Jie Cao, et al. v. PFP Dorsey Investments, LLC, et al.
At a Glance
| Parties | Minority condominium owners challenged a forced sale of their unit after a supermajority termination vote under the condominium statute. |
|---|---|
| Panel | Presiding Judge Paul J. McMurdie, Chief Judge Kent E. Cattani, Vice Chief Judge David B. Gass |
| Statutes interpreted |
Summary
This case addressed a forced condominium termination and sale in which the buyer had already acquired most of the units and then used its voting power to approve termination. The Court of Appeals held that Arizona’s condominium-termination statute is constitutional as applied when owners bought subject to a declaration that incorporated the statute. But the court also held that later substantive statutory changes cannot simply be folded into the declaration without fair notice. Because the trial court had applied the 2018 version of A.R.S. § 33-1228 instead of the earlier version in place when the owners bought, the Court of Appeals reversed and remanded. The opinion is one of the most important Arizona appellate cases on condo termination, minority-owner protections, and the use of Kalway-style notice principles outside classic HOA amendment disputes.
Holding
The court held that A.R.S. § 33-1228 was not unconstitutional as applied in principle, but the owners were entitled to application of the earlier statutory version in effect when they purchased because later substantive changes were not incorporated without adequate notice.
Reasoning
The panel first rejected the broad argument that every forced condominium termination under § 33-1228 is an unconstitutional private taking. It reasoned that the authority for termination came from contract as well as statute because buyers accepted a declaration incorporating condominium law.
The harder issue was which version of the statute governed. Drawing on notice and reasonable-expectations principles, the court concluded that a declaration’s generic incorporation of laws ‘as amended from time to time’ does not automatically bind owners to later substantive changes that alter core property rights in an unforeseen way. Because the 2018 amendments changed how dissenting owners were treated, the earlier purchase-time version controlled.
Why This Matters for HOAs
Cao is unusually important for Arizona condominium practitioners. It limits after-the-fact use of statutory changes to restructure owners’ exit rights and compensation in termination deals.
For minority owners, the case provides serious appellate support for arguing that purchase-time expectations and fair notice still matter even when the declaration broadly references future statutory amendments.
