Caveat emptor

Let the buyer beware.

My wife sold a rental property in 2007 after putting up with a crazy and out-of-control HOA and rather than do a 1031 and reinvest in another rental property, she decided to pay the capital gains tax and look for residential property in Scottsdale for us to live in and then sell in 5 to 10 years after taking advantage of the personal residence tax exclusion.

We looked at around 300 houses between 2009 and 2010. The first house we looked at was Casita 26 in the Hilton Casitas, but felt it was overpriced for the market. The architect who designed the Hilton hotel and the casitas was Ralph Haver, a renown local architect. Something the other casita owners have no appreciation for.

When Casita 21 came on the market we were very interested, as the price was about 1/3 the price of Casita 26. In performing our due diligence, we learn of the 2006 lawsuit over the ground rent. We figured that if the rent allocation was set by appraisal, the ground rent instead of $570 a month, which went up to $790 a month in 2014, would be around $300 a month and who would fight lower rent?

After being burned by the previous HOA, my wife was hesitant to buy. In an effort to have a home with such a magnificent floor plan, I convinced her that a HOA with only 29 homeowners cannot be that bad. Little did I know how wrong I was. We had bought into a community with the HOA from Hell!! A development populated with abject morons, who would rather screw themselves than let the dissent neighbors win lower rent for them.

Look Before You Leap

Anyone considering buying a casita should seek legal advice regarding the enforceability of the amended subleases concerning the 8-acre sub-leasehold on which the 29 casitas of the Hilton Casitas condominium are erected, and co-owned by the owners of the 29 casitas. The Hilton Casitas condominium development is located southeast of Scottsdale and Lincoln Roads behind the Scottsdale Hilton Hotel.

The subleases may be defective because the purported HOA may not be able to perform the rent-setting function in the amended subleases as the State Farm lawyers for purported HOA claim that the HOA is “not party to 1999 subleases and never assumed any obligation under those subleases; nor could it have assumed any such obligation pursuant to its governing documents and Arizona law, as the subleases involve privately owned property and not HOA property.”