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April 2025

Arizona Commercial Lease Breaches and Dispute Resolution - Gottlieb Law
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Commercial Lease Breaches and Dispute Resolution in Arizona
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Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.


Why Understanding Commercial Lease Disputes in Arizona Matters

In Arizona’s fast-moving commercial market, leases form the foundation of countless business operations, from warehouse spaces in Tempe to storefronts in Scottsdale. And when one side fails to meet their lease obligations, the fallout can be expensive and disruptive. Whether you’re a landlord trying to enforce an agreement or a tenant facing unexpected claims, it’s important to understand what qualifies as a breach, what rights and responsibilities come with it, and how to resolve disputes when they arise.

Lease issues aren’t just paperwork problems. They’re legal matters that can have a serious financial impact. Smart planning backed by the right insight can shield your business from avoidable risks and unnecessary costs.

What Counts as a Commercial Lease Breach in Arizona?

While the terms “breach” and “default” are often used interchangeably, most commercial leases in Arizona define specific defaults that trigger legal remedies—so whether a violation gives rise to immediate consequences often depends on the language of the lease.

Understanding what constitutes a commercial lease breach is the first step in protecting your rights, whether you’re the landlord enforcing the lease or the tenant defending your position. In Arizona, these disputes are rarely black and white. Lease agreements are often packed with complex terms, conditions, and legal language that can make it difficult to determine when a breach has actually occurred—and what happens next.

Defining a Commercial Lease Default or Breach

When either the landlord or tenant fails to follow the terms laid out in the lease, it’s generally a default or violation of the commercial lease. These obligations are laid out in the lease contract and can involve everything from timely rent payments to property maintenance or restrictions on how the space is used.

A default can be either explicit, such as failing to pay rent, or implied, like interfering with the other party’s quiet enjoyment of the premises. Either way, Arizona courts look at the specific language of the lease and the impact of the violation before deciding what remedies are available.

Common Triggers That Lead to Lease Disputes

Some lease violations happen more often than others. Below are the issues that most frequently lead to legal conflict between commercial landlords and tenants:

1. Non-Payment or Late Payment of Rent

This is one of the most common and straightforward reasons landlords pursue legal action. Unless the lease provides a grace period or alternative terms, tenants who consistently pay late—or stop paying altogether—are typically in default.

2. Unauthorized Alterations to the Property

Commercial tenants may want to modify the leased space to better suit their business. However, if they move forward without written approval from the landlord, particularly with structural or electrical changes, it may be considered a violation of the lease.

Even cosmetic alterations can violate the lease if they’re done without consent or if they affect the building’s value, safety, or code compliance. Most leases spell out what’s allowed and require formal approval before any work begins.

3. Violation of Use Clauses

Commercial leases often contain use clauses that restrict the type of business activity allowed on the premises. For instance, a lease may prohibit using the space for food service, manufacturing, or high-traffic retail operations. Tenants that deviate from the permitted use risk violating the lease.

In multi-tenant buildings, these clauses are often used to protect existing tenants and maintain a balanced tenant mix. Landlords may have legal standing to enforce these terms even if the tenant’s new use seems harmless.

4. Failure to Maintain the Premises

Maintenance obligations are typically outlined in the lease and can be shared between the landlord and tenant depending on the lease type (e.g., triple-net vs. gross lease). Failing to handle responsibilities like interior repairs, general upkeep, or HVAC maintenance can put tenants in breach of their lease.

If the lack of maintenance creates safety hazards or reduces the value of the property, landlords may have grounds to terminate the lease or pursue damages, depending on the lease provisions.

Material vs. Immaterial Breaches Under Arizona Law

Not all breaches are equal in the eyes of the law. In Arizona, the courts draw a sharp distinction between material breaches and immaterial breaches when determining legal remedies.

What Is a Material Breach?

When a breach strikes at the main purpose of the lease, it’s considered material. In these cases, the affected party may have the legal right to walk away from the lease or seek compensation. Examples of material breaches include:

  • Long-term non-payment of rent
  • Using the space for a prohibited business
  • Major alterations that affect the structure or safety of the building
  • Repeated violations after warnings or notices

The Arizona Supreme Court affirmed this standard in the case Foundation Development Corp. v. Loehmann’s, where it held that only substantial breaches that go to the heart of the lease justify early termination. Courts are required to assess the actual harm caused, not just whether the contract was technically violated.

What Is an Immaterial Breach?

An immaterial breach is one that, while technically a violation, doesn’t significantly impact the other party’s rights or benefits under the lease. Examples might include:

  • Paying rent a few days late on occasion
  • Making minor improvements with verbal but not written approval
  • Administrative errors in providing notice

While tenants should avoid assuming leniency, Arizona courts may not enforce a lease termination or severe penalties for immaterial breaches unless they become habitual or escalate into larger issues. That said, repeated small breaches can signal noncompliance and build a case for legal action later.

Lease Language Plays a Crucial Role

Arizona law puts significant weight on the exact wording in the lease agreement. The specificity of the terms will often determine whether an issue rises to the level of a breach, what notice is required, and what remedies are available.

For example:

  • Cure provisions may require the breaching party to fix the issue within a certain number of days after receiving notice.
  • Waiver clauses may prevent parties from enforcing certain rights if they’ve ignored breaches in the past.
  • Liquidated damages clauses might predefine the financial consequences of specific breaches.

Because each lease is different, identifying whether a breach has occurred and what options are available requires careful analysis of the contract language.

How to Know If You’re Facing a Breach

If you’re a landlord noticing unusual activity at your property, or a tenant receiving written notices or threats of eviction, it’s essential to take a step back and assess the situation with legal help.

Ask yourself:

  • Has the other party clearly failed to perform a duty defined in the lease?
  • Is the breach impacting your ability to use or benefit from the property?
  • Has the issue been addressed through proper notice or communication?
  • Does the lease include terms that limit or expand your remedies?

When to Seek Legal Guidance on a Commercial Lease Dispute

In many cases, the line between a minor issue and a material breach is thin. One party may believe they’re acting within their rights, while the other sees a serious violation. Arizona courts don’t always side with one party simply because a clause was technically broken—they look at fairness, impact, and legal precedent.

That’s why hiring a skilled real estate law attorney early can save time, money, and complications. Whether you’re negotiating compliance, drafting a cure notice, or preparing for potential litigation, having someone who understands Arizona commercial lease disputes is key to protecting your interests.

What Happens After a Commercial Lease Breach in Arizona

Once a breach of a commercial lease occurs, both parties enter a critical phase where legal obligations, financial exposure, and risk mitigation come sharply into focus. What happens next comes down to the type of breach, the language in the lease, and how each party decides to handle the situation. Arizona law offers several ways to resolve these disputes, but navigating them requires clarity, communication, and often legal guidance.

Legal and Financial Consequences for Tenants and Landlords

Whether you’re a tenant facing claims of noncompliance or a landlord trying to enforce the lease, the aftermath of a breach can carry serious consequences.

If You’re a Commercial Tenant

Tenants on the receiving end of a breach claim may face a range of financial and legal repercussions depending on the lease language and how the issue is handled.

  • Unpaid Rent: In many Arizona leases, landlords can demand unpaid rent and other damages.
  • Legal Fees and Expenses: Lease agreements often include a provision stating that the losing party in any legal dispute must cover the winning party’s attorney’s fees. This can leave tenants footing the bill for both sides of the dispute, adding even more financial pressure.
  • Eviction Proceedings: For serious breaches, landlords may initiate eviction through the court system. Commercial evictions in Arizona follow a legal process that starts with notice and can escalate to formal removal through a court order. Ignoring or delaying response to an eviction notice usually makes the situation worse.  Alternatively, if the lease permits it, a landlord may pursue a lockout remedy.

If You’re a Commercial Landlord

Landlords are often quick to act when a tenant breaches the lease, but it’s just as important for landlords to follow the law carefully to avoid triggering legal claims of their own.

  • Risk of Wrongful Eviction: Acting too aggressively or skipping legal steps can backfire. A landlord who changes the locks or forces a tenant out without following court procedures could be sued for wrongful eviction, which might result in damages, loss of rent, or even punitive awards.
  • Potential Landlord Breaches and Counterclaims: Tenants can also claim that the landlord breached the lease—especially in cases where landlords fail to provide necessary repairs, utilities, or access to the premises. These counterclaims can shift liability and even cancel out amounts the landlord is seeking to recover.

How Commercial Lease Disputes Are Handled in Arizona

Many lease conflicts can be resolved without ever stepping into a courtroom. In fact, Arizona offers several paths to resolve lease conflicts that can save time, money, and preserve business relationships.

Direct Negotiation

Often overlooked, simple communication is the fastest way to resolve many lease disputes. If both sides are willing to talk, a direct and well-documented negotiation may lead to a workable agreement without escalating further. Many breaches occur due to miscommunication or unclear expectations, which can sometimes be resolved with clarification or compromise.

Mediation

Through mediation, a neutral facilitator helps the parties communicate more effectively and explore possible solutions. Since it’s non-binding, both sides stay in control of the outcome. Mediation is often a smart choice when both parties want to resolve the issue without damaging their professional relationship or taking on the expense of a lawsuit. For example, if a tenant falls behind on rent due to a temporary cash flow issue, mediation can give both sides a chance to negotiate new payment terms without heading straight to court.

Arbitration

Arbitration takes a more formal approach than mediation, and whether the outcome is final depends on what the lease agreement allows. An arbitrator reviews the case and issues a decision. While arbitration is faster and less expensive than a court case, the outcome may be final and harder to appeal. 

Litigation

When negotiations break down or one party refuses to comply, litigation becomes the final option. These disputes are handled in courts like the Maricopa County Superior Court, where judges can enforce lease terms, issue eviction orders, or award damages.

Taking a dispute to court requires a well-planned strategy, since it often involves high costs, long timelines, and public records. That said, it may be necessary in high-stakes cases involving large financial losses or repeated lease violations.

Preventing Lease Disputes Before They Happen

The best lease disputes are the ones that never occur. Landlords and tenants alike can lower the risk of future disputes by putting the right measures in place from day one of the lease.

Draft Clear, Detailed Leases

A vague lease is a recipe for conflict. Strong commercial leases in Arizona should clearly define rent amounts, payment schedules, maintenance obligations, permitted uses, insurance requirements, dispute resolution processes, and termination clauses. Ambiguities can lead to disagreements down the line, especially when one party interprets a clause differently than the other.

Establish Ongoing Communication

Disputes often start small and snowball when no one addresses them early. Whether it’s a missed rent payment, a noisy neighbor complaint, or an unexpected repair bill, a quick phone call or formal letter can often stop things from escalating. Building communication protocols into your lease, such as specifying how and when notice must be delivered, also makes resolving minor issues easier.

Have Legal Review from the Start

Before signing any commercial lease, both parties should have a qualified real estate law attorney review the terms. Arizona law gives significant power to what’s written in the lease, so making sure the contract is fair, balanced, and enforceable is critical. A good legal review can spot problematic clauses, negotiate better terms, and avoid costly litigation in the future.

Experienced Legal Guidance for Commercial Lease Disputes in Arizona

Commercial lease disputes in Arizona often go beyond basic contract enforcement, whether they stem from non-payment, unauthorized use of the property, or complex material breach claims. These issues can impact nearly every part of a business’s financial stability and daily operations. As this article details, the difference between a manageable disagreement and a costly legal battle often comes down to timing, documentation, and clarity of lease terms. Proactively structuring strong agreements, maintaining open communication, and knowing when to escalate through negotiation, mediation, or legal channels can save both landlords and tenants considerable time and money. And when disputes arise, understanding Arizona’s legal thresholds for enforcement or termination is key to making smart, strategic decisions.

That’s where Gottlieb Law delivers real value. Our experienced legal team understands Arizona real estate law and applies it with precision, foresight, and a strong commitment to protecting what matters most to their clients. From enforcing lease terms and pursuing damages to defending tenants facing wrongful claims, Gottlieb Law brings decades of hands-on experience with commercial lease breaches, dispute resolution, and litigation.

Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

Construction Defect Litigation in Arizona - Gottlieb Law
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Arizona Construction Defect Litigation: What Property Owners Need to Know
Arizona Construction Defect Litigation: What Property Owners Need to Know 1536 1024 Gottlieb Law

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.


Construction defect litigation in Arizona isn’t just about a crack in the wall or a leaky pipe. It’s about protecting one of the biggest investments you’ll ever make—your property. Construction defects can cause serious damage over time and lead to costly repairs if left unaddressed.

In Arizona, there’s a specific legal framework that deals with these issues, and it’s designed to balance the rights of homeowners, contractors, and developers. But here’s the catch: you’ve got to know the rules before you can enforce your rights.

Common Types of Construction Defects

Construction defects can range from minor inconveniences to major structural failures. Some are apparent right after the project is completed, while others remain hidden for years, quietly causing damage beneath the surface. Understanding the specific categories of defects can help property owners in Arizona figure out what they’re facing, how serious the issue might be, and what kind of response is needed. It also helps when communicating with contractors, inspectors, and legal professionals.

Design Deficiencies

Design deficiencies are problems that begin long before construction even starts. These issues come from errors or oversights in the architectural or engineering plans. In some cases, the design may fail to meet local building codes. In others, it may include unrealistic or unsafe structural specifications. For example, if an engineer miscalculates the load-bearing requirements for a roof or balcony, the result could be sagging supports, premature wear, or even partial collapse. Identifying design flaws typically requires expert evaluation from engineers or architects who can analyze plans and compare them to the actual construction.

Material Deficiencies

Material defects occur when the products used during construction are substandard, deteriorate too quickly, or were never appropriate for the job in the first place. These defects can stem from manufacturers, suppliers, or even from the contractor’s decision-making. Common examples include siding that warps under normal weather conditions, tiles that crack easily, or insulation that fails to provide the promised energy efficiency. In Arizona, where intense heat and seasonal monsoons are factors, improper materials can lead to faster-than-expected breakdowns. Even high-quality construction work can be compromised if the materials themselves are flawed or poorly matched to the local climate.

Construction or Workmanship Deficiencies

This category covers a wide range of problems tied directly to how the building was put together. Workmanship issues are caused by poor execution during construction, whether due to inexperience, rushed labor, or a lack of supervision. Signs of workmanship defects include crooked framing, uneven flooring, faulty electrical systems, misaligned doors or windows, and leaky plumbing. These defects may be visible right away or may only become noticeable after regular use begins. In some cases, the outward appearance looks fine, but improper installation causes long-term damage behind the walls or under the floors.

Subsurface or Geotechnical Problems

Issues beneath the ground are often the most costly and dangerous. Subsurface defects involve problems with the soil or the way the foundation interacts with the land it sits on. These problems can result from poor site analysis, failure to follow geotechnical recommendations, or shortcuts during soil compaction and grading. Arizona’s desert soil composition can pose unique challenges, including expansive clay that swells with moisture and then contracts during dry spells. If these conditions aren’t properly addressed before construction, the result can be shifting slabs, cracked foundations, or major structural instability. These issues usually require input from geotechnical engineers and may lead to extensive and expensive remediation work.

Legal Framework Governing Construction Defects in Arizona

Navigating Arizona’s construction defect laws requires a clear understanding of how the legal system treats these cases. The rules are structured, the timelines are strict, and any misstep can seriously impact your ability to pursue compensation. If you’re a homeowner, knowing how the legal framework works is essential.

Statute of Limitations and Statute of Repose

Arizona law sets specific deadlines for when a construction defect claim must be filed. Property owners generally have eight years from the date the construction was substantially completed to take legal action. If a defect is discovered during that eighth year, the law allows one additional year to file a claim. That extends the window to a maximum of nine years, but only under very specific circumstances. These timelines are not flexible. Once they pass, it becomes extremely difficult—if not impossible—to bring a successful claim, no matter how serious the defect is.

Implied Warranty of Workmanship and Habitability

In Arizona, there’s a built-in legal protection for homeowners that doesn’t need to be written into a contract. This is known as the implied warranty of workmanship and habitability. It guarantees that a new home was built with reasonable care and is fit for habitation. Importantly, this warranty extends beyond the original buyer—even second or third homeowners can bring a claim. Arizona courts do not require a direct contract between the buyer and the builder for this warranty to apply. However, claims involving subcontractors or material suppliers may be more complex and are often pursued under different legal theories, such as negligence or product liability.

The Economic Loss Doctrine

Arizona applies the economic loss doctrine to construction defect claims, which limits when a property owner can sue for negligence. If the only harm is financial—such as the cost to repair a defective roof or faulty plumbing—then the claim must usually be brought under contract or warranty law, not negligence. This doctrine draws a clear line between tort claims (like negligence) and contract disputes.

However, there are important exceptions. If a construction defect causes personal injury or damages property outside the scope of the original construction contract, then a tort claim may still be available.

For example, if faulty electrical work causes a fire that spreads beyond the home addition covered in the contract, the owner may have a valid negligence claim for damage to the rest of the property.

Understanding where your case falls under this doctrine is critical—and something an experienced Arizona construction defect attorney can evaluate right away.

Pre-Litigation Procedures: Arizona’s Purchaser Dwelling Act (PDA)

Before filing a lawsuit over construction defects, Arizona law requires property owners to follow specific pre-litigation steps. These procedures are outlined in the Arizona Purchaser Dwelling Act and are meant to create an opportunity for resolution before the legal system gets involved. The goal is to give the builder a chance to correct the issue and possibly avoid a drawn-out court case.

Notice Requirements

To start the process, homeowners must provide the contractor with a written notice that clearly describes the alleged defects. The notice must be specific enough to identify what parts of the home are affected and what type of defect is being claimed. General complaints or vague statements won’t meet the requirements of the Act. This written notice triggers the rest of the timeline and is an essential part of preserving your right to file a lawsuit if the issue is not resolved.

Contractor’s Right to Repair

After receiving the notice, the contractor has the legal right to inspect the property. They are also allowed to propose a solution, which could involve repairs, financial compensation, or both. The contractor does not have to accept blame to make an offer. However, they must make a good-faith effort to respond to the claims. Ignoring the notice or failing to take reasonable action could open the door to litigation. At this stage, keeping records of communications and contractor visits can be critical for building a case if the issue proceeds to court.

Tolling of Statutory Periods

During the pre-litigation process, Arizona law temporarily pauses the countdown on the statute of limitations. This is known as tolling. While it doesn’t give an unlimited extension, it does provide extra time while both sides engage in the notice and repair phase. This pause allows homeowners to pursue resolution without risking their right to file a claim simply because time is running out. Once the process concludes, the clock resumes, so it’s important to keep track of dates and deadlines throughout.

Dispute Resolution Mechanisms for Construction Defects

When pre-litigation efforts under the Arizona Purchaser Dwelling Act fail to bring a resolution, property owners must turn to the next phase. What happens next will largely depend on the language in your original construction contract. Some agreements spell out a clear dispute resolution process, while others leave that door wide open. Understanding your options is key to choosing the right path forward and avoiding unnecessary delays or costs.

Alternative Dispute Resolution (ADR)

Many construction contracts include mandatory alternative dispute resolution provisions. These often require the parties to attempt mediation or arbitration before filing a lawsuit. These methods are designed to be more efficient than traditional court proceedings and can offer a private setting to work through disagreements.

Mediation involves a neutral third party who helps both sides negotiate a resolution. The mediator does not make a binding decision but instead facilitates discussion in hopes of reaching a mutual agreement. It is typically less formal, less expensive, and faster than a courtroom battle.

Arbitration, on the other hand, is more structured. A neutral arbitrator hears evidence from both sides and then makes a decision, which is often binding. This means the outcome can be enforced like a court judgment. Arbitration can resemble a mini-trial, though the procedures are usually more streamlined than litigation. Some contracts may even dictate which arbitration service must be used or specify the number of arbitrators involved.

Before beginning either process, it’s important to carefully review your contract. Some clauses may require you to engage in ADR before you can even consider taking legal action. Failing to follow those terms can delay your claim or result in dismissal altogether.

Litigation

If alternative dispute resolution is not included in your contract, or if it fails to produce a satisfactory outcome, then the next step is filing a lawsuit in civil court. Litigation is a more formal and often lengthier process, but in some cases, it is the only way to resolve deeply contested or complex construction defect issues.

Pursuing litigation means entering Arizona’s civil legal system, which comes with procedural rules, filing deadlines, and evidentiary standards. You will likely need expert witnesses who can speak to the nature of the defects, the quality of the construction, and the appropriate method and cost of repair. Courts in Arizona expect detailed documentation, including inspection reports, correspondence with contractors, and repair estimates.

While litigation may take longer, it provides the structure of a courtroom setting and allows a judge or jury to determine liability and award damages. For major defects or high-stakes claims, it may offer the clearest path to a meaningful resolution.

What Property Owners Should Do When Facing Construction Defects

If you’re a homeowner dealing with a newly discovered crack, for example, construction defects require immediate and informed action. Addressing the issue the right way from the start can strengthen your position, help preserve your legal rights, and improve the chances of a successful resolution.

This section breaks down what property owners need to do in Arizona construction defect claims.

Step One: Gather and Organize All Documentation

Strong documentation is the foundation of any successful construction defect claim. From the moment you notice something that seems off, start creating a record. Photos of the damage, copies of repair estimates, builder warranties, inspection reports, and even casual emails with contractors can all become key evidence.

Be specific with dates and keep a running log of any communications related to the defect. If a contractor visits your home or promises a fix, make a note of what was said and when. If you send a formal notice under the Arizona Purchaser Dwelling Act, save a copy and record when and how it was delivered.

The more organized your documentation, the easier it will be for an attorney or expert to evaluate your case.

Step Two: Review Your Construction Contract and Warranties

Before you contact the builder or bring in outside help, take a close look at your original construction or purchase contract. Many agreements include specific provisions that affect how disputes must be handled. You may find mandatory arbitration clauses, warranty exclusions, or deadlines for reporting problems.

Understanding what your contract says about defect resolution can help you avoid procedural mistakes that might weaken your claim. If something isn’t clear, this is a good time to reach out to a construction defect attorney for guidance.

Step Three: Seek Input from Legal and Technical Professionals

No matter how much research you do, there’s no substitute for professional insight. A qualified construction defect attorney, such as the team at Gottlieb Law, can review your documentation, explain your legal options, and ensure that you meet all required deadlines under Arizona law.

Alongside legal help, you’ll likely need a licensed contractor, structural engineer, or home inspector to provide an independent assessment of the defect. Their expertise can confirm whether the problem was caused by poor workmanship, faulty materials, or a more serious design or subsurface issue.

Bringing in both legal and technical professionals early in the process gives you a much clearer path forward and helps you avoid delays that can cost you later.

Final Thoughts: Acting Early Makes All the Difference

Identifying construction defects early and taking informed action is the best way to protect your property investment. From documenting the damage and understanding your contract, to seeking advice and knowing your legal rights, each step matters.

If you’re unsure how to move forward, the attorneys at Gottlieb Law can help you understand your options and develop a strategy that makes sense for your situation. Their team handles both individual claims and large-scale HOA litigation, making them a trusted resource for property owners across Arizona.

Protecting Your Property from Construction Defects in Arizona

Construction defect claims are rarely straightforward. From tight deadlines under Arizona’s statute of limitations to mandatory pre-litigation steps outlined in the Purchaser Dwelling Act, there’s a lot to navigate. Whether you’re dealing with structural flaws, material failures, or workmanship issues, knowing where your responsibilities begin and how Arizona law supports your rights is essential. The earlier you document problems, understand your contract, and consult with professionals, the stronger your position will be.

Gottlieb Law provides experienced legal guidance for property owners and homeowners’ associations facing construction defect disputes in Arizona. Their team understands the complexities of this area of law and works closely with clients to assess claims, enforce repair obligations, and recover damages. Whether it’s a single-family home or a community-wide issue involving an HOA, Gottlieb Law is equipped to help you move forward with clarity and confidence.

Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

 

Arizona New Groundwater Rules and Homebuilding 2025 - Gottlieb Law
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Arizona’s New Groundwater Rules and Homebuilding: Legal Challenges, Political Fallout, and What It Means for Developers
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Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.


Arizona’s Housing Crunch Just Hit a New Obstacle: Groundwater Rules

Arizona’s water crisis isn’t new, but what’s unfolding in 2025 has shaken up the state’s homebuilding industry. With a rising population, long-term drought, and growing pressure to regulate groundwater use, the Arizona Department of Water Resources (ADWR) has introduced major changes to groundwater rules and how new developments are approved.

Builders are now facing halted projects, tighter permitting hurdles, and a growing cloud of legal uncertainty. Homebuilders are challenging the new rules in court. Lawmakers are scrambling for solutions. And local economies are caught in the middle of the current changes.

This article walks through how the situation unfolded, what the latest Phoenix-area groundwater rules mean, and what developers and property owners need to know. If you’re navigating this regulatory shift, this article is a great place to start.

The Backstory: Why Arizona Cracked Down on Water Use

Arizona’s relationship with groundwater has always been complicated. In a state where rivers run dry and rainfall is scarce, underground aquifers have long served as both a lifeline and a point of contention. For decades, rapid population growth and suburban expansion pushed the limits of groundwater use, especially in the state’s desert metro areas.

Recognizing the danger of unchecked pumping, Arizona passed the Groundwater Management Act in 1980, a landmark piece of legislation at the time and still one of the most comprehensive state-level water laws in the country. The law divided the state into Active Management Areas (AMAs) — high-growth regions with elevated water demand — and put in place a tiered system for managing groundwater withdrawals.

At the heart of the legislation was the Assured Water Supply (AWS) program, which created a clear legal threshold: any new residential or commercial subdivision within an AMA must prove it has access to a 100-year supply of water before receiving a certificate to build. This water could come from groundwater, surface water, reclaimed sources, or a mix of them, but the underlying intent was to prevent communities from being built on empty promises and dry wells.

For years, the AWS program allowed Arizona to balance growth and conservation, but that balance has grown more fragile. The rise in long-term drought conditions across the Southwest, combined with decreased Colorado River allocations and persistent over-reliance on groundwater pumping, put increasing strain on the state’s water security. The AWS rules remained on the books, but the data behind those rules began to shift.

In 2023, the Arizona Department of Water Resources (ADWR) published updated groundwater models that significantly altered the outlook for long-term water planning. The findings revealed that within the Phoenix AMA, groundwater supplies would fall short of meeting projected demand by 4 percent over the next 100 years, representing a staggering 4.86 million acre-foot deficit. Although 4 percent may sound small, the scale of urban development in the Phoenix metro means even a modest shortfall translates to tens of thousands of homes and substantial economic implications.

Faced with those projections, ADWR made a consequential policy decision. It halted the issuance of new Assured Water Supply certificates that relied on groundwater in the Phoenix AMA. This wasn’t a symbolic move. It functionally shut the door on numerous proposed developments, especially in high-growth suburbs where groundwater remained the primary water source.

To further tighten oversight, ADWR introduced two new criteria into the AWS review process: “unmet demand” and “water depth.” Instead of only looking at whether a developer could prove water availability on a specific parcel, the department shifted to a broader, regional analysis. “Unmet demand” assesses how much water is already being overdrawn in a particular area, while “water depth” reflects the physical depth of groundwater in the aquifer and whether it’s economically or technically feasible to access it. This represented a significant change in approach, replacing parcel-level assessments with a broader focus on regional groundwater impacts.

This new framework meant that even if a builder could pump water on-site today, the broader groundwater conditions could block development altogether. It also left many in the development community scrambling, as previously planned projects no longer met the state’s updated criteria.

The policy shift was not just a response to dry numbers. It reflected a growing awareness among state officials that Arizona’s water future demands a higher standard of scrutiny. With rising temperatures, increasingly scarce river flows, and exploding housing demand, the state’s margin for error has narrowed. These changes to AWS enforcement marked the beginning of a broader shift in Arizona’s approach to groundwater management, with a stronger focus on long-term water reliability over short-term growth.

The 2024 Changes Impacting the Industry

Following the release of ADWR’s updated groundwater projections, state regulators moved quickly to tighten oversight. On November 25, 2024, the agency finalized and enacted a set of far-reaching changes under the Alternative Path to Designation of Assured Water Supply (ADAWS), which is a framework originally designed to provide flexibility in the AWS certification process for large master-planned communities and municipalities. This time, however, the changes were stricter for most builders in the state.

The new water rules package represented a significant shift in how Arizona evaluates water adequacy for future developments. The most notable change was the move from site-specific hydrologic testing to regional groundwater modeling. Historically, developers had been able to hire hydrologists to run local aquifer tests and submit those findings as proof of sufficient supply. That approach allowed even small-scale projects to move forward if they could demonstrate local access to groundwater, regardless of the broader conditions in the area.

Under the new rules, those localized tests no longer hold weight on their own. Instead, ADWR now relies on area-wide groundwater models developed and maintained by the agency itself. These models consider the cumulative impact of pumping across entire basins or sub-basins, not just the conditions on a single parcel. This approach evaluates the water needs of each new development in the broader context of existing demands on the same aquifer, such as those from municipalities, industry, farms, and other residential areas.

The metrics for unmet demand and water depth are now part of the regulatory baseline. ADWR will reject applications for developments in areas where unmet demand is significant or groundwater levels have dropped too low, regardless of whether wells are still functioning.

The consequences were immediate. Communities like Queen Creek and Buckeye, both major hubs for suburban growth, were hit especially hard. In these areas, much of the new housing stock relied on groundwater-based AWS certifications, many of which were still working their way through the approval pipeline when the rule changes landed. Practically overnight, those applications were frozen or rejected outright under the new modeling criteria.

Developers across the state described the rollout as abrupt and destabilizing. While ADWR had previously telegraphed a tightening of groundwater access, many in the homebuilding sector are alleging they had no opportunity to provide formal comment on the specifics of the new rules. They claim the process included no public hearing, no economic impact review, and no formal rulemaking docket, even though the Arizona Administrative Procedure Act requires those steps for significant policy changes.

This lack of process has become a core issue in ongoing litigation, but the business impact was immediate and measurable. Projects that had already secured preliminary approvals or had invested heavily in planning and engineering suddenly found themselves in limbo. For developers with large landholdings in growth corridors like the West Valley, the financial risks multiplied almost instantly.

What’s more, the new modeling approach has created a moving target. Since groundwater models are updated regularly based on new data, a site that qualifies for certification today may not meet the same criteria six months later. That unpredictability makes it significantly harder to plan long-term projects or secure financing, particularly in fringe areas without guaranteed access to municipal water systems.

In the span of weeks, what was once considered a manageable regulatory hurdle turned into a significant barrier to entry. For smaller builders and investors, especially those without the resources to negotiate alternative water arrangements, the new rules have raised the cost of doing business and reduced the feasibility of entire subdivisions.

The shift also pointed to a broader change, as Arizona is no longer issuing water certifications based solely on engineering feasibility. Now, policy, modeling assumptions, and sustainability thresholds play a much larger role in determining whether a project gets the green light.

Legal Blowback: Builders Take the Fight to Court

The response from builders came quickly. On January 22, 2025, the Home Builders Association of Central Arizona filed a lawsuit challenging the new water rules. Their claim focused on ADWR’s adoption of metrics like “unmet demand” and “water depth,” arguing the department lacked the authority to impose these standards without going through the proper legal process.

A second lawsuit filed by the Home Builders Association of Central Arizona and the Arizona House and Senate against ADWR followed on March 10, 2025. That case targeted a newly imposed 33.3% groundwater fee, arguing it unlawfully raised housing costs and lacked any basis in state law.

Homebuilders argue the new rules:

  • Represent regulatory overreach by ADWR

  • Were imposed without following Arizona Revised Statutes

  • Have inflicted economic harm on builders, buyers, and local communities

These legal fights are now central to the debate over Arizona’s water policy, and they raise questions about how far agencies can go in restricting development. If your business is facing uncertainty in this area, it may be time to talk with an Arizona lawyer experienced in builder disputes and litigation.

Legislative Efforts Collapse as Division Grows

In December 2024, Arizona legislators introduced House Bill 2299 in an effort to carve out exemptions for certain projects in Queen Creek and Buckeye. Sponsored by Rep. Gail Griffin, the bill aimed to allow developers to move forward using outdated groundwater models that were previously accepted.

While the bill had support from many Republicans and homebuilders, it faced strong resistance. Environmental groups, Democratic lawmakers, and even some Republicans pushed back, warning that the exemptions would undermine long-term water security.

On March 12, 2025, HB 2299 failed in the Arizona House by a vote of 29 to 26. With that outcome, the possibility of a legislative fix effectively disappeared, leaving developers with fewer options and more pressure to adapt to the current rules.

What This Means for Developers and Local Economies

The consequences of the new water regulations are already visible in housing markets and city planning departments.

  • Builders are pausing projects while they reassess water availability
  • Permitting delays are stacking up, especially in groundwater-reliant zones
  • Construction costs are increasing as developers consider new water sourcing methods

For investors and landowners, the uncertainty poses real financial risks. Land value in affected areas could drop, and some cities may see slower population growth. Municipal tax bases may shrink as developments get shelved or relocated. All of this underscores the importance of having a legal team with experience in ADWR compliance, housing development restrictions, construction litigation and water-rights disputes.

Where Gottlieb Law Comes In

Whether you’re planning a new subdivision or trying to rescue a stalled project, Gottlieb Law offers the legal support needed to make informed, strategic decisions in this climate. As a respected Arizona real estate law firm, our experienced attorneys understand the complexities tied to groundwater regulations and development law.

Here’s how our law firm can help:

Expert Regulatory Guidance

Gottlieb Law can explain the current ADWR regulations, assess project eligibility, and help clients determine the best path forward. Our legal team stays on top of regulatory shifts so clients can act with confidence.

Litigation and Dispute Resolution

From assured water supply litigation to broader constitutional challenges, Gottlieb Law represents key real estate players in court and in negotiations. Our experience with real estate and Arizona law helps craft strong, results-focused legal strategies.

Compliance and Permitting

Navigating water certifications will require more than paperwork going forward. Gottlieb Law can work alongside professionals like hydrologists, engineers, and local planners to ensure projects meet all regulatory requirements.

Development Strategy

Our firm helps clients choose viable locations, explore alternative water sources, and work with municipalities to assist with development strategy. If your project touches groundwater policy in any way, working with an experienced Arizona real estate attorney could be the difference between delay and success.

If your business or development project has been impacted by the recent water regulations, contact Gottlieb Law for a consultation. Our legal team can help you navigate the challenges and protect your interests.

Final Thoughts on Arizona’s New Water Rules

Arizona’s new groundwater rules are reshaping what’s possible in the state’s real estate landscape. For developers, investors, and municipalities, the stakes are high and the legal landscape is shifting fast.

These changes won’t resolve overnight. Lawsuits are pending, political debates continue, and ADWR shows no signs of backing down. Now more than ever, proactive legal guidance is essential.

Gottlieb Law is here to help developers make sense of the rules, avoid costly missteps, and continue building for Arizona’s future. Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

 

Multi-Party Real Estate Fraud Litigation in Arizona - Gottlieb Law
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How Multi-Party Real Estate Fraud Litigation in Arizona Works and Why These Cases Are So Complex
How Multi-Party Real Estate Fraud Litigation in Arizona Works and Why These Cases Are So Complex 1651 1101 Gottlieb Law

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.


When fraud happens in real estate, it’s often more than just one rogue agent or shady investor. The recent Arizona v. Cameron Jones et al case made that crystal clear, exposing a coordinated effort involving multiple players and institutions allegedly targeting vulnerable homeowners.

This follow-up article breaks down how multi-party real estate fraud unfolds in Arizona, why these cases are so difficult to untangle, and how the legal system is working to address them. If you’ve been affected by suspicious property transactions or think something wasn’t right in a past deal, this is essential reading.

Recent Real Estate Fraud Cases in Arizona: The March 2025 Foreclosure Scheme

To understand just how serious multi-party real estate fraud has become in Arizona, take a closer look at the lawsuit filed in March 2025 by the Attorney General. Known formally as Arizona v. Cameron Jones et al., this case marked a turning point in how the state is confronting coordinated property fraud. We broke down the key claims in our recent article detailing the landmark foreclosure fraud lawsuit in Arizona, which outlines what every homeowner, investor, and real estate professional needs to know.

According to the lawsuit, several individuals and corporate entities targeted homeowners who were already in financial distress and at risk of losing their homes. These defendants claimed to represent charitable organizations offering help to stop foreclosure, but the real goal was to transfer title and drain any remaining equity from the property. In many cases, the homeowners believed they were signing documents to save their homes, only to find out they had unknowingly signed them away.

What sets this case apart is the structure behind the fraud. It wasn’t a single person running a con. It was a coordinated effort involving real estate operators, title companies, and connected entities that allegedly worked together to create the appearance of legitimacy. Every part of the process was designed to mislead, from the initial contact to the final property transfer.

The lawsuit points to violations of the Arizona Consumer Fraud Act and the Arizona Racketeering Act, both of which provide the legal tools needed to pursue cases involving widespread deception and organized schemes. This is exactly the kind of situation where multi-party real estate fraud litigation becomes necessary. It allows the state to bring legal action against everyone involved, not just the face of the operation.

As real estate markets continue to fluctuate, bad actors are finding new ways to exploit distressed homeowners. That’s why legal professionals, lenders, and property owners alike need to stay alert and informed.

The Legal Framework Behind Real Estate Fraud Cases in Arizona

Arizona’s legal system is built to handle the kind of complex, multi-layered real estate fraud seen in cases like the foreclosure equity stripping scheme alleged to have occurred by the defendants in the State of Arizona v Cameron Jones, et al.. The state has long-standing statutes that are specifically designed to bring order to property transactions and hold fraudulent actors accountable when things go wrong.

Arizona’s Statute of Frauds (A.R.S. § 44-101)

At the foundation is the Statute of Frauds, codified under A.R.S. § 44-101. This law requires that certain types of agreements, including nearly all contracts involving real estate, must be documented in writing to be legally valid unless an exception applies. Verbal agreements or handshake deals simply don’t generally hold up under this statute.

Its purpose is straightforward. When a real estate transaction involves large sums of money, property rights, and long-term commitments, written documentation becomes critical. This requirement not only protects buyers and sellers but also serves as a key tool in identifying and prosecuting fraudulent activity. When there is no paper trail, it becomes easier for deceptive individuals to manipulate the process. The Statute of Frauds helps eliminate that ambiguity and creates a clear standard of proof.

Arizona Consumer Fraud Act and Racketeering Act

Two other statutes that frequently come into play in fraud cases are the Arizona Consumer Fraud Act and the Arizona Racketeering Act. Both are central to the Attorney General’s case against the defendants in the March 2025 lawsuit.

The Consumer Fraud Act is designed to protect Arizona residents from deceptive practices in the marketplace, including those that occur during real estate transactions. It addresses any misrepresentation, omission of material facts, or other dishonest conduct that may mislead consumers into making financial decisions under false pretenses. This applies to homeowners who may be tricked into signing over property rights, investors misled about a property’s value, or buyers lured into illegitimate deals.

The Racketeering Act comes into play when fraud isn’t limited to one individual. It provides legal grounds for the state to pursue civil remedies or criminal charges against groups of people or businesses engaged in coordinated fraudulent activity. This is especially important in multi-party real estate fraud cases, where different entities—such as title companies, real estate operators, and shell corporations—may each play a role in an organized scheme.  It is important to note that broad financial penalties and remedies can be sought if such a claim is brought.

When these laws are used together, they allow Arizona prosecutors and civil lawyers to address the full scope of the wrongdoing and pursue meaningful legal consequences. For homeowners and investors, understanding these protections is the first step toward taking action if fraud is suspected.

The Real Challenges of Multi-Party Real Estate Litigation

When fraudulent activity involves multiple individuals and entities working in coordination, the legal complexity increases exponentially. These cases are rarely resolved through a simple lawsuit against a single bad actor. Instead, the courts must unravel a network of roles, responsibilities, and overlapping conduct that often spans months or even years.

What makes these cases especially difficult to prosecute or defend comes down to three key areas.

Overlapping Legal Strategies and Conflicting Interests

Each party named in the lawsuit is likely to have its own legal counsel, and with that comes competing strategies, shifting blame, and motions that can conflict with one another. What one defendant wants to settle, another may want to fight. This dynamic creates a procedural maze that slows down litigation and requires the court to constantly manage the flow of filings, deadlines, and discovery requests across multiple parties.

Disentangling Individual Responsibility from Group Conduct

In a coordinated fraud scheme, not every participant plays the same role. One person may have drafted the misleading paperwork, while another facilitated the transfer of title or handled the funds. Courts must parse out who did what, whether they acted knowingly, and how much each individual’s actions contributed to the harm. This evaluation isn’t always straightforward, especially when some defendants claim they were unaware of the broader scheme.

Information Gaps and Fragmented Evidence

Evidence in multi-party cases is often spread across different platforms, offices, and data systems. Communications may be buried in emails, transaction records, or internal documents held by separate companies. Establishing a timeline, proving intent, and connecting the dots between parties demands an intense level of investigation. In many cases, digital forensics and subpoenaed records become essential tools.

Even professionals who appear to have played minor roles—such as escrow agents or document preparers—can be drawn into the proceedings. While some may ultimately be cleared of wrongdoing, their involvement must still be examined under the same scrutiny.  Courts have held that not all participants in a transaction owe the same legal duties—especially escrow agents, whose role is often limited by contract. 

Navigating the intricacies of a case involving multiple defendants and interrelated claims requires legal strategy, procedural discipline, and a deep understanding of real estate law. Without that, the process can spiral into delays and dead ends before it ever reaches resolution.

Importance of Hiring an Experienced Real Estate Litigation Attorney

Multi-party real estate fraud cases are rarely straightforward. Whether you’re pursuing a claim or defending against one, the legal and factual issues involved can be incredibly complex. These disputes often involve multiple parties, overlapping transactions, and conflicting narratives—all of which need to be carefully unraveled.

An experienced real estate litigation attorney plays a critical role in managing these challenges. Effective legal counsel can:

  • Coordinate with investigators and financial professionals to uncover key details
  • Construct detailed timelines to establish who knew what and when
  • Address the nuances of joint liability and manage parallel legal strategies
  • Identify opportunities for resolution or, when necessary, prepare for litigation

At Gottlieb Law, our experienced attorneys have handled real estate cases involving disputed ownership, fraud claims, and multi-party conflicts. We understand how Arizona courts evaluate evidence, assign liability, and apply state statutes in these matters.

If you believe you’ve been affected by real estate fraud or are facing allegations, it’s important to speak with an attorney who can assess the specifics of your situation. Every case is unique and must be reviewed on its own facts.

Staying Informed and Taking Action Against Real Estate Fraud

The most effective defense against real estate fraud is staying alert to how these schemes work and recognizing when something doesn’t feel right. Fraud in today’s market isn’t always obvious. It often hides behind formal paperwork, seemingly legitimate entities, and offers that appear helpful on the surface. The harm is rarely immediate, which is why so many people don’t realize what’s happened until long after the documents are signed.

Whether you’re a homeowner, investor, or part of the real estate industry, being proactive is critical to combating real estate fraud. Review every document before signing. Research any organization or individual offering financial assistance or foreclosure relief. Ask questions, keep records, and rely on professionals who are properly licensed and transparent about their role in the transaction.

If you believe fraud may have occurred, take it seriously. The consequences extend beyond the financial loss. Property ownership disputes, damaged credit, and long-term legal battles often follow. Addressing concerns early can help prevent these outcomes and may give you more options for resolution.

When real estate fraud involves multiple parties, the legal process becomes more demanding. These cases need careful legal review and a strategy that fits the unique facts involved. 

If you’re unsure whether your situation involves fraud or suspect something is off in a transaction, don’t wait. A legal review can clarify your rights and help determine the next steps.

Arizona Real Estate Fraud Cases: Why Legal Guidance Is Essential

As fraud schemes continue to surface across Arizona, it’s more important than ever to understand how these cases unfold and what protections are available under state law. These schemes often involve a range of players working together in ways that make detection and prosecution difficult. Staying informed, documenting every step in your transactions, and knowing when to seek help can make all the difference when something feels off. The complexity of these cases calls for decisive action.

Gottlieb Law represents clients on both sides of high-stakes real estate litigation, including cases involving fraud, disputed ownership, and multi-party liability. Our attorneys understand how Arizona courts assess these claims and what it takes to move a case forward with precision and clarity. If you suspect fraud, or if you’ve been named in a real estate dispute, we can help you evaluate your options and build a plan that fits your situation.

Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.

Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.  Laws change over time and you should seek counsel to discuss any specific legal questions.

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