By Mark Zinman | Zona Law
We often write articles for AZREIA about the eviction process, as it’s the only remedy a landlord has when a tenant defaults. The owner needs this avenue to get back possession so they can re-rent the unit to a new tenant. But what we often don’t discuss, is collecting the amount of the judgment from the tenant. In an eviction, a property owner is awarded a monetary amount. However, that doesn’t mean a tenant pays that amount in court – the owner has to try to collect it through legal means. Also, when a tenant moves out and causes damage to a unit or owes back rent, the owner is left trying to collect the balance owed. Unfortunately, collecting just became much more difficult in Arizona.
In the November 2022 election, there was a proposition on the ballot called: “INITIATIVE PETITION RELATING TO PREDATORY DEBT COLLECTION PROTECTION.” Further, the proponents of the bill put out a lot of information claiming that it was intended to stop abusive medical debt collections. The title alone sounds bad and with that type of information being presented, it would make a lot of people want to vote for it. Well, that is exactly what happened. While Arizona had the closest race in recent memory, with the Attorney General race coming down to less than three hundred votes, this proposition passed with over 72% approval.
The problem with most propositions is that a lot of people don’t understand what they are supporting. Also, because propositions go straight to the ballot and do not go through the legislative process which gets input from both sides, they often do not get balanced by both political sides. Any person, or special interest group, can get something on the ballot if they jump through the necessary hoops including collecting sufficient signatures.
In the case of Proposition 209, it is going to have sweeping implications on collections across Arizona. This will not just impact medical debt, it will limit the collection of any kind of debt, including judgments and debts owed by residents. The proposition significantly increases the threshold for a person’s wages before they can be garnished. Therefore, even if you have a judgment against someone, you may not be able to collect that money. The association representing debt collectors estimates that this will reduce garnishments in the state by up to 70%. It is expected that many of the eviction judgments that landlords get, will fall under this new law and would prevent garnishments.
This proposition is currently being challenged in court. However, if it is not modified or struck down, it could have lasting impacts. This could include banks increasing their interest rates on loans throughout the state to account for those files they will not collect. For property owners, it is a reminder for clients to ensure that they have good rental standards and enforce the standards consistently. When entering into a lease, you are entering into a partnership with a resident and you want to know that your new resident can live up to their end of the bargain. Also, landlords may wish to increase their deposits to ensure that they have enough money to cover normal defaults. Remember, as a landlord you can only take a deposit up to 1.5 times the monthly rent.