Glossary · Thresholds & Valuation
Residential property
In short
Defined for the alteration threshold by property tax class, not by what the building looks like. Class three, class four, and two narrow class two subdivisions.
In full
For the alteration threshold, residential is a property tax classification rather than a description. A house is not residential property because someone lives in it; it is residential property because the assessor placed the parcel in one of the classes the statute names.
A.R.S. § 42-5075(S)(1)(a) reaches three things. Class three property under § 42-12003 — real and personal property used for residential purposes and occupied by the owner as a primary residence, occupied by a qualifying relative as a primary residence, or occupied by the owner as a primary residence and also rented to lodgers. Class four property under § 42-12004 — a wider residential category covering property used for residential purposes and not otherwise classified, property used residentially and solely leased or rented, licensed child care facilities, nonprofit residential housing and licensed care institutions for persons with disabilities or aged sixty-two and over, small bed-and-breakfast operations, agricultural employee dwellings, common areas, timeshares and low-income multifamily rentals. And class two property under § 42-12002, paragraph 1, subdivision (c) or paragraph 2, subdivision (c), used for residential purposes.
Those two class two subdivisions are the nonprofit-owned ones — real property at paragraph 1, personal property at paragraph 2, owned and controlled by an organization exempt under section 501(c)(3), (4), (7), (10) or (14). The paragraph therefore does not reach every class two parcel used residentially, only nonprofit-owned ones.
ADOR's Evaluating Mixed Construction Contracts worksheet states the residential definition more narrowly than the statute, citing only § 42-12002, paragraph 1, subdivision (c) and omitting paragraph 2, subdivision (c). The statute reaches both.
Acreage matters to the denominator, and the rule is the same in both of the residential classes. A homesite in class three under § 42-12003(B), or in class four under § 42-12004(A)(1), may include up to ten acres on the single parcel the residential improvement occupies — or more than ten and up to forty, where the parcel is zoned exclusively for residential purposes or carries legal restrictions or physical conditions preventing its division. Physical conditions are defined as topography, mountains, washes, rivers, roads or any other configuration limiting the residentially usable land area.
All of that land is within the full cash value the threshold is measured against. On a forty-acre homesite the denominator is large, and the contract that would breach the threshold is correspondingly large.
A.R.S. § 42-5075(S)(1)(a); A.R.S. §§ 42-12002(1)(c), (2)(c), 42-12003, 42-12003(B), (C), 42-12004(A)(1); ADOR Evaluating Mixed Construction Contracts worksheet, step 2