I’m Sorry. You’re Still a PUD
In 2011, I was hired by a community to facilitate an FHA Condo Approval. I went through the typical pre-screening process and everything checked out. We completed an agreement and I collected the retainer.
When I received the legal documents from the property manager, it was evident that they weren’t a condominium; they were a planned community or PUD as they are commonly known in most of the country. FHA does not require approval of PUD communities in order for FHA financing to be used to finance the units.
I notified the property manager of this and was told that the Board of Directors wished that I proceed with the submission of the application. I reiterated that there was no need to get approved because they were a PUD; FHA financing was already available to them. Still, it was insisted that I complete the application and submit.
Since they weren’t going to take my word for it, I completed the application and submitted it to FHA. A couple of weeks later, I received an email from FHA stating that they don’t approve PUDs. No kidding.
I forwarded the email to the property manager and received a reply that the Board requested a refund of the retainer. We worked out an equitable split (I had done all the work that was requested of me) and I cut a check to the association.
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Fast-forward two years and the property manager notified me that the association was in the process of converting from a PUD to a condominium. When completed, they wanted to retain me to assist in the FHA approval. Confused as to why they would go through the trouble, I offered to review the documents prior to taking it to a vote in the association in case language was included that would not fly with FHA.
The amended and restated declaration and by-laws were sent to me. Sure enough, there was leasing restriction language that would prevent an FHA approval. I made suggestions to revise the language and they cleared it with their attorney.
The revised documents were recorded in June of this year and I was again retained to assist in the FHA approval process.
However, when I received the documents, it was clear that they were still a planned community. I notified the new property manager and he said that he would look into it.
Apparently, it would have taken a unanimous vote by the unit owners and all of the lenders (mortgagees) to convert to a condominium. This is because the PUD would have to be dissolved before being declared a condominium. The association decided to remain a PUD and revised their documents accordingly.
I told the property manager that as a PUD, there is no FHA approval list; FHA financing was already available to the units in the association. He then asked for a refund of the retainer. We negotiated a fair refund (again, I had done more work) and I cut the check.
And this is why I can still say that every condominium that I have submitted has been approved with FHA.
Top Photo Credit: (c) Can Stock Photo / kenhurst
Lower image courtesy of Stuart Miles/freedigitalphtos.net
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