Court Rules that Provisional Remedies Apply to Breach of Lease
April 25, 2016 |
Christopher J. Charles, Esq.
The Maricopa County Superior Court recently ruled in favor of Provident Law’s client and found that Arizona’s provisional remedies statutes, A.R.S. §§ 12-1521 and 12-2402(A), apply to breach of lease disputes. This ruling provides landlords with significant leverage for collecting unpaid rent from tenants.
Provisional remedies provide creditors (such as landlords) with exceptionally effective collection options. For example, rather than having to wait until trial, in limited circumstances, the provisional remedies statutes authorize the creditor to seize the debtor’s assets “for the purpose of securing satisfaction of the judgment ultimately to be entered.” Rule 64, ARIZONA RULES OF CIVIL PROCEDURE. If the Court grants the provisional remedy, then the creditor can immediately move to garnish and attach all non-exempt assets to satisfy the money owed, including anticipated attorneys’ fees and costs.
Non-exempt assets include real property, cars, boats, ATVs, bank accounts, stocks, bonds, precious metals, jewelry, etc.
Because the issuance of a provisional remedy often effectively ends the case without affording the debtor the opportunity to conduct discovery or to try their case before a jury, the Courts are careful to only issue provisional remedies in limited circumstances as authorized by the provisional remedy statutes. Fortunately for landlords, according to the recent ruling by the Superior Court, one of those limited circumstances includes “an action upon a contract, express or implied, for payment of money which is not fully secured by real or personal property, or, if originally so secured, the value of such security has, without any act of the plaintiff or the person to whom the security was given, substantially diminished below the balance owed.” A.R.S. §§ 12-1521(1).
Everyone agrees that the above circumstance includes a debtor’s breach of an unsecured promissory note. But Provident Law successfully argued on behalf of its landlord client that the above circumstance should also extend to the breach of a residential lease due to non-payment of rent since a lease qualifies as an “express contract for the payment of money” and is not secured.
Although provisional remedies can be an effective strategy to swiftly resolve disputes, there are caveats to consider. First, in order to protect the debtor in the event that the creditor is ultimately unable to prove their case, the Court will require the creditor to post a bond before issuing the provisional remedy. And second, if the creditor’s provisional remedy application is unsuccessful, the Court may order the creditor to pay the debtor’s attorney’s fees incurred in defending the provisional remedy application.
The takeaway for landlords is that if its tenant (commercial or residential) fails to pay rent (without a legal justification), the landlord can sue for damages and apply to the Court for the immediate garnishment or attachment of the tenant’s non-exempt assets to satisfy for the landlord’s expected judgment amount.
If you or someone you know has questions regarding a contract or lease dispute or any other real estate matter, please call or email today.
Christopher J. Charles is the founder and Managing Partner of Provident Law, PLLC. He is a State Bar Certified Real Estate Specialist and a former “Broker Hotline Attorney” for the Arizona Association of REALTORS® (the “AAR”). He is also an Arbitrator and Mediator for the AAR regarding real estate disputes; and he serves on the State Bar of Arizona’s Civil Jury Instructions Committee where he helped draft the Agency Instructions and the Residential Landlord/Tenant Eviction Jury Instructions.