GSN Real Estate 071722

REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

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Balanced home market presents new opportunities

BY MINDY JONES GSN Columnist

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balanced real estate market has hit Arizona hard and fast, kind of like that feeling you get when you open up your car door and the heat hits your face after driving around blissfully with the AC on max.

The shift in the real estate market feels sudden and unexpected on the tail of a laundry list of signaling trends.

Volatility in interest rates and rapid escalation of home prices for buyers, sellers unsure of how long they can bank on that growing pile of cash build-

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ing up in their home, investors finding it difficult to cash flow as the cost of money, labor and materials increases and rental rates stabilize, and seasonality that we haven’t experienced in the Arizona market since the onset of COVID have all been paving the path for this return to balance.

What we couldn’t have predicted, much like we can’t predict how long we’ll stay in balance, is how fast the market would have shifted and how much the rapid change in market conditions coupled by the skewed sense of reality and expectations set by the extreme sellers market of the last two years would impact the consumer perspective on the local real estate market.

A balanced market challenges sellers

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to prep, price and market their property in accordance with its true value.

That means that unlike an extreme sellers market – where you can sell literally anything – homes that haven’t been updated in 10+ years will not have the same selling experience as a home that is properly prepared to attract today’s home buyers and stand out from the other options available at its price point.

With inventory expected to rise, you can expect to see more price modifications, negotiations, and longer days on

market.

If you are selling your primary residence, the assumption is that you’ll still need a place to live – which is where you’ll really reap the benefits of a balanced market.

Unlike your counterparts who braved the frenzy of the last two years and helped your home come up in value by nearly 50% when they sold, you’ll get to take the equity that you’ve gained and have more options to use it than any of

see MINDY page RE5

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REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

Cities get more short-term rental oversight

BY MARK MORAN GSN Staff Writer

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ov. Doug Ducey earlier this month signed a bill providing local cities and towns with more authority to fine and penalize short term rental “bad actors,” but stops well short of banning them or limiting the length of their leases.

Co-sponsored by Republicans Sen. J.D. Mesnard of Chandler and Steve Kaiser of Phoenix, and SB 1168 is being called a “compromise,” and gives cities and towns increased authority to fine homeowners whose occupants violate noise and other community ordinances.

Those rules are often breached by weekend visitors who rent a large house for the weekend, fill it with raucous revelers who party late into the night, disrupting families and yearround residents’ peace and quiet, as well as their normal routines.

Philip Minardi, a spokesman for Expe-

dia Group, hailed the legislation, calling it “a targeted, sensible package of protections and reforms to Arizona’s vacation-rental industry.”

He said the measure puts “Arizona at the forefront of innovative policy solutions for this important industry that supports over 75,000 jobs statewide” and said it creates “new mechanisms to ensure neighborhood safety while fostering an environment that will allow vacation rental hosts and their guests to continue their important contributions to a vibrant tourism economy in Arizona.”

The Legislature in 2016 took away municipalities’ authority to impose regulations on short-term rentals but in recent years has given them some leeway to control rowdy party houses.

The northeast Mesa community of Las Sendas recently voted to amend its Covenants, Conditions and Restrictions, or CC&Rs, to restrict rentals to no fewer than 31 days.

The measure passed with the support of 75% of Las Sendas residents after a six-month campaign that the HOA board publicly supported. Of the 3,090 total votes cast, 2,604 votes were in favor of the amendment and 486 were opposed.

SB 1168 really has no bearing on authority to regulate short-term rentals, according to Las Sendas attorney Curtis Ekmark.

“The state doesn’t have anything to do with communities,” he said. “They left intact an association’s ability to ban STRs. But it allows the City of Mesa to fine people who violate noise and other ordinances.”

The measure also shifts fines and penalties away from online rental platforms such as Airbnb and VRBO and places them on the property owner or management company that is renting out the house. It also makes various other technical and legal changes to the terms of STR agreements in Arizona.

In an earlier interview with the Tribune, Shannon Preston who, with her husband Colin owns a home in Las Sendas but lives in Oregon, said that an outright ban on STRs is not in line with what they thought they bought into when they purchased their Mesa home.

“The CC&Rs are a contract that we entered into when we purchased our property with the homeowner’s association.

“For them to just take a one-sided majority vote and remove our property rights doesn’t seem like that’s fair,” Preston said. “They are using our dues to take our property rights away from us.”

The Prestons advocated for an approach that stops short of banning short term rentals outright, such as a higher fee structure, which Senate Bill 1168 addresses, or a “three strikes and you’re out” policy for people who re-

see RENTALS page RE3

REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

RENTALS from page re2

ceive multiple complaints about their renters.

“There has to be some ways around just changing everyone’s rights,” Preston said.

The new state law may give people who live near disruptive party houses in Las Sendas an avenue for their frequent complaints.

Given that the new law empowers the City of Mesa to enforce noise ordinances, disgruntled neighbors will be able to call the police with their complaints. As it stands now, annoyed neighbors say they themselves fear being the target of legal action for “harassing” short-term homeowners’ “guests.”

Newer communities write short term rental bans directly into their CC&Rs as a matter of course, but older, more established communities that are often sought by weekend partiers have remained wide open and largely unregulated.

This issue is not likely to go away any time soon for Las Sendas or any other community that votes to ban the short-

term rentals.

A quick internet search reveals page after page of suggestions on how to get around such regulations, for instance. Beyond that, Valley real estate attorney Ben Gottlieb says a decision in March by the Arizona Supreme Court, Kalway v. Calabria, could have a significant impact across the entire state, and on a community’s ability to change its CC&Rs. In a nutshell, the case states that in order to amend them, a community’s original CC&Rs must make mention of the possibility that the rules could, potentially, be altered in the future.

“You have short term renters who will come in and seek declaratory relief,” said Gottleib. “And say ‘wait a minute, under the Kalway case this amendment is invalid and I want to protect my investment here and I had no notice that this would happen.’ So, I think this is going to have interesting ramifications.

The Kalway case really makes it clear that everything hinges on what is in the original CC&Rs.”

State Rep. John Kavanaugh, R-Scottsdale, who has been involved in shortterm rental legislation since they became an issue, said it will be difficult to get around the HOAs approved ban.

“The HOA’s will have no problem enforcing that,” he said. “First of all, the neighbors will know when different people start showing up every weekend.”

Kavanaugh, a pro-business Republican understands both sides of the issue, but falls clearly on the side of people opposed to short term rentals.

“On one side there is the right of people to own their property and do what they want,” he said. “On the other side is the right of people to rely on zoning laws that were in effect when they

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bought their land.

“No one purchased their homes thinking that there would be horizontal hotels popping up next to them. The fact that people made the biggest investment of their lives and then had that open up next to them is a real shame.

It destroys their life and their property value, he said.”

As far as the Kalway v Calabria case?

“That’s gonna play out in the courts.”

Kavanaugh said.

But even Ekmark, the Las Sendas attorney, acknowledges that the community’s CC&R amendment is far from a slam dunk.

“Every association considering banning short term rentals should be aware of Kalway,” he said.

Check us out and like the Gilbert Sun News on Facebook and follow @gilbertsunnews on Twitter.

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REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

How inflation can impact resident, business leases

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BEN GOTTLIEB GSN Guest Writer

4 bedroom, 2 bath, located in the award winning community of Power Ranch Come see this great single level home with vaulted ceilings! The covered front porch offers a warm welcome to the home. Security screen door, shutters and sunscreens an added bonus. 3 of the 4 bedrooms offer walk-in closets. Living and Dining rooms could make a great teen space or office. The open kitchen includes a spacious island, brand new stainless steel appliances, and pantry which is open to the family room and breakfast nook. The primary suite includes a spacious room with shutters & the bathroom offers dual sinks, a seperate tub & shower, and a walk-in closet. Dog door and dog run on side of home with full size gate. The beautiful backyard includes two paver patios, one with a ramada to take in our Arizona outdoor living.

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fter enduring the COVID-19 pandemic and navigating around a barrage of state and federal executive orders inhibiting landlords’ ability to carry out eviction actions, landlords and tenants are now living in a world facing the highest rates of inflation since the Great Inflation period transpired during the 1970s.

High inflation in the overall economy is translating into higher rent being demanded by landlords and carries key implications in the landlord-tenant space, especially since most landlords and tenants have not paid much attention to it lately since inflation has not been a significant news headline in de-

Buying or Selling a Home?

cades.

Also, long-term leases – especially commercial leases – usually provide the tenant with an option to renew the lease several years in the future from when the original lease is executed.

Some leases (mostly commercial) have provisions addressing inflation in connection with the renewal period in the event a tenant exercises a negotiated option to renew the lease.

Extra attention and care should be used in drafting options to renew in leases.

Landlords may want to negotiate shorter rental periods and/or have lease provisions addressing escalating rent that accounts for rising rental rates in any renewal period, while tenants should attempt to negotiate rental rate “locks” or modest rent increases.

see INFLATION page RE6

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REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

MINDY from page re1

them ever had.

There has been a 220% increase in supply over the past four months, taking us from the most malnourished supply situation we have ever experienced to a thriving market of choice.

One of the most beautiful things that happens when a market shifts is the onslaught of solutions that present themselves and scenarios that are challenged by the change in market conditions.

Now we’re turning our creativity to lowering interest rates for buyers through 2/1 buy-down programs and seller rate buy downs through conces-

sions, plastering the motto “marry the house, date the rate” all over social media and helping buyers and sellers see the benefit of working together again in the hopes of preserving as much of that equity as we can and giving traditional buyers a fair shot A balanced market carries many, many benefits for both buyers and sellers in its inherit slower pace and solution-oriented selling conditions – which is why we don’t typically sit in balance for long in Arizona. A market of choice and opportunity is the breeding ground for the next sellers’ market.

Miss a previous Real Estate section?

Check out our digital copies at www.GilbertSunNews.com

GOT NEWS? Contact Paul Maryniak at 480-898-5647 or pmaryniak@timeslocalmedia.com

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So, how has Gilbert fared through all of this change? Well much like its counterpart cities - inventory has risen to pre-COVID times. While annual sales numbers are very similar to that same time frame, buying has slowed significantly in recent months moving our supply from just two weeks to just under two months, making it feel like we are in a buyer’s market.

We are, however, still sitting in a low-to-moderate sellers’ market with lower than average inventory AND lower than average demand with inventory still leading pricing with both monthly

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sales $/sf and annual sales $/sf up instead of down.

Homes are still selling on average at or above list price depending on the neighborhood, preserving much of the equity that Gilbert residents have gained over the last two years. But the trend in buyer activity and ultimately the stabilization of interest rates will determine how long that lasts.

Mindy Jones, a Gilbert Realtor and owner of the Amy Jones Group brokered

by EXP Realty, can be reached at 480250-3857, Mindy@AmyJonesGroup. com or AmyJonesGroup.com.

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REAL ESTATE

GILBERT SUN NEWS | JULY 17, 2022

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It is important to note that most leases provide the tenant with the option to renew the lease.

The option must generally be exercised in writing and in accordance with the option to renew clause. If the tenant does not exercise the option to renew but remains at the premises, the tenant will be considered a “holdover tenant.”

Lease provisions addressing holdover terms usually contain a higher rental rate and the holdover period runs month-to-month (meaning the holdover term can be terminated with 30 days’ notice).

Many tenants are left scrambling at the end of their lease periods and do not want to renew their lease at a higher rental rate. Ultimately, if the lease is properly terminated by the landlord, the landlord could proceed with an eviction of the tenant.

In the residential context, the landlord is not permitted to “lock out” the tenant.

Under the Arizona Residential Landlord Tenant Act, the landlord must proceed with a judicial eviction and obtain what is called a Writ of Restitution from the eviction judge.

In the commercial realm, if the lease permits a “lock out” remedy, the landlord may simply change the locks if the tenant has defaulted under the lease and need not pursue a judicial eviction.

Of course, a landlord cannot raise rent or charge the tenant unauthorized fees in contravention to the lease terms.

In all cases, the parties should follow the lease.

Patrick MacQueen and Benjamin Gottlieb created a different kind of law firm using state of the art legal software and technology combined with award-winning legal minds to provide the best real estate representation available. If you have additional questions, contact Ben Gottlieb at 602-533-2840 or ben@ mandglawgroup.com.