PHOENIX — Arizona legislators are considering a significant change to the law that allows investors to force condo owners to sell, after reporting by ABC15.
ARS 33-1228 allows investors to buy 80% of units in a condo complex, take control of the condo association, then force the remaining 20% to sell at a price determined by an appraiser chosen by the investor-run HOA. After the sale, investors convert the complex into rental apartments.
On Monday ABC15 reported on a termination happening at Citi on Camelback Condos in Central Phoenix. 91-year-old Ziba, who takes care of her son who has a disability, and 71 of their neighbors are being forced to sell after a Chicago-based investment group purchased 80% of the units.
"Why?" Ziba asked. "I am a good taxpayer. Isn't this land of...where everyone has the right to live? Justice for all? Where is my justice?"
After watching the story State Representative Jeff Weninger, (R) Chandler, told ABC15 he is working to change the ownership requirement from 80% to 100%.
“Meaning you (an investor) have to own all of them in order to transition. And I think that would solve the problem,” he said. “It's a simple, elementary fix. But hopefully, we can do it now.”
History of the law
Signed into law in 1985, the Arizona Condominium Act was overwhelmingly approved by the Arizona legislature.
Real estate attorney Jill Casson Owen with Snell & Wilmer Law Offices told ABC15 the laws are modeled after the Uniform Condominium Act which was developed in 1980.
“The idea behind model acts or uniform acts, is to provide some consistency. So that if you are a developer in multiple states, you don't have a bunch of different sets of rules,” she said.
Owen estimates 14 other states have similar laws. She said the intention of the termination provision is to give the ability to disband a broken condo in an equitable way.
“Sometimes the condominium structure isn't going to work properly or it's not working properly. So it gives you the opportunity to terminate the condominium and put the property to a different and, presumably better use,” Owen said.
But since 2015, ABC15 has reported on several instances of investors approaching condo owners specifically to obtain 80% of the units, gain control of the HOA, then use the law to force the remaining owners to sell.
Often displacing owners with low incomes, senior citizens, and people with disabilities who purchased at the bottom of the market during the Great Recession.
In 2018 and 2019 Rep. Weninger helped passed amendments to the law that gave owners the right to:
-an equal portion “of any monies in the association’s reserve fund and the operating account”
-5% in relocation costs
-their own appraisal
-arbitration if the appraisals differ by more than 5%
“But obviously, it doesn't solve the crux of the problem, which is people don't want to move out of their house,” Weninger told ABC15. “And they're being forcibly removed by a private party.”
He said he is trying to convince lawmakers in both parties to support his proposed change of requiring 100% ownership of units before the legislative session ends in a few weeks.
“I can't guarantee anything, but I'm going to try to move this forward in the budget,” he said. “I’ve got to get 89 other colleagues to get on board with it. But to me-and we've had a lot of bipartisanship down here--this should cross party lines. And I think it does,” he said.
Representative Jennifer Longdon, (D) Phoenix, represents Ziba's district and told ABC15 she is ready to work on the law.
"The value of the home goes beyond the finishes, you know, it's not the marble countertops or the upgraded carpet. It is the accessibility features that have been built into this home and built into this living situation," she said.
Any changes made to the law would likely be too late for Ziba and her neighbors but could prevent other condo owners from having to sell against their will.
“For a private party for a corporation to be able to come in and say, ‘No, you're moving, because I own 80% of the property,’ is just disgusting,” Weninger said.