PHOENIX — Legislation that would change Arizona's condominium termination statute narrowly passed a key vote after more than a dozen homeowners pleaded with lawmakers to advance the bill last week.
Currently, state law allows an entity to purchase 80% condo complex units, force the remaining 20% of owners to sell, then convert the units to apartment rentals.
It's an issue that ABC15 has followed for several years as condo owners around the Valley were blindsided by the effects of the law, and being forced from their homes.
Rep. Jeff Weninger (R-Chandler) backed HB2275 would require agreement from 100% of owners before a condo association could disband.
But attorneys for large investors who use the law to takeover complexes argued the change would violate the state constitution.
"You're not just considering changing the statute," investor attorney Charles Markle told the Senate commerce committee. "You are considering changing hundreds of thousands of people's contracts in our state."
Markle said that for existing condo associations that currently use the statute in their governing documents or CC&Rs, the change would amount to retroactively changing a contract which he said is unconstitutional.
Several lawmakers seemed convinced.
Senator Tyler Pace, R-Mesa, was the most vocal.
"The problem here is that people have purchased condos and did not understand what they had entered into," Pace said.
There were also discussions of a different statute that allows CC&Rs to be changed if 67% of the owners agree.
"There was an opportunity at one point for 67% of them to get together and say, No, we want 100%. No one has done that," Pace said.
But many of the complexes that have been taken over have been under declarant control. That means the developer either could not or did not sell all the units they built and instead held them as rentals. A practice that allowed them to maintain complete control of the HOA board.
Fountain Hills condo owner Amy Wautier believes her complex, Four Peaks Condominiums, is in the sights of a large investor who she fears would come in and replace the declarant. She said their CC&Rs has never allowed an opportunity to raise the threshold because the HOA has remained under declarant control since it was built in 2007.
"That means that any changes to the CC&Rs would have to have been done or implemented by the declarant," she said.
"If the declarant of our condominium unit owns one unit, he still has to agree with our vote. That's our CC&Rs. That can't be constitutional," said neighbor Susannah Sabnekar who was one of more than a dozen homeowners who testified.
Sen. Michelle Ugenti-Rita (R-Scottsdale) said the law was being used in unintended ways.
"I think that there's been a manipulation of the law. I think they have found a loophole in the law. And it is within our purview to correct that," she said.
The bill passed committee 5-4. But has since been held in the Senate Rules Committee which determines constitutionality.
In the meantime, Sabnekar and Wautier are leading a group of condo owners at Four Peaks working to prevent more units from going into the investor's hands as they attempt to reach that 80% threshold.
"We have done nothing but try to fight back. Try to keep him from getting the units and we've also banded together as a group of homeowners. That if someone needs to get out, or a family crisis (and) they've got to sell. Come to us. We'll get you a buyer or we'll buy it. We will help you with whatever you need. But just please don't let him get control of us," Sabnekar said.
