FHA Condo Approvals – Transient Leasing Update
In a recent bulletin, HUD announced an update to its transient leasing restriction guidance. It has seen an increasing number of condominium project approval applications where transient leasing is allowed in the projects.
HUD only allows a handful of leasing restrictions and barring unit owners from transient leasing is one of them as is setting a minimum lease term. HUD also does not allow unit owners to use their unit for hotel purposes.
The term transient or hotel purposes is defined to mean:
1. any rental for a period of less than 30 days, or
2. any rental if the occupants of the housing accommodations are provided customary hotel services such as room service for food and beverages, maid service, furnishing and laundering of linen and bellboy service.
Prior to this bulletin, the only way for a project to get approved with HUD if the legal governing documents allowed for this was to amend the legal documents to remove or revise this language. This can sometimes be difficult to accomplish as the legal documents often require a 2/3 majority vote in order to amend the documents.
HUD now allows for another option.
If the Association is not willing to amend their legal documents, an executed written statement may be provided by the Board that affirms that there are no units within the project currently rented for less than 30 days and/or pursuant to the lessor for providing any services normally associated with a hotel.
On the loan-level, the FHA Originating Lender will also be required to provide an executed written statement that affirms in the event of a conveyance action to the lender that they will not rent the associated unit for less than 30 days an/or provide any services normally associated with a hotel.
Borrowers will now be required to execute form HUD-92561, Borrower’s contract with Respect to Hotel and Transient Use of Property for all condominium loans using FHA insured financing. This is the same form required by HUD for loans for 2-4 unit properties.
This once again shows how HUD is using a common sense approach to condominium project approvals.
Image courtsey of Salvatore Vuono/freedigitalphotos.net
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 firstname.lastname@example.org or call me at 404-433-4565. I will be happy to answer any of your questions.
FHA/VA Condo Approval Specialist
404-433-4565 Cell Phone
860-644-3772 Fax Phone
Check out our article in Common Interest magazine on page 19!