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If you buy, manage or sell real estate, eventually you will have to deal with someone in bankruptcy. Attorney Dave Knapper regularly handles such matters and has put together a synopsis of the issues you need to know. Click here for the full article.
On Wednesday, February 26, 2014, Governor Brewer vetoed the highly contested SB 1062. While the veto prevents the bill from becoming law in Arizona this year, it doesn’t resolve the underlying issues. Numerous other states have proposed similar legislation. Ultimately, the issue , including the bill’s effect on fair housing, will have to be resolved by the courts. Click here for a full analysis and history on the bill.
While our firm does not practice in bankruptcy court, we often come across bankruptcy issues when occupants and tenants in property file bankruptcy. It is important for a landlords and investors to know that if it is the occupants first bankruptcy in 12 months, an automatic stay will apply. This means that the landlord or investor must get permission from the bankruptcy court (lift stay order) granting permission to pursue an eviction. The issue often becomes more complicated, however, when the person is a serial bankruptcy filer, meaning that they repeatedly file bankruptcy in a short period of time. The landlord or investor’s rights may change. Click here for an article written by Attorney David Knapper, who regularly works with our firm in representing landlords and investors in bankruptcy court.
With the number of people buying homes at trustee’s sales increasing and with the associated increase in property values, an old opportunity is coming back – excess proceeds. Excess proceeds are monies that the trustee collects at the sale above what was owed to the lender on the debt. If the home sells for more than what is owed, the trustee has a statutory obligation to account for the excess funds. Usually the trustee will deposit the balance of the proceeds with the county treasurer and commence a court action for interested parties to make claims to the funds. See, A.R.S. § 33-812. As a result of the crash in the real estate market, excess proceeds cases dropped significantly for the past several years. However, as the values have come back up, we are starting to see foreclosed homeowners, and junior lienholders pursuing these excess proceeds. With the recovery comes a resurgence of third party businesses trying to assist them in recovering the funds.
A.R.S. § 33-812 provides that when a sale has occurred, and the sales price exceeds the amount owed, the trustee has to pay-out the proceeds following a priority schedule. For example, the trustee is to pay the costs and expenses of the sale, to other obligations undertaken by the lender before the sale, and then any condominium, homeowner’s association and to other lienholders. If there are any excess proceeds remaining, the trustee is to notify the former borrower. Instead of applying the proceeds pursuant to these priorities, a trustee can elect to deposit the excess proceeds with the county treasurer and start an interpleader lawsuit in Superior Court. The lawsuit would ask the court to determine who gets the money, and letting the interested parties litigate over it. The trustee is then discharged from further obligations.
This interpleader action is the former owner’s and junior lienholder’s opportunity to collect excess proceeds. Among other documents, the former owner would file an Application for Distribution of Excess Proceeds to collect their portion of the funds. Depending on the issues and parties involved, this process can take several months. Of course, many former owners are either unaware of these rights or they choose not to pursue the amounts because they think that the litigation is a hassle or don’t want to pay an attorney to file the Application. As a result, many entrepreneurs set up companies to assist with the process. The company need not be a law firm, but a lawyer or the former owner is required to file the actual court documents.
A.R.S. § 33-812(P) addresses such situations. It says that a claimant may enter into an agreement with a third party to pay for or assist with the recovery of excess proceeds. To do so, the statute requires that the parties have a written agreement and that the agreement cannot be entered into within the first 30 days after the trustee’s sale. A fee can be paid to the third party company, but the fee must be reasonable given the facts of the case and such fees are presumed unreasonable automatically if they exceed $2,500.
A former owner or junior lienholder does not need a third party to assist with collecting the excess proceeds. They can either hire a real estate attorney directly or file the pleadings themselves. It’s just important that they act timely and follow the required statutory procedure to make sure that they obtain the proper amount of funds to which they are entitled. Remember to check, because if you had a property foreclosed, or were an investor with a junior lien, there may funds to recover. In Maricopa County the list is found at http://treasurer.maricopa.gov/excessproceeds/