The VA is Definitely Tougher on Condo Leasing Restrictions
In the past month, three of our condominium submissions have been approved by FHA and rejected by the VA - all for leasing restriction language. Through at least the end of the year, when hired for FHA Condominium Project Approval, we are submitting for VA project approval if requested at no additional charge. The VA submission package is similar to the FHA submission so we offer to do both.
[For those who don’t know, the VA requires condominium project approval prior to allowing VA financing to encumber any of the units in the project.]
The VA is tougher on leasing restrictions than is FHA, if you can believe that. The rationale behind it makes sense though: the VA doesn’t want leasing restrictions to impede a Veteran’s** ability to lease his/her unit in the case of deployment. Therefore, maximum leasing restrictions are reviewed more closely.
Maximum number of leases cannot be established because once this number or percentage is met, no other units may be leased. It’s not difficult to see that this could impede a Veteran from leasing his/her unit.
Must use a Board-approved lease form or the Board must approve the form on which the lease is written. This is not allowed because the Board could require a form that is not in compliance with other VA requirements or the Board could reject the form the Veteran has used.
Third-party approval of tenants is also not allowed by FHA. If the association/Board has the authority to approve or reject potential tenants, most of the time the condominium is not approvable by either the VA or FHA.
Third-party approval of modifications to leases poses a potential restriction for the Veteran. What if the Veteran wishes to extend or shorten the lease according to changes in his/her deployment period and the Board doesn’t allow it?
Maximum lease period can be an issue for a Veteran if the deployment extends beyond the maximum established lease period. Fortunately, though, we don’t see this very often.
Often, developers and Boards place the above provisions in place in an attempt to protect the community. However, in doing so, Veterans are prevented from using their VA benefits to purchase units in the community.
One way to potentially circumvent the above and still obtain a project approval is to include an exception for units that are encumbered with VA financing. From what we have been told by the VA, this should be allowable in most cases.
**NOTE: the term “Veteran” is being used to conserve space and is meant to represent Veterans, active service members and anyone who qualifies for VA home loan financing.
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.
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!