It’s an old axiom that “there is no ATM on the backside of a courthouse.” In other words, just because the landlord won a case and were awarded a judgment, doesn’t mean the landlord will actually collect the money owed. In fact, it has been our experience that a very small percentage of the amounts owed are ever collected on judgments. This is due to several factors including, poor applications that do not obtain enough information about the tenant, using the wrong collection company and allowing delinquent accounts to expire. Each of these issues could be its own article, but for now we will focus on the one before the legislature – expiration of judgments.
Many landlords and owners may not know that when they get a judgment they still have to take significant steps before they ever actually collect any money. For example, unless a tenant voluntarily pays the judgment, most landlords collect the money by completing a wage or bank garnishment. This requires that another legal process be followed. While it is not necessarily a complex process, there are numerous steps that must be taken. Additionally, even if the proper steps are followed, there is no guarantee that the tenant will have the funds to be garnished, either because they don’t make enough money or because there are prior garnishments or other amounts taken, such as child support.
Because of these potential hurdles, judgments often sit dormant for several years. Under the current Arizona law, a judgment is valid for five (5) years form the date of judgment. If it has not been renewed, the judgment then automatically becomes unenforceable after 5 years. This doesn’t mean the judgment is void – it still can sit on a person’s credit report. However, the landlord is no longer able to file a garnishment or take other proactive steps to collect on the judgment. The current law allows any judgment holder to renew a judgment within 90 days of the judgment expiring if a specific court process is followed. Once it is renewed, it is valid for another 5 years. This can be done repeatedly, so that a judgment may last forever if it is properly renewed every 5 years.
As the reader can likely imagine, for larger operators with hundreds, if not thousands of judgments, this can become a difficult task to track to ensure all judgments are timely renewed. As a result of this, a legislator submitted a bill this year, HB 2240, which amends the law and provides that judgments are now to be valid for 10 years. This bill has already been signed by the governor and therefore will become law 90 days after the legislature closes session. This is the first bill to become law that affects AZREIA members and landlords throughout Arizona. While it may not seem important, this change will reduce the frequency in which judgments are renewed and thus will increase the likelihood that old judgments are actually paid.
by Mark B. Zinman, Attorney
Williams, Zinman & Parham P.C. (Zona Law Group)