Foreclosure – Expansion of Homeowner Rights In Arizona

The Arizona Court of Appeals, in a recent decision, clarified the right of a homeowner to legally remain in their home following a foreclosure during the pendency of an appeal concerning the foreclosure.  This was the first time that this issue has been litigated in Arizona.
The case arose when a bank/lender foreclosed on the homeowners/borrowers.  The loan, secured by a deed of trust on the appellants’ home, was in default.  The lender foreclosed.  The homeowners’ claim several irregularities in the foreclosure process.  When the foreclosure (trustee’s) sale was completed the homeowners refused to vacate the premises claiming they had a right to remain in the premises pending the outcome of their appeal challenging the foreclosure.
 
The lender then attempted to have the homeowners evicted.  Following a lower court action in favor of the lender bank the homeowners appealed the decision.  The Court of Appeals ruled that there was precedent in Arizona holding that tenants in Arizona who are litigating concerning the legality of an eviction have the right to remain in possession of the premises pending the outcome of the appeal.

The Court did acknowledge that this was not a customary landlord – tenant situation claiming that the homeowners were tenants at sufferance.  Tenants-at- sufferance is a legal theory describing a situation where a person(s) who at one time had a legal right to possess a property refuses to vacate the property after their legal right to possession has been terminated.  However, the Court of Appeals did condition the former homeowners’ right to remain in possession of the property with the requirement that the former homeowner post a bond sufficient to cover the rental value of the premises during the pendency of the appeal and to cover all damages and costs.

The Court of Appeals sent the matter back down to the lower court for a determination of what the amount the bond should be pending the appeal.
The court indicated the bond should be in an amount equal to the reasonable rental value of the property which may or may not equal what was formerly the amount of the monthly loan payment on the promissory note due to the lender.  Given that the homeowner has to post such a bond to also include the cost of the appeal itself may be a deterrent to many homeowners attempting to use an appeal as an attempt to drag out their right to possession of a property following a foreclosure.

It is difficult to deny that there have been problems created by major lenders using abusive or unfair tactics against homeowners during or concerning the foreclosure process.  California has taken some interesting steps to head off some of these abuses (See companion article, California Takes the Lead Again).  There is a longstanding history of Arizona following the laws of California.  What’s next for Arizona??