FHA Condo Approvals - Is it Too Late to Legally Phase My Condominium?

FHA Condo Approvals - Is it Too Late to Legally Phase My Condominium?

I received an email from a developer asking “is it too late to legally phase my condominium” as it pertains to obtaining an FHA Condo Approval.

The email read:  “I have acquired a 4-building, 24-unit project in NJ, via foreclosure.   The project is 90% complete. The existing Condo Doc’s have it structured as a single phase.”

It went on to say that he had read my blog (thank you ActiveRain) and wanted to know if he could legally phase the project this late in the game.  He also asked if FHA would look at the presale of each phase individually.

The composition of the project looked like this:

Building 1 – 8 units, 90% complete, 2 sold, both owner-occupied

Building 2 – 4 units, 100% complete, 3 sold, all owner-occupied

Building 3 – 8 units, 90% complete, 3 pending sales

Building 4 – 4 units, 90% complete, none sold, not marketing yet

I told him that solely based on these numbers that it appears that the project is already eligible to obtain an FHA Condominium Approval.

Of the 24 units, 5 are already sold and 3 are pending, which FHA counts towards the 30% presale requirement.  Therefore, 8/24=33%; it meets the presale requirement.

In addition, 5 of the 8 sold units are owner-occupied so even if the 3 pending sales are all investors, he would still meet the owner-occupancy requirement of 50%.

Any unsold, unrented and uninhabited units owned by the developer are not counted in the calculation of investor concentration.

To directly answer his questions, I told him that I am not an attorney so the question of whether or not he could legally phase his project at this time should be directed to an attorney that handles condominium law.

Also, FHA does NOT look at each phase individually when calculating presale and investor concentration; it calculates these ratios based cumulatively.  So, each phase would not have to meet the 30% presale requirement nor the 50% owner-occupancy requirement individually.

Image courtesy of Stuart Miles/freedigitalphotos.net