Arizona’s real estate laws are evolving in 2024, and whether you’re a homeowner, buyer, or real estate professional, these changes could impact your next move. With new regulations shaping the way property is bought, sold, and developed across the state, staying informed is more important than ever.
In this overview, we’ll break down the key updates, including new housing options, adjustments to zoning rules, and changes affecting Homeowners’ Associations. Read on to discover what these developments mean for you and how to navigate Arizona’s real estate market in the coming year.
Key Changes in Arizona Real Estate Law for 2024
Arizona’s real estate landscape is set to change in 2024, with new laws aimed at increasing housing options. One major change shaking up Arizona’s property scene is the new rule for cities with over 75,000 people: they have to allow Accessory Dwelling Units (ADUs) on single-family lots. This could mean more housing options and a whole new way to think about your property’s potential [1]. These ADUs, also known as casitas, can be built without onerous design restrictions or additional parking requirements. Importantly, the new bill does not supersede local building codes and does not prevent restrictive covenants from applying to ADUs within an HOA community.
The new legislation, House Bill 2720, permits homeowners to construct at least one attached (such as a converted garage), detached or internal ADU. [2] This change is designed to boost housing supply within established neighborhoods without necessitating additional land development [1]. To prevent overly restrictive rules, the law includes safeguards against costly or infeasible ADU construction, such as prohibiting excessive setbacks or additional parking requirements [2].
Municipal Zoning and Middle Housing
Another significant change comes with House Bill 2721, dubbed the “middle housing bill.” This legislation requires municipalities with 75,000 or more residents to modify their zoning regulations and other official controls [3]. By January 1, 2026, these cities will be required to open the door to a wider range of housing options. Duplexes, triplexes, and even fourplexes will become permitted uses on lots previously zoned for single-family homes. This move could dramatically reshape the landscape of residential neighborhoods, offering more flexibility and density for housing [3].
The law also mandates that cities allow these multi-family projects within a mile of their central business districts [1]. Additionally, it requires that middle housing projects occupy at least 20% of any development spanning 10 acres or more [1]. This change aims to create more diverse housing options, especially in areas close to city centers.
To ensure the feasibility of middle housing development, the law prohibits municipalities from:
- Discouraging middle housing through unreasonable costs, fees, or delays;
- Limiting middle housing to a maximum of two floors or imposing a floor area ratio of less than one;
- Creating a higher bar for middle housing development, compared to the relative ease of building single-family homes in the same area; and
- Requiring owner occupancy or fire sprinklers in these structures. [3]
Homeowner Association Changes
In addition to these changes, Arizona’s 2024 legislation has significant implications for condominium owners, potentially altering the dynamics of property ownership and governance within these communities. House Bill 2141, signed by Governor Hobbs on March 29, 2024, allows condo owners more freedom to renovate or redecorate their units’ interiors without needing approval from the condo board [4]. This includes installing hard surface floors with appropriate noise-reducing underlayment.
Another significant change comes with House Bill 2648, which clarifies the two distinct types of HOA liens: common expense liens (i.e., HOA dues) and individual expense liens (i.e., fines). [4]. Common expense liens, essential for the upkeep of shared property, can be foreclosed as a last resort after one year of delinquency or when the outstanding amount reaches $1,200. However, a home cannot be foreclosed on for individual expense liens due to unpaid fines, providing homeowners with more protection against losing their homes over disputed violations of the covenants [4]. The new law further provides greater protection to homeowners by requiring HOAs to exercise reasonable efforts to settle the claim before initiating a foreclosure action.
These changes aim to create a more flexible and equitable real estate environment in Arizona, addressing housing shortages and protecting homeowners’ rights.
Impact on Property Rights and Development
The 2024 Arizona real estate law changes are set to have a significant impact on property rights and development across the state. One of the most significant updates is the increased variety of housing options available. A new law signed by Governor Katie Hobbs aims to transform unused commercial buildings into affordable housing [5] This legislation allows developers to change or demolish commercial buildings, offices, or mixed-use structures to create residential properties without the need for rezoning [5]
Starting in 2025, cities with populations over 150,000 will be required to allow up to 10% of these structures to be demolished if they’re considered obsolete [5] This change is expected to spark development, as it removes a major hurdle for investors by eliminating the need to seek rezoning or conditional use permits [5]
Updated Case Law on Severance Damages in Easement Cases
Furthermore, the 2024 legal landscape in Arizona has seen updated case law in condemnation cases. This includes updated law on whether severance damages can be sought due to the loss of easements in Common Areas used for freeway expansion projects [7]. The court reasoned that easements aren’t considered parcels of land under the law for purposes of severance damages and therefore you cannot seek proximity damages (a form of severance damages) for loss of value attributable to the remaining parcel when the state condemns Common Areas..
The Corporate Transparency Act
2024 has also seen the The Corporate Transparency Act (CTA) become effective, which was enacted in 2021, is ushering in a new era of transparency in entity structures and ownership, with significant implications for the real estate sector [8] While federal legislation, the CTA will apply to across the U.S. including Arizona entities. This legislation aims to tackle money laundering, tax evasion, and other illegal activities by mandating that certain U.S. and foreign entities provide detailed identifying information to the Financial Crimes Enforcement Network (FinCEN). This includes information about the company’s beneficial owners—those individuals who ultimately hold ownership or control over the company.[8]
Effective January 1st, 2024, the CTA has cast its net wide, impacting “reporting companies” – a broad category potentially encompassing LLCs, corporations, and other entities established through official filings with the Secretary of State or similar offices [8] Additionally, foreign companies officially registered to operate in any U.S. state must also adhere to these reporting requirements. This ensures that the reach of the CTA extends beyond domestic entities, capturing a wider range of companies operating within the U.S. market [8]
Counsel should be sought to determine when deadlines apply to your entity and if your entity is subject to the reporting requirement.
The CTA’s influence on real estate transactions is considerable, particularly in its aim to reduce anonymity within the industry. Special purpose entities (SPEs), frequently employed in real estate deals, may now fall under the CTA’s reporting requirements unless they meet specific exemption criteria. This move towards increased transparency could fundamentally change the way real estate transactions are managed and financed.[8] This necessitates continuous monitoring of changes in ownership structure to ensure compliance.[8]
It’s worth noting that the CTA has faced its share of controversy. On March 1, a federal judge in Alabama declared the CTA unconstitutional and issued an injunction preventing the government from enforcing it against the plaintiffs involved in that case. While this ruling doesn’t invalidate the CTA nationwide, it does raise questions about its future and potential legal challenges [9]. While the Act remains in effect for those not affiliated with the National Small Business Association, this ruling could be the catalyst for a broader legal battle that will ultimately determine the Act’s constitutionality. The outcome of this legal challenge may have far-reaching implications for the future of financial transparency and reporting requirements in the United States.[9]
Final Thoughts on Arizona Real Estate Laws
While the above is not a comprehensive recitation of all the 2024 Arizona real estate law changes, it is clear that Arizona has taken swift action to address the current housing affordability crisis. These modifications aim to boost housing options, protect homeowners’ rights, and streamline development processes. From allowing Accessory Dwelling Units to mandating middle housing in certain areas, these changes reflect a push towards more diverse and affordable housing solutions. In addition, the new regulations place restrictions on HOA powers, providing homeowners with added protections.
These legal updates also demonstrate new potential reporting requirements to Arizona entity owners under the Corporate Transparency Act. Property owners and real estate professionals need to keep up with these changes to effectively manage the evolving legal landscape. As these new laws take effect, they’re likely to have a lasting impact on Arizona’s real estate market, potentially leading to more housing opportunities and a more balanced approach to property rights and development.
Experienced Arizaon Real Estate Lawyers Can Help
Staying ahead of these legal shifts is crucial for all parties involved in Arizona’s real estate transactions. Whether you’re a buyer, seller, agent, or developer, understanding and complying with these new regulations is essential for protecting your interests and ensuring a smooth transaction. That’s where experienced Arizona real estate lawyers come in.
The team at Gottlieb Law has a proven track record of guiding clients through complex legal challenges with experience and precision. We’re committed to staying up-to-date with the latest laws and regulations, ensuring you have the experienced guidance you need to make informed decisions and protect your investments.
Contact Gottlieb Law today to schedule your consultation and let us help you navigate the ever-changing world of Arizona real estate law.
Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation.
References
[2] – https://tempeyimby.org/2024/05/27/arizonas-new-housing-laws-explained/
[3] – https://www.azleg.gov/legtext/56leg/2R/summary/S.2721FICO.DOCX.htm
[4] – https://independentamericancommunities.com/2024/04/17/arizonas-new-hoa-laws-for-2024/
[5] – https://www.abc15.com/news/business/new-bill-could-help-convert-old-commercial-buildings-in-phoenix
[6] – https://www.azleg.gov/legtext/56leg/2R/bills/HB2648H.pdf
[7] – https://www.azbar.org/media/epjnvc4f/real-estate-case-and-legislative-update.pdf
[8] – https://www.azcc.gov/docs/default-source/corps-files/boi-crib-sheet.pdf?sfvrsn=52c2dc91_1
[9] – https://www.thomsonreuters.com/en-us/posts/corporates/cta-unconstitutional-ruling/
