The right of co-ownership disputed its validity

PHOENIX — A proposal to prevent condominium owners from being evicted from their homes has hit a snag.

It may be unconstitutional.

An attorney for a Chicago developer told state senators that their plan to rewrite the laws governing condos would retroactively change the laws under which buyers got their property. And Charles Markle said it would also interfere with contractual agreements signed by those buyers.

But the top proponent of House Bill 2275 told Capitol Media Services he wasn’t ready to give up.

Rep. Jeff Weninger, R-Chandler, is armed with an opinion from legislative attorneys concluding that lawmakers can step in, as long as they do so before the developer acquires 80% of the units.

It is a significant number.

Under current law, the owners of 80% of the units can effectively dissolve the condo corporation if they want to do something else, like convert it into apartments. And that forces the owners of the remaining 20% ​​to sell.

However, it also means that a developer who wants to convert the units into apartments can get the 80% voting rights and tell the owners of the remaining 20% ​​that they have to sell – and go live somewhere else.

“These are people’s homes,” Weninger said. And he said requiring owners to be paid an appraised value does little for retired, fixed-income people who won’t find a comparable property in the same neighborhood.

This was underscored by a parade of witnesses from several targeted condos who asked members of the Senate Commerce Committee for help last week.

“I want to tell you how distressed I am by the current law that allows a big budget developer to come in and force me out of my house,” Ellen Marginson said.

She told lawmakers that she and her husband bought the condo 12 years ago and retired last year.

“We will never be able to buy another house in this economy,” Marginson said. “Are we supposed to go back to work to qualify and afford a home in an economy that sees prices rising day by day every minute?

Anthea Harrison, 82, said she lived alone on a fixed income after her husband died.

“My intention is to live the rest of my life in my current home,” she said.

“If I were forced to move, I would find myself in a very difficult situation,” Harrison said. “There are no comparable properties available in this area, and I would be forced to pay a much higher price for another home.”

And Cheryl Desimone said she bought a condo after her divorce.

“It’s been instilled throughout my life that you buy a house or condo to own it,” she said. And now her daughter has leukemia.

“So the last thing I want to do is worry about losing my house,” Desimone said.

The only thing is that each condo buyer has signed documents agreeing to live under the terms, covenants and restrictions of the association. And in each case, these documents referred to existing Arizona law that sets out this 80% rule.

It is that contract, Markle said, that remains enforceable. And it is this contract, he told lawmakers, that they are powerless to rescind or change.

But Jill Evans, who said she bought her condo directly from the builder in 2007, said it was unclear.

She said the document she signed had a statutory reference to ARS 33-1228. This is the section on the 80% rule for ending a condo project.

“My husband and I didn’t review the law before the purchase,” Evans conceded.

“We assumed state law was there to protect us as landlords,” she said. “We didn’t know it was going to protect a company that would force us to sell our house.”

But Greg Patterson, a Rockwell Properties lobbyist who has bought condo projects in Arizona, said that was an oversimplification.

“One of the rights that is part of the package of rights that owners have is the right to orderly termination,” he told lawmakers. He said it’s no different from laws on everything from corporations to marriages, where the legislature makes laws on how they can be formed as well as how they can be dissolved.

And Patterson said that’s important because condos don’t last forever and owners may want to sell.

“Real estate becomes obsolete, can deteriorate,” he said. “In a hundred years, these will no longer be condominiums.

Charles Markle, an attorney for Rockwell, told lawmakers that the 2021 partial collapse of Champlain Towers South in Surfside, a Miami suburb, that killed 98 people, shows what can happen in situations where condo owners lose interest in paying large appraisals for upgrades.

Markle said that’s why Arizona law allows the condo project to be dissolved — and sold for any reason — once 80% of owners conclude it no longer makes sense.

But Senator Michelle Ugenti-Rita, R-Scottsdale, said that was not the case here. Instead, she says, it’s a single entity that comes in and makes enough offers to enough landlords to allow it to evict those not interested in selling.

“I think the mindset of the 80%-20%, people were thinking of individual ownership,” she said, with no entity controlling that 80%.

All of this leaves the question of what, if anything, lawmakers can do.

While Markle argues the contracts are out of legislative reach, Ken Behringer, the legislature’s general counsel, said lawmakers are free to change the law to impose a different ballot requirement for ending a project — say. 100%. Specifically, Behringer said the law could apply to any condo where a single entity has not yet acquired 80% of the units.

Weninger said it’s simple: Condos are a creation of the legislature, which means lawmakers can change the rules under which they must operate.

Senator JD Mesnard, R-Chandler, said another option would be to leave the 80% requirement in place but change the law so that each owner gets only one vote, regardless of the number. of units he owns.

But Markle, whose client has about $450 million in pending deals in Arizona, said it doesn’t matter how you phrase it. He said these CC&Rs are binding, enforceable — and unalterable by state law.
Markle also said it’s not like people are thrown out on the streets.

The law requires owners of the remaining 20% ​​to receive market value plus 5%, plus an additional 5% for relocation costs. And he said each side had the option to choose an assessor, with differences ironed out in arbitration.

During last week’s hearing, several lawmakers debated whether they should get involved in what is essentially a contract dispute.

“The problem here is that people bought condos and didn’t understand what they had entered into,” said Sen. Tyler Pace, R-Mesa.

He also noted that if the co-owners had acted sooner, they might have been able to avoid this situation.

That’s because Arizona law allows CC&Rs to be changed with the vote of only 67% of owners.

This could have changed the percentage of votes required to dissolve the condo association or also avoided situations where one entity could simply buy the majority and evict the others.

But that, Pace noted, was not done when they got the votes. And now they’re on Capitol Hill asking lawmakers to intercede.

He was not friendly.

“That was the deal they made,” Pace said. “Whether they are aware of it or not, it was disclosed in their contract, the statutes were quoted in their contract.”

The measure, which has already been approved by the House, faces an uncertain future when it is now before the full Senate.

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