By Kristena Hansen
Phoenix Business Journal
Unlike homeowners, Arizona commercial real estate owners who lose their property to foreclosure aren’t legally protected from having to cough up the remaining debt on their loans.
Commercial property owners may find some relief under an opinion issued this summer by an Arizona Court of Appeals judge. The opinion essentially said lenders haven’t been adequately proving loan deficiency amounts in court. This gives borrowers a newfound advantage in the ability to reduce or even eliminate their loan obligations after foreclosure.
Real estate experts point out the opinion comes during a crucial time, as many commercial borrowers still face financial hardship when the commercial market’s recovery is lagging the residential side. They also see the opinion as a milestone for the commercial real estate industry because it holds lenders more accountable to state law.
“The effect of this decision isn’t going to be retroactive,” said Michael Scheurich, an attorney with Mariscal, Weeks, McIntyre & Friedlander PA in Phoenix who has represented banks and lending institutions in these cases. “This could have a ramification in that it’ll make it much more difficult for the lender to prove their deficiency actions.”
Scheurich said the lending industry, on the other hand, believes the opinion won’t have much of an impact on the outcomes of deficiency lawsuits, just complicate the process.
