FHA leasing restrictions are waived …for now

31 Mar

Many associations have struggled with Federal Housing Administration (“FHA”) restrictions related to rentals within an association.  Many homeowners associations prudently have been seeking FHA approval so that units for sale, whether through foreclosure or otherwise, may be sold to individuals who had obtained FHA financing.  In order to qualify for FHA financing, the homeowners association needed to have FHA approval and the FHA guidelines historically have prevented associations from qualifying if they had rental restrictions in place.  Especially recently, this requirement has created tension with another FHA requirement, that the association be at least 50% owner occupied.  In fact, other loan guarantee agencies have their own owner-occupancy requirements which might not be satisfied if an association does not at least limit the percentage of units that may be rented.

On March 18, 2011, the FHA issued the following waiver: read here, which provides greater flexibility on those leasing restrictions.  The waiver in its current form has a one year term and some other restrictions that are set forth therein.  However, the waiver provides a welcome relief for many associations which are currently struggling with the FHA requirements and yet believe that placing a cap on the number or percentage of units that may be rented is also important for preserving the association’s property values and re-sale potential.

Chris Renz contributed to this post. Chris is a shareholder at Thomsen Nybeck. He practices in the litigation area of the firm with primary focus on  real estate litigation, employment litigation, townhome and condominium law, and criminal law, particularly as the prosecutor for the Metropolitan Airports Commission.

Matt Drewes contributed to this post.  Matt is a Shareholder with Thomsen Nybeck.  He is the head of the firm’s nine-member Community Association Representation Group and the firm’s Creditors’ Remedies Group. and practices in the areas of business and real estate litigation and transactions, employment law, construction litigation, community association law, debtor/creditor law and insurance.  He has been included in Minneapolis/St. Paul Magazine’s list of Rising Stars for several years, and has been quoted on issues involving construction litigation, community associations and real property issues in the Minneapolis Star Tribune, Minnesota Lawyer, Yahoo!Finance.com, Bankrate.com, and elsewhere.  He can be reached at mdrewes@tn-law.com or by phone at 952.835.7000.

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