family a view of the community park, a view easement in writing and recorded would be required. Second, the Covenants, Conditions, and Restrictions (“CC&Rs”) of the community probably authorized the HOA to plant the three large ficus trees. Therefore, this family should review the CC&Rs carefully. If they were to determine that the CC&Rs authorized the planting of the three large ficus trees, CC&Rs generally can be amended by the written agreement of a percentage of the homeowners, e.g., sixty per cent of the homeowners.

Prepaying a Year of Rent to Landlord?Use Caution

Due to of the collapse of the Arizona real estate market an Arizona couple has some bad credit problems. Unfortunately, they are losing their Scottsdale home to foreclosure before long, but they want to rent a home in the same neighborhood for one year. But, because of their bad credit, they are having issues renting any homes in their same neighborhood. They have the funds to pay all of the rent for one year in advance. Is it possible to pay rent in advance for one year? If so, will they forfeit any of this prepaid rent if the landlord loses the home to foreclosure in the next year?

The first thing you should know is, the Residential Arizona Landlord-Tenant Act generally prohibits a landlord from charging a security deposit, including any prepaid rent, of more than one and-a-half month’s rent. A.R.S. §33-1321. If the tenant, however, “voluntarily” pays more than one and-a-half month’s rent (usually for winter rentals when the tenant pays the entire three or four month’s winter rent in advance), the landlord can accept this additional security deposit. Therefore, if the couple is “voluntarily” prepaying one year’s rent due to credit problems, the landlord can accept this one year of prepaid rent.

Secondly, if the couple does pre-pay rent for one year, and the landlord loses the home to foreclosure, under a 2009 federal law the renters are generally entitled to stay in the home for the remainder of the lease term. If the new landlord after the foreclosure never receives any of the prepaid rent, however, the protection under the 2009 federal law is unclear. Therefore, as an Arizona real estate attorney, it is recommended that the tenants and the landlord deposit the one year of prepaid rent into an escrow account, to be distributed monthly to the landlord, or to any subsequent landlord after any foreclosure.