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Real Estate

Election Of Remedies: Can Mortgagees Have Their Cake And Eat It Too?

By | Articles, Real Estate

Most secured creditors have multiple options if the debtor defaults on payment. That is precisely why they require borrowers to pledge security (such as real estate) for the performance of the repayment of the debt – so that if the borrower defaults, the creditor is not limited to the borrower’s promise to repay the debt – in addition, the creditor can seek reimbursement from the sale of the secured asset.

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How Long Can A Lender Wait Before Foreclosing

How Long Can A Lender Wait Before Foreclosing Or Suing On A Note?

By | Articles, Real Estate

Years ago, Justice Oliver Wendell Holmes, Jr. asked: “What is the justification for depriving a man of his rights, a pure evil as far as it goes, in consequence of the lapse of time?” Several reasons exist: [1] our laws aim to resolve just claims within a reasonable time; [2] if a claimant sits on her rights for too long, relevant evidence to disprove the claim may be lost or destroyed by the passage of time; and [3] litigation of a long-dormant claim by result in more cruelty than justice

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The definition of "Encumbrance” in the real estate world

Word of the Day: “Encumbrance”

By | Articles, Real Estate

When it comes to real estate transactions, more often than naught, the “devil” is in the details. The Arizona Court of Appeals, Division One, recently provided a roadmap to the rules concerning the specificity of an agreement required to obtain specific performance of an option to purchase real property.

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Supreme Court Rules: Claims for Wrongful Foreclosure Must Be Filed Prior to Trustee Sale

Supreme Court Rules that Claims for Wrongful Foreclosure Must Be Filed Prior to Trustee Sale

By | Articles, Real Estate

The recent Arizona Supreme Court case, Zubia v. Shapiro, 243 Ariz. 412 (2018), reminds homeowners to obtain early legal counsel when facing foreclosure, while bolstering lenders’ affirmative waiver defenses. Particularly, the Supreme Court ruled that borrowers waive claims to damages concerning the validity of a trustee’s sale when they first fail to obtain injunctive relief to prevent the trustee’s sale.

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Property Owners Waive All Claims And Defenses Against Lender

Property Owners Waive All Claims And Defenses Against Lender After Foreclosure

By | Articles, Real Estate

Pursuant to Arizona’s deed of trust statutes, if a borrower defaults on her mortgage obligations, the lender may foreclosure non-judicially by recording its Notice of Trustee Sale with the County Recorder’s Office. See generally, A.R.S. § 33-801, et seq. Importantly, if the borrower believes that she has any claims or defenses against the lender concerning the loan, those claims must be filed before the non-judicial foreclosure takes place.

There are generally only three ways to stop a trustee sale:

  1. reinstate the loan by paying the outstanding balance or otherwise curing the default;
  2. file for bankruptcy protection; or
  3. file a lawsuit and seek an emergency temporary restraining order (TRO).

To be clear, reinstating the loan or filing for bankruptcy are the only guaranteed strategies to postpone a trustee sale; the filing of a lawsuit, on the other hand, is only successful if the Court:

  1. grants the request for a TRO; and
  2. enters the TRO sometime prior to the date and time of the trustee sale.

Based on recent history, it generally takes the Court about five business days to consider and enter a TRO. (Importantly, any lawsuit and request for TRO must have a good faith basis and is subject to sanctions pursuant to Rule 11, Arizona Rules of Civil Procedure.)

Pursuant to Madison v. Groseth, 279 P. 3d 633, 636 Ariz. Add. Rep. 23 (App. 2012), the failure to obtain a TRO prior to the trustee sale waives all claims against the lender (and the new owner), including any allegation that the lender failed to provide the borrower with proper notice of the trustee sale.

At first blush, the above holding appears inequitable and even unconstitutional – after all, how can the borrower object to lack of notice if the borrower doesn’t discover the wrongdoing until after the fact? In Madison v. Groseth, the Court of Appeals observed this potential paradox:

Under other circumstances, [requiring a borrower to obtain a TRO to halt the trustee sale] may apply to deprive borrowers of due process if the borrower does not receive sufficient notice of the trustee sale to obtain an injunction of the sale.

Id. at 635. The Court noted that in the present case, however, the borrower admitted that she received notice of the trustee sale yet failed to apply for a TRO to halt the trustee sale. Indeed, the borrower not only received notice of the trustee sale, but the borrower actually filed a lawsuit against the lender prior to the trustee sale and did not allege that she received inadequate notice of the sale. Consequently, the Court held that this waiver requirement did not deprive her of due process.

In conclusion, if a lender initiates the foreclosure process and the borrower believes that she has claims or defenses against the lender regarding the foreclosure process, the borrower must immediately file a lawsuit against the lender and request a TRO to halt the trustee sale or else the borrower will waive all claims against the lender regarding the alleged wrongful foreclosure.

Mr. Charles regularly represents lenders and borrowers in foreclosure matters. If you or someone you know has questions regarding foreclosures or buyer/lender disputes, please call or email today to speak with Mr. Charles.

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