Automatic Power of Attorney is not Acceptable for FHA Condo Approval

gstockstudio_2During the round table session that HUD held in Washington DC recently, it clarified its position on automatic Power of Attorney written into a condominium’s legal governing documents.  If the legal documents grant irrevocable POA to the association simply by the unit owner accepting the deed, the condominium is ineligible for FHA condominium project approval.

We don’t see this language very often but do bump into it now and again, twice yesterday in fact.  The language reads like this:

Each Unit Owner shall and does by the acceptance of his deed grant to the Association of Unit Owners an irrevocable power of attorney, coupled with an interest, to acquire title to or lease any Unit whose owner desires to surrender, sell or lease the same…” [I won’t bore you with the rest of the legal mumbo jumbo.]

In both of these cases, the condominiums were approved by HUD in 2013.  Fortunately, one of them recently recorded its Amended and Restated Declaration and Bylaws and removed the power of attorney section in its entirety.  They will be eligible for approval.  The second is in the process of doing so and will not be eligible for FHA approval until the document is adopted and recorded.  [I offered to review them for compliance with HUD’s guidelines.]

Because it was announced that HUD will begin enforcing the Appendix A Project Certification form, it would behoove any submitter of a recertification package to re-read the legal documents of a condominium to ensure offending language like this does not exist.  As a reminder, the submitter is responsible for the accuracy of the approval package, whether or not he/she signed Appendix A.  Had I submitted these for project approval without re-reviewing them, I would have been subject to fines.

Just because the condominium was approved 2 years ago does not guarantee that it will be recertified.  Not only has HUD modified many of its guidelines for project approval, HUD staff members have become far more adept at reviewing the packages.  This is a perfect example of the need to review the entire condominium prior to submission for recertification.

Top Photo Credit: (c) Can Stock Photo / gstockstudio

FHA’s “6-Month Window” for Condo Recertification

FHA’s “6-Month Window” for Condo Recertification

fotomineThis week I received a call from a property manager who was concerned that the 6-month window for recertification with FHA was quickly approaching.  The condominium’s FHA approval expired on 3/21/14 and the manager and association were concerned that they would have to get recertified by 9/21/14 or else risk losing their approval.

The manager called me to see if I could expedite the process as he felt that he and the association would not be able to get it done as quickly as a professional service.

I told him that we would be happy to handle the recertification process for him and his client.  I went on to say that in the interest of full disclosure, there is no 6-month window for FHA recertifications at present.  A full submission package would need to be supplied to FHA as if it had never been approved.

Initially in 2011, when HUD released the Condominium Project Approval and Processing Guide, it named a “Recertification Period”.  During this time, approved condominiums could apply for FHA recertification.  The Recertification Period stretched from 6 months prior to the expiration of the approval to 6 months following the expiration.

If an approved condominium submitted a recertification package to HUD during this time period, only new and updated information would need to be provided.  So-called “permanent documents” would not need to be re-supplied, which would reduce the required paperwork for recertification.

“Permanent documents” typically include the condominium’s legal governing documents, building plans, plat maps, site plans and flood maps.  Obviously, if any of these are modified or amended, the new documents must be supplied as part of the recertification package.

If a package is submitted after this 6-month window closed, the condominium would have to go through the full approval process and all required documents for approval would need to be re-supplied.  This would also include the “permanent documents”.

It was HUD’s intention to store submission packages electronically so that the permanent documents would not have to be re-supplied and re-reviewed every two years.  Unfortunately, at the time, HUD did not have the capability to store the documents electronically.

Because of this, current recertification packages must include everything that a full submission package would include.  Thus, there is no 6-month window.  I would expect that HUD will be implementing this procedure in the near future and those that are being approved and recertified now will be able to take advantage of the streamlined process in two years.

I told the property manager, there is no cause for concern with the 9/21/14 deadline for recertification.  It simply doesn’t exist.  I could hear the relief in his voice over the phone.

(c) Can Stock Photo / fotomine