Under Arizona law, death and certain other events/conditions need not be disclosed by a seller or lessor. According to A.R.S § 32-2156:
A. No criminal, civil or administrative action may be brought against a transferor or lessor of real property or a licensee for failing to disclose that the property being transferred or leased is or has been:
1. The site of a natural death, suicide or homicide or any other crime classified as a felony.
2. Owned or occupied by a person exposed to the human immunodeficiency virus or diagnosed as having the acquired immune deficiency syndrome or any other disease that is not known to be transmitted through common occupancy of real estate.
3. Located in the vicinity of a sex offender.
B. Failing to disclose any fact or suspicion as set forth in subsection A shall not be grounds for termination or rescission of any transaction in which real property has been or will be transferred or leased.
Investors lost billions of dollars on defective mortgage securities. Now, they understandably want to recover their losses. The investment advisers, brokers and others that sold the defective securities may have to pay. State securities and other laws prohibit misrepresentations in the sale of investments, such as mortgage backed securities. If the brokers and others knew that the securities were more risky because the underlying mortgages were defective and the brokers did not disclose that knowledge, they may be liable under state securities and other laws.
Such claims have already been investigated by, for example, the Massachusetts attorney general against Morgan Stanley. In one case involving Morgan Stanley’s reported “partner,” New Century Mortgage, the Massachusetts attorney general alleged that Morgan Stanley provided New Century with financing to provide high risk loans to low income borrowers and then Morgan packaged the loans as securities and sold the securities to investors. The loans were allegedly not correctly underwritten and violated Massachusetts laws that required the lender to ascertain the borrower’s best interests. Without admitting any wrongdoing Morgan Stanley agreed to pay a total of $102 million, including $58 million to 1,000 homeowners and $23 million in investment losses to a pension fund.
Although Arizona does not have a “borrower best interest” statute, there are Arizona laws that may provide a basis for civil claims against those that sold defective securities, including consumer fraud and securities fraud statutes, as well as common law claims for fraud and negligent misrepresentation. Berk & Moskowitz, P.C. handles most types of disputes, including claims for fraud and misrepresentation. If you or your company bought defective mortgage backed securities or other related investments, contact us.