What Condominium Leasing Restrictions Are Allowed by FHA?
FHA-allowed leasing restrictions in condominiums has been a hot topic as of late. As we all know, a condominium’s legal governing documents may place restrictions on the leasing of units in the condominium. These restrictions can vary greatly and recently HUD clarified what is and is not allowable.
[For information on the background of why certain restrictions are not allowed, you can follow THIS LINK to an article about 24CFR203.41.]
During the roundtable session that Eric attended in late August, the facilitator offered this broad statement:
“If the homeowners association has approval authority of a unit owner’s ability to lease his/her unit either directly or indirectly, the condominium is ineligible for project approval with FHA.”
During the ensuing discussion, the following clarifications were offered.
Allowable Leasing Restrictions
The association can
Restrict total number of units that can be rented at any given time
Restrict the total percentage of units that may be leased at any given time
Create a hardship clause for exception to the first two above
Require that the Board be provided with a copy of the lease
Require that the lease must be in writing
Request the names of the tenants
Require that the lease conforms to the legal governing documents of the association
Set minimum and maximum lease periods
Require unit owner to check the Registered Sex Offenders list
Require rent to be assigned to association if the unit owner is delinquent in the payment of his/her common charges
Provide corporate leasing restrictions
Require Board of review of lease [May not require Board approval of lease]
Require that the lease be on a specific form
Non-allowable Leasing Restrictions
The association cannot
Outright restrict leasing of all units (at least one unit in the condominium must be allowed to be leased) [**See Note below]
Require that the unit owner inhabit the unit for a period of time prior to being allowed to lease the unit
Require Board/HOA approval of lease
Require Board/HOA approval of modifications to, alterations of, amendments to or extensions of lease
Be granted automatic power of attorney by the unit owner upon purchase of or the leasing of a unit
Restrict a unit owner’s ability to lease if delinquent in the payment of common charges
Require potential tenant to sit/interview with the Board
Require credit references
Require criminal background checks (except for Registered Sex Offenders list)
Require Board/HOA approval of tenant
Have the power to void leases (leases cannot be voidable by a third party)
Allow transient leasing
Allow accommodations typically associated with a hotel, such as maid or front desk service.
**NOTE: There are two exceptions where an association can outright restrict leasing: age-restricted communities and condominiums where 100% of the units are under Affordable Housing restriction.
If you have specific leasing restriction questions, please contact us. We would be happy to answer any of your questions on this matter. approvals@readysetloan.com
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 askeric@readysetloan.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!
Hi Eric Boucher , For those who are looking for Condos, They need to read your blog.
Hi Eric. These restrictions can severely reduce what an owner can do with their property.
Thank you very much Larry. I try to stay "cutting edge".
Which is certain why FHA won't insure loans on units with these restrictions, Conrad Allen
Eric, this is a terrific list. I've managed condo associations as well as homeowner associations. The condo associations like to control who moves in, so no wonder your post is making the rounds with condo associations and attorneys offices. Do you have a similar checklist for condo sales?
Great information for the condo buying client to know Eric...thank you for sharing your knowledge here for all of us.
Eric it has been a while...clearly great advice... unfortunately in my market most Condominiums are not FHA Certified... and I suspect there is a reason...Endre