Arizona Foreclosure Anti-deficiency Rule Also Applies To Vacant Land

Arizona Foreclosure Anti-deficiency Rule Also Applies To Vacant Land

I just got this from my CPA Warren Taryle at

He keeps an ear on the ground for me on legislation and IRS rules pertaining to LAND.

Here you go. I think you will find this interesting…

In a decision issued on December 27, 2011, the Arizona Court of Appeals held that Arizona's anti-deficiency statute applies to debtors who purchase vacant land with the intent to reside on the property upon completion of construction of a home – even if they do not complete construction or actually occupy the property.

In M&I Marshall & Ilsley Bank v. Mueller, the debtors purchased a vacant lot on which they intended to construct a single-family home. The debtors borrowed approximately $440,000 from M&I Bank to finance the construction. Many months into the construction the debtors experienced construction delays. The debtors defaulted on the note and M&I conducted a non-judicial foreclosure on the property. After foreclosure, M&I sued the debtors for the resulting deficiency. The trial court held that the debtors were entitled to protection under Arizona's anti-deficiency statute.

This is a change from the commonly-held interpretation (and even the plain language) of A.R.S. § 33-814 that the property must be “utilized” as a dwelling before it receives anti-deficiency protection.

M&I has until February 24th, 2012 to appeal this decision, and I expect that they will. So, this issue is far from resolved. However, there's a solid chance that Arizona's already excellent anti-deficiency laws will now cover raw land purchased for the intent of building a primary residence

Please be advised that, based on current IRS rules and standards, any tax advice that may be contained herein is not intended to be used, nor can it be used, for the avoidance of any tax penalty that the IRS should assess related to this matter. That being said, please do not hesitate to call me if you have any questions regarding this matter

Warren Taryle, CPA, MST



Taryle Accounting, CPA PLLC
14500 N. Northsight Blvd. Ste. #133
Scottsdale, AZ 85260

t 480 948-9510
f 480 948-9530


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