By Rusty Bradshaw
Independent Newsmedia

Real estate professionals want to see some changes that clarify condominiums vs. other types of housing to avoid confusion and problems in sales.

Identifying duplexes, quads and other types of homes as condominiums not only creates confusion, but has properties appraised incorrectly and is causing some loans to be denied for FHA funding, according to Ermilinda Evans of Award Realty in Sun City. She said there are only four condo associations in Sun City, not 386 as quoted by Sun City Condo Owners Association officials and others.

“The term condo is loosely used,” Ms. Evans said. “People believe if there is a common area or adjoining walls it is a condo.”

The difference is that single-family homes include in ownership the land on which they are built, whereas condos do not, according to Ms. Evans.

“If you look at non-condo owners documents, you will see the word lot,” said Jim Ball, Sun City resident and former COA board member.

There are five classifications of homes used by Recreation Centers of Sun City officials, according to Joelyn Higgins, RCSC communications and marketing coordinator. They are single-family homes, garden apartment homes, multi-level apartment style condominiums, patio homes and Gemini twin homes.

“RCSC refers to these simply as residential housing units, regardless of the style of home,” Ms. Higgins said.
However, RCSC officials do use the term condominiums in certain circumstances, including maintaining its status under Title 10 rather than Title 33.

A lawsuit filed against RCSC by 39 Sun City residents wants Sun City to be classified as a planned community, falling under the Planned Communities Act. In statements emailed to the Independent in February regarding Senate Bill 1175, amending Title 33 to protect rec centers’ rights to assess its preservation and improvement and other fees, Jan Ek, RCSC general manager, stated A.R.S. 33-1802(4) defines a planned community as one that does not include condominiums. She pointed out the Sun City COA provides assistance to 386 condo associations in the community.

Condos are clearly defined by law, according to Sam Estok, Sun City COA board president. The key is owners’ vested interest in the undivided common areas, he added.



“If you own a percentage of the common area, it is considered a condominium,” Mr. Estok said.

That is spelled out in A.R.S. 33-1202’s definition section.

“‘Condominium’ means real estate, portions of which are designated for separate ownership and the remainder of which is designated for common ownership solely by the owners of the separate potions. Real estate is not a condominium unless the undivided interests in the common elements are vested in the unit owners,” the definition states.

However, from the Realtor’s perspective, the properties do not fit the common sense definition of a condo based on land ownership. They believe they are planned unit developments.

The issue is not a new phenomenon. Denny Elmes, Award Realty owner, wrote about the issue in January 2011.

“They (misidentified units) are not organized or legally created under the condominium laws and do not have or need several of the documents that would be required as condominiums,” Mr. Elmes wrote. “A PUD is a residential dwelling which is part of an association of the homeowners of the project.”

But so far there has been little change.

While some associations changed their names to take out the term condo, the term is still widely used, according to Ms. Evans. Mr. Ball, while a COA board member, tried to get that entity to change its name but was unsuccessful.

“The name Sun City Condo Owners Association perpetuates the problems,” he said.

Sun City West’s condo association did change its name last year to avoid confusion, according to Tona Carruthers, Oragnization of HOA’s office manager.

“A lot of people thought we only represent condominiums,” she said. “While we do have traditional condos here in Sun City West, it’s very confusing for everybody.”

She believes the Legislature’s definition grouped all types of homes together.

“We represent all HOAs, regardless of the state definition,” Ms. Carruthers said.

But she also believes the state has made it very confusing, especially in the Sun Cities.

“Condos can be long or a duplex,” she said. “Scottsdale has a lot more of the traditional high-rise condos. I find it very confusing trying to explain to people. They may be a duplex, but by state law may be required to follow the rules of a condo.”

While some FHA home purchase loans are being denied in the Sun Cities due to the preservation fees charged by the rec centers organizations, some FHA loan requests are also denied because most condo associations are not FHA certified, according to Mr. Ball.

“PUDs don’t require FHA certification,” he said.

But the misidentification affects non-FHA financing as well, according to Ms. Evans. She said appraisers value condos lower than single-family, duplexes, quads and other types of homes not considered condos because the ownership does not include the land.

“So that affects conventional and VA loans, too,” she said.

While some Sun Cities Realtors, familiar with the community’s circumstances, can get around the obstacles, it is much different for Realtors from out of the area.

“We battle lenders all the time who are not familiar with the area,” Ms. Evans said.

Mr. Ball said the Arizona Department of Revenue “gets it” regarding condos. The ADR land manual states, “In many areas the terms condominium and townhouse are used interchangeably. However, this is an incorrect practice.” It further states that condominiums are only created under Title 33 by the Uniform Condominium Act.
“Note that while ‘undivided interests’ may be held by the owners of individual townhouse units in a planned unit development, the PUD is not a ‘condominium’ by definition.”

None of those arguments are swaying Sun City COA officials to make any changes in agency name or practice. In addition to the state statute definition, COA officials follow guidelines in “Condo and Planned Community Statutes of Arizona,” a manual published by the Carpenter and Hazelwood law firm.

“That is what we always go by,” Mr. Estok said.

He added most associations do not pursue FHA certification because it costs the association a lot of money.

“What we tell people is that if a seller or buyer wants an association to get FHA certified, they should apply for it and pay the costs involved,” Mr. Estok said. “This is something that always comes up in our workshops.”