PHOENIX — Francine Hardaway's bill from her condominium homeowners association arrived unexpectedly by email in May.
The air conditioning at Landmark Towers in Phoenix needed a major fix, and her share to pay for it was $18,000.
"I was horrified and frightened," said Hardaway, founder of Phoenix-based Stealthmode Partners. "When I bought my condo in 2011, it was at the height of the recession. I bought it for cash thinking that if everything went to hell in a handbasket, I could live there."
She rents out the condo in the iconic 17-story tower and doesn't own another home.
After getting the email, she immediately called a friend who lives and owns a condo in Landmark. He told her they were all upset and asked her to come to the tower to talk.
"I thought I might lose my safety-net home," Hardaway said. "I lost my retirement in the last housing crash and recession. I paid $58,000 cash for my Landmark condo, and it's about all I have to retire to."
She banded together with a handful of other Landmark condo owners angry and confused about the unexpected $5 million charge.
They all thought fixes to the high rise's air-conditioning system already had been paid for and were almost done, using about $6 million received in a construction-defect lawsuit settlement in 2013.
The HOA assessment for a new HVAC system would have cost each of them at least $15,000 per condo. Many other owners in the 236-condo high-rise said the same thing as Hardaway: They could not afford the assessment, and it could cost them their home.
The group immediately started talking to other Landmark condo owners, sending out emails to their neighbors and going door to door. They only had a few weeks until the assessment went to a vote.
They also repeatedly reached out to Landmark's HOA board to get an explanation about the charge.
"Talks went nowhere," Hardaway said.
Foreclosure possibility looms
When people buy a condo or a house that's part of an HOA, they agree to abide by a lengthy set of rules known as the Covenants, Conditions and Restrictions, or CC&Rs.
Along with monthly or quarterly assessments, the CC&Rs also allow an association to levy a special assessment for major, unexpected repairs, if a certain number of residents approve.
If homeowners don't pay their dues for more than a year, or rack up a debt of $1,200 in missed regular or special assessments, an HOA can foreclose. HOAs foreclosed on a record number of homes in Maricopa County last year, and are on pace to match the record again this year.
Bob Banner owned four Landmark condos when the special assessment was announced. It would have cost him more than $70,000.
“I talked to several Landmark homeowners, many who are young and were concerned because they couldn’t afford to pay the assessment,” said Banner, who sold one of his condos since the fight over the special assessment began. “They were afraid the HOA would foreclose on them.”
A pivotol vote, a 2/3 majority
Landmark Towers has been part of Phoenix's skyline since the early 1960s. It was developed as an apartment tower and then converted to condos by a California developer during the boom in 2006.
Currently, condos in Landmark are selling for $125,000 to $299,000.
The condos attracted many investors, including Hardaway.
As Hardaway began to research the cost of repairing an HVAC system, she realized she had done work for a real-estate developer who was involved with writing Landmark's HOA rules.
"He told me getting two-thirds of the condo owners to vote against the assessment was key," Hardaway said. "We reached out to more condo owners. And we got two-thirds."
In early summer, the $5 million Landmark HOA assessment didn't get the votes needed to pass.
"After we voted it down, we thought, now we will start talking with the board and management company about why the HVAC is costing so much to fix and find a better and hopefully less expensive way to do it," Hardaway said.
But instead, Landmark's board and management company added the costs of the repair to the condo HOA's budget.
Landmark owners were told they would need to pay their share by the end of the year, and there would be no vote on the charge.
Each condo owner's bills went up a bit because the financing for the $5 million charge changed when it was added to the budget.
"When they added the assessment to the budget, my HOA bill for it climbed to $20,000," Hardaway said. "And then we really got busy fighting it."
Condo owner goes to court
By late summer, Danielle Sutton, one of Landmark's condo owners, hired an attorney and filed a lawsuit to try to stop the $5 million charge.
"Danielle used her own money to fight this crazy charge in court," said Hardaway, who went to the hearing with several other Landmark owners. "I didn't testify, but the condo owners who did were really brave."
In early October, a few days after the hearing, a Maricopa County Superior Court judge ruled in Sutton's favor, saying the way the assessment was levied violated the Landmark HOA’s rules. A temporary injunction against the assessment was issued.
The Landmark board that backed the $5 million assessment resigned right before the ruling.
Brown Community Management, the tower’s HOA manager, also resigned.
But the controversy isn't over, former Landmark HOA President Chuck Bressi said.
“The work at Landmark still needs to be done and has to be paid for some way," he said. "I think people had a visceral reaction to the assessment.”
He said the past board worked closely with its HOA management firm and a lawyer before proposing the $5 million levy.
Bob Brown, president of Brown Community Management, did not respond to several requests for comment.
Hardaway and other Landmark condo owners know the air-conditioning needs to get fixed, but through their research they believe they found less expensive ways to do it.
“We fought an unfair assessment, and we won,” Hardaway said. “It's hard to fight an HOA and win. Few people have done it."