What This Statute Protects Against
Buying real property that carries a hidden lien or outstanding encumbrance can create serious problems for property owners. Arizona law gives buyers a clear remedy. If the sale does not include an assurance that the buyer will receive clean title, the buyer can void the entire transaction.
The sale of any lot or parcel of property which is subject to a lien or encumbrance or when the interest of the seller is held under option or contract of purchase or in trust, shall be voidable by the buyer, unless there is a provision in the instrument evidencing the lien, encumbrance, option, contract or trust agreement, or in a valid supplementary agreement, assuring that the buyer will receive title free of the lien, encumbrance, option, contract or trust agreement, upon completion of all payments and performances of all the terms and provisions required to be made or performed by the buyer.
A.R.S. § 33-438(B)The definition of "lien or encumbrance" under this statute does not include taxes, assessments, easements, rights-of-way, or mineral reservations. It also excludes covenants and restrictions. Those are considered standard conditions of property ownership.
This protection applies whether the lien is a mortgage or deed of trust, mechanics liens, or another type. The county recorder's records will typically show what encumbrances exist against a property.
Time Limits and Other Remedies
A buyer's right to void the sale is not unlimited. The action must be filed within two years after the buyer discovers the lien or encumbrance. It can also be filed within two years after the buyer completes all required payments, whichever comes first.
If the buyer has already received clear title, the right to void the sale no longer applies.
The buyer's right to void such sale shall be in addition to and shall not affect any other legal or equitable remedy.
A.R.S. § 33-438(D)This protection matters in real estate and estate planning contexts as well. When property held in a trust or under a contract is sold, the buyer must receive assurance of clear title. Families selling inherited property should verify that all liens and encumbrances are resolved before closing.