In 2018, the Arizona Legislature amended A.R.S. §33-1228 to modify the procedure for terminating condominiums. In spring 2019, PFP Dorsey Investments, owner of more than 90% of the units (90 of 96 units) in Dorsey Place Condominiums in Tempe, Arizona, followed the procedures outlined in A.R.S. §33-1228 and the Declaration for Condominium for Dorsey Place and terminated the condominium. At the time, A.R.S. §33-1228 required agreement from 80% of the owners; the Declaration required 90%.
Jie Cao and Haining Xia, owners of a unit within Dorsey Place objected to termination (PFP Dorsey reached agreements with the other five-unit owners and each signed deeds transferring title in their respective units to PFP Dorsey). Instead of availing themselves of the arbitration process in the 2018 version of A.R.S. §33-1228, Cao and Xia sued PFP Dorsey and Dorsey Place Condominiums, claiming, among other things, that A.R.S. §33-1228 is an unconstitutional taking of their unit.
Dorsey Place Condominiums successfully moved to dismiss Cao and Xia complaint on the ground that they had properly terminated the condominium per the requirements of the 2018 version of A.R.S. §33-1228. Cao and Xia appealed on several grounds, not the least of which is their argument it is unconstitutional. In the interim (and after oral argument), the Arizona Supreme Court (“ASC") issued its decision in Kalway v. Calabria Ranch HOA, LLC, 252 Ariz. 532 (2022). The Court of Appeals (“COA") requested both additional briefing just before the Supreme Court issued its Kalway decision and then supplemental briefing to address that decision.
Ultimately, the COA determined that A.R.S. §33-1228 was unconstitutional, except as to Cao and Xia because they had accepted the Declaration when they purchased their unit and the Declaration expressly incorporated the Arizona Condominium Act (A.R.S. §33-1201 et seq.) However, the COA also found that in light of Kalway, any amendments to statutes also acted as amendments to the Declaration and unless those amendments were reasonably foreseeable by Cao and Xia, the amendments did not apply to Cao and Xia, and they are governed by the version of the statute in effect at the time they purchased their unit.
The Arizona Court of Appeals in Cao/Jie v. PFP Dorsey et al. has decided that if there are “substantive post-purchase" amendments to A.R.S. §33-1228 (the Arizona condominium termination statute), the version of the statute in place at the time an owner purchased their unit, controls the owner's interests and rights vis-à-vis termination. “Substantive post-purchase" amendments is not further clarified. We believe if this decision is allowed to stand, it will apply to more than just the condominium termination statute.
Further, it will result in associations being forced to treat owners differently depending upon which version of a statute is in effect at purchase and even whether an owner may choose to “opt in" to a particular version of a statute. This decision has the potential to require an association to treat its members differently, and potentially inequitably, in contravention of Tierra Ranchos Homeowners Association v. Kitchukov 216 Ariz. 195 (App. 2007) and RESTATEMENT (THIRD) OF PROPERTY (SERVITUDES) §6.13.
Amicus Brief
Supplemental Amicus Brief
Washington State Supreme Court Opinion March 2024
Court: Arizona Supreme Court
Topic: Condominium Termination
Brief Author: Lynn Krupnik, Esq., CCAL, Krupnik & Speas, PLLC, Tim Krupnik, Esq., Krupnik & Speas, PLLC, and Quinton Cupps, Vial Fotheringham, LLP, Robert Diamond, Reed Smith, LLP, and James C. Martin and Ted A. Hages, Reed Smith, LLP
Filed: December 19, 2022
CAI Amicus Review Panel: Mr. Robert Diamond, Esq., CCAL, Co-Chair of Amicus Committee
Mr. Stephen Marcus, Esq., CCAL, Co-Chair of Amicus Committee
Mr. Henry Goodman, Esq., CCAL (MA)
Ms. Karyn Kennedy Branco, Esq., CCAL (NJ)
Ms. Melissa Francis, Esq. (MI)
Mr. Daniel Heaton, Esq. (CA)