This week I have been blogging on recent changes made by HUD to the FHA guidelines which condominium associations must comply with to become FHA-certified. This certification is important since it enables purchasers of units in these associations to be eligible for FHA-backed loans which enhances the marketability of units.

Beneficial changes have been made in the Condominium Project Approval and Processing Guide (“Guide”) relating to the percentage of commercial space which may be present in a condominium project and the percentage of assessment delinquencies an association may have to be eligible for FHA-certification. Here’s what you need to know:


Commercial Space 


Prior to June 30, 2011, condominium associations were not eligible for FHA-certification if more than 25% of the space in the project was commercial in nature. The new Guide permits up to 35% of commercial space if the following requirements are met:


● The condominium project must be 100% completed for at least one year;

No more than 35% of the condominium project space can be commercial; and

● The declarant has transferred control of the condominium project to the unit owners.


Assessment Delinquencies


Unpaid assessments have been the nemesis of many condominium associations seeking FHA-certification. Prior to June 30, 2011, an association would not qualify if 15% or more of the units were more than 30 days delinquent in assessments. Under the new Guide, an association may qualify for an exemption from this 15% threshold if the following conditions are met: 


No more than 20% of the units are in arrears more than 30 days. 

● The association provides a report for the past 6 months that reflects the history of unpaid assessments;

● The association’s current reserve fund balance and current operating results (documented association Balance Sheet and Income/Expense financial statements dated less than 90 days at time the time of submission) evidences excess available funds in the amount of the outstanding arrearage.

● A review of the association’s financial statements and verification of the reserve account balance reveals that the association has sufficiently accounted for bad debt and arrearages.

● A current reserve study that is no greater than 24 months old supports the sufficiency of the current assessments to meet the project component replacement needs.

● The association provides evidence of actions to collect the unpaid arrearages, including legal action, execution of payment plans, or other similar efforts.


For condominium associations that are experiencing significant assessment delinquencies, meeting these additional requirements will certainly be a challenge. However, it does provide an option for these associations to consider.


As always, keep an eye on our blog for the latest news from HUD relating to FHA-certification.