A proposal to save condominium owners from being forced out of their homes has run into a problem.
It may be unconstitutional.
Charles Markle, 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 the buyers obtained their property. Markle said that also would interfere with the contractual arrangements those buyers signed.
But the chief proponent of HB 2275 told Capitol Media Services he’s not 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 it before the developer acquires 80% of the units.
Under current law, the owners of 80% of the units can effectively dissolve the condominium association if they want to do something else, like convert it to apartments. And that requires the owners of the other 20% to sell.
What it also means, however, is that a developer who wants to convert the units to apartments can obtain the voting rights of the 80% and tell the owners of the other 20% they have to sell — and go live somewhere else.
“These are people’s homes,” Weninger said. And he said the requirement to pay the owners an appraised value does little good for people who are retired and on fixed incomes and won’t find a comparable property in the same neighborhood.
That was underlined by a parade of witnesses from several condos being targeted who asked members of the Senate Commerce Committee this past week for help.
“I want to tell you how distressed I am about the current law that allows some big money developer to come in and force me out of my home,” said Ellen Marginson.
She told lawmakers she and her husband bought the condo 12 years ago and retired just last year.
“We will never be able to purchase another home in this economy,” Marginson said. “Are we supposed to go back to work to qualify and afford a home in an economy that sees day-to-day prices rising every single minute?”
Anthea Harrison, 82, told of living alone on a fixed income after her husband passed away
“If 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 required to pay a much higher price for another home.”
Only thing is, each and every condo purchaser signed documents agreeing to live by the conditions, covenants and restrictions of the association. And in each case, those documents referred to the existing Arizona law that spells out that 80% rule.
It is that contract that remains enforceable, according to Markle, who represents Rockwell Properties, a Chicago developer that’s purchased condo projects in Arizona.
Greg Patterson, a lobbyist for Rockwell Properties, told lawmakers they are powerless to void or alter those contracts. That’s important, he said, because condos are not forever and owners may want to sell.
“Real property becomes obsolete, can deteriorate,” Patterson said. “In a hundred years, these are not going to be condominiums any more.”
Markle told lawmakers the 2021 partial collapse of the Champlain Towers South in Surfside, a suburb of Miami, which killed 98, shows what can happen in situations where condo owners lose interest in paying major assessments for improvements. Markle said that’s why Arizona law allows for the condo project to be dissolved — and sold off for whatever reason — once 80% of the owners conclude it no longer makes sense.
But Sen. Michelle Ugenti-Rita (R-Scottsdale) said that isn’t the case here. Instead, she said, it’s a single entity coming in and making enough offers to enough owners to allow it to force out the ones who aren’t interested in selling.
“I think that the spirit of the 80%-20%, people thought individual ownership,” she said, not one entity controlling that 80%.
All that leaves the question of what, if anything, lawmakers can do.
While Markle contends the contracts are beyond legislative reach, Ken Behringer, the legislature’s general counsel, said lawmakers are free to amend the law to impose a different vote requirement to terminate a project — say 100%. More to the point, Behringer said that law could be applied 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, meaning lawmakers can alter the rules under which they have to operate. But at the hearing this past week, several lawmakers questioned whether they should get involved in what essentially is a contract dispute.
“The problem here is that people have purchased condos and did not understand what they had entered into,” said Sen. Tyler Pace (R-Mesa).
The measure, which already has been approved by the House, faces an uncertain future when it now goes to the full Senate.