Condo Association Management Blog

Perhaps not since it is not a requirement for condos to be FDA approved. You may want to check with an attorney IF you would be prepared to insigate legal action against the board. Remember it's on your dime and the cost could be quite high.

Is a condo board required to abide by a motion that was discussed, passed, and put in the minutes of an annual meeting? 
 
Our bord was directed to hire a lawyer to monitor our recent transition from the builder/declarant. The board ignored our wishes and completed the transition. To date,seven months later, we have no written info on the transition. Do we have legal recourse?

Wow, the more I read about condo/hoa owner woes, the more I believe that these unfriendly user organizations need a major over haul. Why in the world does the answer seem to be to many of the problems with them is that the poor owner has to become a policeman and enforce or attempt ro enforce the law. This is just plain wrong, and must be corrected because bad laws must be addressed.

Every state has a Condominium Act. find yours by putting 
(name od state)Condominium Act.com into your browser. Your will find specific requirements that must be followed in transitioning from developer control to Council of Unit Owner Control. Some state laws even requiew a condominium to hire a management company to support their operation-Maryland is one such. Further you must force your noard to comply with your state law and get a motion passed forcing the board to hire an attorney.

I'm curious myself as FHA approval was removed from my complex as well. My condo is up for sale and this removal has been a problem with selling it too. I've been told that FHA lifts their approval when the amount of rental's in a complex exceeds their requirements and also if it has too many deliquent association fees. I am in California and do not know if the requirements change from state to state. Since it is a federal program I would think it would be one set of rules. I would like to know the answer to this as well.

Jackie, 
 
 
 
The FHA requirements are federal law and apply to all states equally. There is no requirement that all condos obtain FHA approval, nor that they maintain that approval. It's totally up to the condo BOD.

Dennis, 
 
 
 
Even though a motion is made and passed at an annual meeting of the members, the BOD may choose not to abide by it if it was about something the members had no right to vote on. Members can only vote on topics that the gov docs give them the right to vote on. I doubt that your gov docs give the members the right to decide whether an attorney should be hired by the BOD. Although I'm a strong advocate for communication between the board and the members, if the BOD was not required to inform the members of the completion of the transition then they have not violated anything, meaning the members have no legal recourse. If they have not violated the gov docs and/or state law there is no justification for a law suit.

Our Condo Association only found out about the 2009 change in laws regarding the FHA/Hud approval. We had approval but in 2009 all associations had to reapply. We are still in the process of this and only recently got an amendment passed in our association that will allow FHA/Hud to give us back our status. We had to finally hire a real estate lawyer to find out what the holdup was. So, even though we wanted to do due diligence, we were stymied by FHA/Hud. I urge all associations to find a real estate lawyer who has dealt with this goofy 2009 ruling. (Missouri)

FHA approval for condominiums is a national program with requirements that must be met. It is not the boards duty to maintain this status. This is not grounds for litigation. Grow up and stop looking to blame someone else for this unfortunate issue. FHA changes some of their guidelines in 2009, dropping condo SPOT loans. This is no guarantee that HOA approval is forever. Changes in your HOA such as finances, # of owners vs non owners, etc will drop your HOA approval in midstream. You may no longer get this FHA status if your HOA cant fit in their requirements box. MOve on and look for other lender programs that provide condo financing programs. Bottom line - condos are HARDER to finance period as significant losses in condo property values and finances continue to mount NATIONALLY. Get off the blame train and take responsibility for selling the property. Not the boards fault !

I am on our Board and we have also been taken off the approval list for FHA loans. We had one heck of a time trying to find out how to get back on the approved list. After many months of phone calls and emails, we have the information needed to be re-approved, but we understand that an FHA mortgage lender has to file the paperwork to get us back on this list. We let our members know that if they have an FHA buyer, to contact us so we can get their mortgage lender to assist us in this process. We meet all the criteria, but have no idea how to proceed on our own. We are a small association and prefer to not hire an attorney unless absolutely necessary. Then we have to get reapproved every 2 years!  
 
 
 
Before you decide to file a lawsuit against your association....remember you are a member of said association. You'll be suing yourself. Also check with the Board....they may have faced similar issues we did. We had no idea, or received no notification that the law was changing until it was too late.

For condo leadership and members, it is important to understand the historic perspective (1980-90s) regarding condos. 
 
During the 20th century, an individual's ability to purchase, refinance, or sell the condo unit was a personal obligation. This affected the writing of both State legislation and association documents. There is no stated responsibility of a board to insure the sellability of an individual's unit. There is an implied obligation for a board to maintain the project in a financially stable condition to ensure the owners' ability to resell property.  
 
Adoption of state laws regarding items such as insurance coverage, open meetings, reserve funding, etc., has occurred because of the interdependence of financial requirements and the lack of consumer protection was prevalent in the standards for condo (and HOA) legal documents.  
 
This was evident in the attitude of boards regarding FHA approval. Many boards did not want units sold to purchasers who required FHA financed loans. Value of property increased while mortgage companies lowered borrowing standards and for nearly 15 years, FHA loans became a minimal player in the mortgage financing for residential sales. FHA in the 80s and into the mid 90s required condo boards to update information yearly. Many boards were unaware of FHA approval of their condo and were neither aware of this requirement nor concerned about the ability of a purchaser to obtain FHA financing. Enforcement of the yearly certification was not enforced. The mortgage industry was not concerned about the financial and legislative condition of the condo complex due to the constant increase in unit property values.  
 
As the housing financial crisis developed, enforcement of lending regulations for condominiums became a standard that financial institutions are now required to meet. This included FHA approval of condo projects which resulted in the revisions in 2009.  
Several issues affect this: 
- Board members were unaware of the new standards. 
- The foreclosure of properties affected even the possible sale of a unit. 
- FHA has knowledge of the physical location of projects and no effective method of reaching the leadership. 
- Management company staff generally have never been involved in obtaining FHA approval. 
- Attorneys who were familiar with FHA requirements had retired and most lawyers today are just becoming familiar with the underwriting approval process. 
 
The entire process is complicated by several additional issues - condos who are financially prime for FHA loans are the same projects dealing with delinquent accounts, underfunded reserves, and in some instances an increase in investor owners. Reserve studies have been delayed due to the other financial burdens faced by the project. 
Boards are members of the condo community who volunteer their time. Few association members understand the complex issues that a board member should understand and there is no mandated requirement for leadership training. Many property managers have limited financial training and the community often does not want to hire a company with educated managers due to the difference in management fees.  
 
ALL CONDOS may seek FHA approval regardless of their current approval status. This does not require any unit purchaser to be seeking FHA financing. It does require the cooperation of the condo members - in meeting the requirements for reserve study and by-annual update of the study, in funding the reserves after determining the specific financial obligations; in communicating to all members the necessity of timely payment of assessments, and in preparing the necessary application for FHA certification or re-certification. This can be accomplished by a dedicated board, There are several sources of professionals providing this expertise: some management companies are equipped to provide this service; professional consultants in the industry; and legal advisors.  
 
Meanwhile, Community Associations Institute (CAI) is working to achieve some relaxation of FHA standards on issues such as the delinquency index and the need to work with the communities as the newly enforced requirements are enforced.  
 
Perhaps this overview will help owners and boards to move forward in this process. With nearly 25 years in this industry, including years of preparation of FHA submittals, I can perhaps provide clarification or assistance. Initial contact should be by email to nancy@cpwi.com or nancycpwi@gmail.com. Nancy Jacobsen, CPWI - Consulting Division.  
 
 
 

You absolutely would have a claim against both the listing and selling agent involved in the transaction. Their failure to investigate and disclose to you that the association was facing decertification in the midst of your escrow is professional negligence, and you would be able to recover any and all damages resulting from their breach. Punitive damages would not be available in a breach of contract action, and would only be awarded in the case where you could prove it was intentionally kept from you.

The response by CG yesterday addressed the question of the real estate agents' responsibilities regarding FHA. Unless the seller accepted a contract offer specifying that the loan could only be FHA underwritten, the seller is not the responsible party. If the property was listed as FHA approved in the initial listing, that does cause the seller a problem.  
Most contracts state that the buyer will move forward to obtain mortgage financing. Even with FHA underwriting, the mortgage company does not have to approve the loan application should the information provided by the condo cause the mortgage company a problem. While most loan officers do check the status for FHA approval, that is not usually done by the real estate agent.  
 
Further, even when a condo was approved, if the mortgage company receives information that is not in their best interest, a loan can be denied. This can include a newly higher delinquency, litigation against the condo, failure to maintain the property, liens against the condo for unpaid vendor accounts.  
 
Currently, FHA has introduced some draconian requirements for management company fidelity bonds that has created a "stop" on submitting renewals of certification. Our office has a backlog of condo requests for certification that currently cannot meet the FHA standards.  
 
A more reasonable approach would be for the seller to learn what the total issue is and then address it as appropriate, with his board and with his elected Federal representatives.  
 

If the Board of Governors allowed your condo complexe's FHA approval to lapse, by not re-filing necessary paper work in a timely manner, then they're not fulfilling their fiduciary duty & should be recalled. The Board needs to see that the entire complex is as sellable as possible. However, the approval may have been denied by FHA based on a number of issues: Offsite owners vs. renter ratios, association litigation, underfunded reserve fund, not having a CURRENT reserve fund & a high number of units behind in HOA fees. All Board members should have been aware of the approval expiration date & the association's need to re-file for re-approval at least 3 months in advance so this very scenario would not happen.

Staying current with HUD guidelines for receiving HUD approval or recertification can be daunting for both property managers and volunteer board of director members. Our firm Condo Approval Advisors (part of Total Capital Solutions Group) provide these advisory services to condo associations, developers and property managers on a national basis. If we can assist, please send e-mail to mark@totalcapitalsolutionsgroup.com