FHA Condo Approvals – Recent Email Inquiry: Site Condominiums
This is a follow-up email to the last one that I posted regarding the insurance for Site Condominiums as they pertain to FHA loans. The original email noted that the HOA pays for the insurance for the units, which is enough for HUD to deem the project as not being a “site condominium” project.
If you already read the original post, skip down to the RED WORDS.
I am going through escrow on a property that is a site condo. I had questions on one of the requirements. The HOA currently procures the insurance and organizes landscaping but it is funded through HOA dues. Does this mean that the maintenance and insurance is not the sole responsibility of the homeowner or are there nuances with the requirement?
Are there any options if the property does not qualify that can be processed rather quickly?
In order for a project to qualify as a “site condominium”, the insurance of each unit must be the responsibility of the respective unit owner. According to HUD's guidelines, it doesn't state that the landscaping must be maintained by the individual unit owners but I have heard that some lenders are requiring this.
If the HOA pays for the insurance of the units then the project is not site condos and full project approval is required.
I wish I had better news for you, sorry
Thank you for the quick response. If I do pay for the HO6 insurance on my own, does that count for anything or are they primarily concerned with the exterior?
My reply to his reply:
Unfortunately, HO6 has no bearing on this topic. Essentially, when a condominium project is deemed "site condos" by HUD the units are treated as though they were single family homes. Therefore, the project would have to appear as a grouping of single-family homes that is a common interest community. A stand-alone single-family homeowner would be responsible for the maintenance and insurance of both the interior and exterior of the dwelling.
If you think along this line of logic, it may clear up the questions you have but I would be happy to entertain any others.
You may want to investigate the legal documents for your project to verify that the declaration or by-laws state that the HOA is to provide insurance for the units.
There are two courses of action that are possible. The first is to get the project approved with HUD. This typically takes a couple of months if you are working with someone who knows the process, the paperwork and what HUD is looking for and not looking for.
The second is to amend your project's legal documents so that they are in line with the requirements of a site condominium. If the members of the HOA fully understand the benefits of doing this, they may be inclined to vote for such a radical change.
I hope that this answers your question.
The Condominium Project Approval Team at ReadySetLoan is dedicated to helping condominium projects across the nation to obtain their approvals with FHA and the VA or become recertified with FHA. We have assisted nearly 200 condominiums and we can help your association.
ReadySetLoan is an active member of the Connecticut and New England chapters of the Community Associations Institute (CAI) and is a frequent contributor to Common Interest Magazine as an expert in FHA/VA condominium project approvals.
Please contact us with any questions regarding FHA or VA condominium project approvals. You can email me at email@example.com or call me at 404-433-4565. I will be happy to answer any of your questions.
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Check out our article in Common Interest magazine on page 19!