Our firm recently became aware of a home within an HOA community that is being offered for sale in fractional interests. (i.e. the owner of the home is selling the home in 1/8th interests). The HOA wanted to know what its legal rights and remedies are. The HOA had concerns with the possibility of many short-term renters, numerous people coming and going from the property, and it being a potential commercial business. Our firm immediately reviewed the HOA’s CC&Rs, only to find out they did not have a provision prohibiting timeshares.

Since coming across this issue just a few weeks ago, we have now become aware of several other houses that are currently listed in fractional shares across the valley. Is this a new trend associations across the Valley are going to see? From a legal standpoint, it is important for associations to review their CC&Rs and see whether or not the association has a prohibition on timeshares, commercial business and/or short-term rentals. The way these provisions are worded will be equally as important. If your association does not have a prohibition on timeshares, or restrictions on businesses or rentals, it would be a good idea to contact your attorney to go over amendment possibilities, as well as, the process the association would need to follow to properly amend the CC&Rs.

Vice Mayor of Paradise Valley Julie Pace recently wrote a great article outlining the potential issues of fractional interest sales with the Paradise Valley Town Code and Arizona Department of Real Estate. Depending on the location of the home, a fractional interest sale could violate other cities codes as well. Please contact Mulcahy Law Firm, P.C. for a complimentary review of your association’s CC&Rs and to get more information on the process to amend the CC&Rs.