Most of the new guidelines set forth in the new Condominium Project Approval and Processing Guide became effective June 30, 2011, including provisions regarding leasing provisions within condominium association declarations.

Until March 18, 2011, many condominium communities were having applications for FHA approvals and re-certifications denied if their Declaration contained leasing caps, minimum leasing terms, maximum leasing terms, and other provisions typically found in Declarations limiting rentals, as HUD considered such restrictions a violation of 24 CFR 203.41(a)(3).  On March 18, 2011, HUD issued a temporary waiver effective for one year permitting leasing provisions in condominium association declarations, provided such provisions complied with the waiver.  This temporary waiver is now permanent for all condominium approval and re-certification applications.  As such, a condominium declaration, master deed, bylaws, or other pertinent documents may restrict an Owner’s right to lease his or her unit if the restrictions meet one or more of the following criteria:

  • All leases must be in writing and subject to the declaration and by-laws of the condominium project.
  • The condominium association may request and receive a copy of the sublease or rental agreement.
  • The condominium association may request the name(s) of all tenants including the tenant’s family members who will occupy the unit.
  • Unit owners are prohibited from leasing their units for an initial term of less than 30 days.
  • The condominium association may establish a maximum allowable lease term, e.g. six months, twelve months, etc.
  • The condominium association may establish a maximum number of rental units within the project; however, the percentage of rental units may not exceed the current FHA condominium
  • project owner-occupancy requirement (i.e. currently 50%).
  • The condominium association may not require that a prospective tenant be approved by the condominium association and/or its agent(s), including but not limited to meeting creditworthiness standards.

If you were holding off on seeking FHA approval or re-certification because of delinquencies over 15%, you may now proceed if the above documentation and requirements can be provided and met.  If you have questions regarding the FHA certification process or desire assistance obtaining certification, please contact our office at 303-991-2070.  For more information regarding the new FHA guidelines, read the following article, “Federal rules no boost to condominium industry” and visit CAI’s Mortgage Matters page.

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