By Jones Osborn II

Arizona law requires an Affidavit of Real Property Value to be filed whenever real property is deeded from one party to another. This is a notarized document signed under oath by the parties to the transaction or their representatives stating the purchase price or value of the property, the amount of the down payment, and other information. Unless an exemption is available, the County Recorder is instructed by law to refuse to record any deed not accompanied by a properly completed Affidavit of Value. When filed, the Affidavit is a public record available for inspection by anyone who desires to see it.

Purpose of Affidavit. The Affidavit is used by the County Assessor to assist him in valuing property for tax purposes. While the Affidavit does not necessarily establish the value of the property for tax purposes, it is a factor that may be considered by the Assessor. As a result, property owners are often unhappy with the requirement of filing an Affidavit, particularly when the sales price of the property is far above the amount then shown on the Assessor's rolls. In addition, since the Affidavits are public information, some owners dislike having to file them, preferring to keep the purchase or sales price of their property private.

It should also be noted that Affidavits are also used by appraisers, brokers, investors and others to help determine the value of a given piece of real property.

Non-Cash Transactions. An Affidavit is required even when no cash is paid; for example, when there is an exchange of properties, or when an owner deeds his property into a limited liability company in order to reduce his risk of liability. In these cases, the parties are required to state the fair market value of the property in the Affidavit. Value, of course, is a matter of opinion, and a property owner concerned about the valuation of his property for tax purposes can be expected to take a conservative approach when stating the property's value. The ability of an owner to do this, however, may be limited when there is a recent appraisal of the property, or when a loan has recently been placed on the property which is in excess of the value the owner would like to use. Affidavits are executed under oath, meaning that there could be a violation of law if clearly erroneous information is intentionally placed on the Affidavit.

Exemptions. There are a number of statutory exemptions to the requirement of filing an Affidavit. If one of the exemptions is available, it must be stated on the face of the deed before the County Recorder will accept the deed for recordation.

The most commonly-used exemptions are the following:

1. A deed of gift.

2. A deed releasing a mortgage or deed of trust, including a trustee's deed recorded after a foreclosure.

3. A deed between a husband and wife or parent and child with only nominal consideration.

4. A deed resulting from a merger of corporations.

5. A deed from a subsidiary to a parent corporation for no consideration or for the cancellation of the subsidiary's stock.

6. A deed into or out of a trust with only nominal consideration.

Notice that there is no exemption for a deed into a corporation, partnership or limited liability company by a stockholder or owner. Similarly, there is no exemption for a distribution by any such entity to a stockholder or owner. This has caused consternation on more than one occasion because a property owner conveying his property into a wholly-owned company without cash consideration cannot understand why he or she must file an Affidavit, particularly when it might lead to an increase in property taxes. This situation can arise, for example, when a lender requires that the property securing the loan be conveyed to a so-called "single purpose entity," or when a corporation is liquidated and its assets are distributed.

Conclusion. The filing of an Affidavit of Property Value serves a useful purpose both for the government and for those involved in the real estate industry. However, if you are a property owner wishing to maintain your privacy or minimize your property taxes, be aware of the exemptions and if possible, avoid unnecessary conveyances where an Affidavit might be required.

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A.R.S. § 11-1131 et seq.