HB 2817

Overview

HB2817 – A proposal to amend A.R.S. §§ 33-1228 and 33-1260 and to add 33-1262 to further revise the condo termination process by increasing the amount of the “relocation costs” that must be paid to owner-occupied units from five percent of the total amount paid to the owner for the sale of the owner’s unit to ten percent; requiring the buyer to pay all closing costs of the sale and title insurance if requested by the unit owner; by adding more specific criteria for determining the value of the units to be sold; by requiring a state licensed or certified appraiser to determine the value of the units to be sold; by allowing either the unit owner or the buyer to initiate arbitration if the parties cannot agree upon the compensation to be paid to the unit owner; by defining “owner-occupied” as “a property in which the owner resides for any portion of a year and for which the owner does not receive rent for more than one-half of the year;” by requiring condominium associations to include a statement in their resale disclosures that the condominium may be terminated if approved by a vote of eighty percent or more of the unit owners and that owners may be forced to sell their units, along with a statement that the condominium is governed by recorded CC&Rs that regulate the use of the property; to add a legislative intent statement and retroactivity statement with respect to condominium termination; and to impose an annual notice requirement for boards of directors to notify unit owners that the condominium may be terminated if approved by a vote of eighty percent or more of the unit owners and that owners may be forced to sell their units, along with the total number of units in the condominium, the number of units owned by each unit owner and the name of each unit owner.

Key Changes

Current Law

Owner-occupied units receive relocation costs equal to 5% of their unit’s sale price during condominium termination. No specific requirements exist for certified appraisals, dispute resolution procedures, or regular owner notification about termination rights.

Proposed Amendment (Inactive)

• Increased Relocation Costs: Relocation costs for owner-occupied units increase from 5% to 10% of the total amount paid to the owner for the sale of their unit.
• Buyer Responsibility for Closing Costs: Buyers must pay all closing costs and title insurance if requested by the unit owner during a termination sale.
• Owner-Occupied Definition: “Owner-occupied” is defined as a property where the owner resides for any portion of a year and does not receive rent for more than half the year.
• Certified Appraisal Requirement: A state licensed or certified appraiser must determine the value of units being sold in a termination.
• Enhanced Valuation Criteria: More specific criteria are established for determining unit values during termination proceedings.
• Arbitration Process: Either the unit owner or the buyer may initiate arbitration if parties cannot agree on compensation amounts.
• Resale Disclosure Statement: Condominium associations must include a statement in resale disclosures that the condominium may be terminated with 80% unit owner approval, owners may be forced to sell their units, and the property is governed by recorded CC&Rs.
• Annual Termination Notice: Boards must provide annual notices to unit owners stating that the condominium may be terminated with 80% approval, owners may be forced to sell, the total number of units in the condominium, the number of units owned by each owner, and the name of each unit owner.
• Legislative Intent and Retroactivity: The bill adds legislative intent and retroactivity statements regarding condominium termination procedures.

Legislative Timeline

• February 13, 2025 – House Second Reading
• February 12, 2025 – House First Reading; Assigned to the House Committee on Commerce and the House Committee on Rules

Impact

These proposed changes would strengthen protections for condominium owners facing termination, particularly those who live in their units. The doubled relocation costs and mandatory buyer-paid closing costs provide greater financial cushion for displaced owner-occupants. The certified appraisal requirement and enhanced valuation criteria reduce the risk of undervalued buyouts, while the arbitration process gives owners recourse if negotiations fail. The expanded definition of “owner-occupied” is relatively broad, capturing owners who live in their units part-time or seasonally. Annual termination notices would keep all owners informed of their vulnerability to forced sales and provide transparency about ownership concentration—critical information when 80% approval could trigger termination. The resale disclosure requirement ensures prospective buyers understand termination risks before purchase.

Boards would face increased administrative obligations for annual notices and disclosure statements, and associations pursuing termination would encounter higher costs due to professional appraisal requirements and potentially more disputes requiring arbitration. The retroactivity provision could affect pending or recently completed terminations.