All You Need to Know About FHA “Site Condos”
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| Site Condos in Suffield, CT |
One of the most common inquiries I receive about FHA condo approvals is about “site condos”. The primary reason for this is that FHA treats detached condominium projects that meet certain criteria differently than attached projects. If the project meets the site condo requirements, project approval with FHA is not necessary in order for FHA financing to be available.
I have written many articles on this topic due to the number of different inquiries I have received.
On the most fundamental level, a “site condo” project is one in which the units are completely detached from each other and the unit owners are responsible for the interior and exterior maintenance and insurance, which includes the parcel of land that he/she owns. In essence, the community must have the “look and feel” of a single-family housing community that is under a declaration of condominium.
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| Typical Townhouse-Style Condos |
In a typical condominium community, the unit boundaries (what the owner actually owns) include only the interior of the unit. The exterior of the structure and the grounds are owned and maintained by the association. These are called common elements and limited common elements.
In a site condo community, the structures are free-standing and the unit boundaries include not only the exterior of the individual structure, but also a plot of land. It can also include a driveway, garage, patio, deck and flower beds.
Although there is a set list of criteria to be met to be considered a site condo project, there are many nuances. Also, FHA does not maintain a list of site condo projects. In fact, FHA does not brand projects with the “site condo” designation; the determination is made by the individual lenders.
Because of this, it is possible for one lender to consider a project site condos and for another lender to not consider it site condos. The condominium project reviewers at FHA frequently field incoming calls from lenders to discuss the nuances. Ultimately, the lender is on the hook for the loan so it must do its due diligence to make this determination.
In processing applications for FHA condo project approval, I inquire if the units are detached. I have occasionally encountered associations made of detached units that have met the requirements to be a site condo project. Obviously, these associations were pleased that they didn’t have to go through the process of getting approved with FHA.
However, more common have been detached projects that do not meet the requirements to be deemed a site condo project. Among these have been:
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| Site Condo Unit in Ellington, CT |
1. The association is responsible for the maintenance and/or insurance of the exterior of the unit. Even if the all the association does is mow the front yard of the unit owners, it would not qualify as a site condo. FHA says that no part of the individual unit (anything attached to the structure and residing in the structure’s footprint, aka unit boundaries) may be maintained by the association.
2. The garages are grouped together. To qualify as a site condo project, no part of the units may be touching which includes garages. This also includes patios, decks, awnings, etc.
3. The project is a Manufactured Housing Condominium Project. MHCPs must go through full project approval with FHA. Projects that consist of modular homes are treated the same as stick-built communities, not MHCPs.
4. The interior mechanicals are considered limited common elements. Limited common elements are owned by the association but are provided for the exclusive use of the unit owner. An example would be the water pipes and drain pipes in a unit. Nothing within the footprint of the unit (within the unit boundaries) may be a common element or limited common element. This includes the mechanicals, steps, patios, decks, driveways and lawns.
5. The project is not a condominium. I know this sounds silly but I can’t count on my hands and toes the number of times I have received inquiries about FHA condo approvals and the community is a planned community or PUD. In order to be considered a site condo project, it must be declared as a condominium. (Planned communities or PUD’s are not required to be approved by FHA.)
If you have questions as to whether or not your condominium project might qualify as a site condo in the eyes of FHA, please leave a comment below or feel free to contact me directly.
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