Legal Hotline, June 2010
The following is for informational purposes only and is not intended as definitive legal or tax advice. You should not act upon this information without seeking independent legal counsel. If you desire legal, tax or other professional advice, please contact your attorney, tax advisor or other professional consultant.
Q&As are not “black and white,” so experienced attorneys and brokers may disagree. Agents are advised to talk to their brokers/managers when they have questions.
Property Manager Not Obligated to Report Felony
The property manager furnished the two-day notice to inspect the tenant’s apartment. The tenant was not home at the time of the inspection. During the inspection the property manager saw a handgun with a silencer. Is the property manager required to notify the police of this handgun with silencer?
Answer: No. Although a handgun with a silencer is a felony, A.R.S. §13-3101(A)(8)(ii), a real estate licensee, or any other member of the general public, has no obligation to report a felony to the police. Note: Inasmuch as a felony is being committed in the tenant’s apartment, however, there may be grounds to terminate the lease. See A.R.S. §33-1368.
TITLE & INTEREST IN PROPERTY
No Prohibition Against Non-Resident Alien Purchasing Arizona Real Property
The broker represents Japanese individuals who want to buy investment homes in Arizona. Are there any federal or Arizona prohibitions against non-U.S. citizens purchasing Arizona real estate?
Answer: No. There are no federal restrictions. Although some states prohibit or limit ownership of real estate by non-resident aliens, e.g., some Midwestern states limit the amount of farm land that a non-resident alien can purchase, Arizona has no prohibition against ownership of Arizona real property by non-resident aliens.
No Listing Commission upon Condemnation of the Listed Real Property
The listing broker has a six-month commission agreement for the sale of a home. During the term of the listing agreement, the state of Arizona has condemned the home for the expansion of a roadway. Has the listing broker earned a commission because of the condemnation sale to the state of Arizona?
Answer: Probably not. The condemnation of a listed property, or even a sale to the state of Arizona because of the threat of a condemnation of a listed property, does not generally entitle a listing broker to a commission under the listing agreement. See Mealy v. Orlich, 120 Ariz. 321 (1978).
Seller Obligated to Refund Security Deposit to Tenant
Owner #1 of the home and the tenant execute a one-year lease with a $1,500 security deposit. Ten months later, owner #1 sells the home to owner #2. Owner #1, however, did not deliver the $1,500 security deposit to owner #2. The one-year lease has now terminated, and the tenant is demanding the return of the $1,500 security deposit. Is owner #2 liable to the tenant for the $1,500? If not, is owner #1 liable to the tenant for the $1,500 security deposit?
Answer: If owner #2 never received the $1,500 security deposit from owner #1, owner #2 has no liability to the tenant for the $1,500 security deposit. The tenant, however, is entitled to return of the $1,500 security deposit from owner #1. Note: The proration of rent and the transfer of the security deposit should occur at the time of the closing of the sale of the home.
No Arizona Law Requiring Seller to Provide SPDS to the Buyer
The seller is an investor who does not want to provide an SPDS to the buyer and is demanding that lines 131-133 of the contract requiring a SPDS be deleted. Does Arizona law require a seller to deliver an SPDS to the buyer of a home?
Answer: No. Under common law disclosure principles, a seller of real property must disclose to a buyer any material, adverse fact affecting the value of the real property. Unlike some states, in Arizona a formal SPDS is not required by statute. Note: The seller’s SPDS, however, is valuable for disclosure of more than just the material, adverse facts, e.g., the identities of utility providers and any transferable termite warranty.
FORECLOSURES & LIENS
No Anti-Deficiency Protection after Foreclosure of Commercial Office Building
A mortgage lender has a $4,000,000 loan on a commercial office building. The commercial office building is worth $2,500,000. After the foreclosure sale, can the mortgage lender file a lawsuit against the former owner of the office building to collect on the $1,500,000 deficiency?
Answer: Yes. Arizona’s anti-deficiency statutes protect only owners of homes. After the foreclosure sale, the mortgage lender has ninety days to file the lawsuit to collect the $1,500,000 deficiency based on the mortgage lender’s appraisal of $2,500,000 as the value of the commercial office building. The primary defense of the former owner of the commercial office building is that the $2,500,000 appraisal is too low. In other words, there would be a “battle of the appraisers” in the lawsuit to determine the amount of the deficiency.
FORECLOSURES & LIENS
Only Former Owner of the Home Has Liability for Unpaid HOA Fees at the Time of the Foreclosure Sale
At the time of the foreclosure of the home, there is a lien for unpaid HOA fees of $2,200. After the foreclosure of the first mortgage loan, the first mortgage lender becomes the owner of the home. Is the HOA lien for $2,200 in unpaid HOA fees extinguished at the time of the foreclosure sale? If so, who is liable for the $2,200 in unpaid HOA fees?
Answer: At the time of the foreclosure sale, the lien for $2,200 in unpaid HOA fees is extinguished. The former owner of the home, however, still has personal liability for the $2,200 in unpaid HOA fees. The first mortgage lender as the new owner of the home is only liable for HOA fees incurred after the date of the foreclosure.
TITLE & INTEREST IN PROPERTY
Seller Entitled to Remove All TVs, Including Attached Flat Screen Plasma TV, at Closing
The seller owns four televisions, including an attached flat screen plasma television. There is nothing in the contract relating to existing personal property to include any televisions. At the time of closing, the seller removes all four televisions, including the attached flat screen plasma television. The buyer contends that the attached flat screen plasma television belongs to the buyer pursuant to line 36 stating “attached TV/media antennas/satellite dishes.” Is the buyer entitled to the attached flat screen plasma television?
Answer: Probably not. Although the flat screen plasma television may be attached, the reasonable intent of the seller is that all of the televisions in the home, whether attached or unattached, belong to the seller and do not convey to the buyer. Murray v. Zarbel, 159 Ariz. 99 (App. 1988). Line 36 of the contract should be read as attached antennas, whether TV ormedia antennas. Note: If the buyer wanted the flat screen plasma television, the buyer should have requested in the contract that the attached flat screen plasma television would convey to the buyer at closing.