Archive for February 2014

Can you be sued for not getting your condominium community FHA approved?

February 28, 2014

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Up until a few months ago the answer would have been an emphatic NO but times have changed. We came across a company, The HOA Store, that brings up some very interesting points and offers a cheap solution for this dilemma.

The FHA Condos Approval Company, Inc.

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With permission from The HOA Website – In 2013 a single mother from Ohio filed a claim against a HOA board declaring that, because they had let their HUD approval lapse, that they where discriminating against her. Her point was that by the board not formally considering seeking certification for FHA financing the HOA board opened themselves up to a civil rights claim.

Her contention was based on the fact that in 2012 a large percentage of minorities used FHA financing to purchase their homes. In fact 51 percent of African-American and 50 percent of Hispanics used FHA financing for home financing (the rate for condominium buyers was a lot higher). Her point was that because the HOA Board did not seriously consider renewing their FHA Approval they were in violation of the Fair Housing Act. These civil right claims are not limited to just minorities but apply to all protected classes under the Fair Housing Act.

The claimant could also have based a claim on “Disparate Impact”. This is a controversial legal theory that does not require discriminatory intent but only disproportionately negative effect of a policy, activity or purposeful inactivity. This is a claim that seems to be in favor with the current Administration and Justice Department.

The board did decided that they were not going to pursue FHA approval and while it is OK to not be FHA approved if a claim is made the courts will look for proof that the Home Owners Association rejected FHA approval based on a thorough review of all pertinent facts and costs. The HOA must show that they made their decision in good faith and not because they wanted to exclude a certain type of potential buyer by not offering FHA financing.

This impacts condominium complexes because HUD, which is the regulatory agency for the FHA, will not allow any unit in the community to use FHA financing until the entire complex has passed the FHA certification process. Because of the changes in HUD/FHA requirements that went into effect in late 2009 a lot of condo complexes have decided not to became or stay FHA approved and thus they are leaving themselves open to lawsuits. For a more in-depth look at this issue please click here.

There is a cheap and easy fix for this problem. The HOA Store sells a “Prevent Your HOA From Being Sued” package that should satisfy the requirements to “Formally Consider Acquiring FHA Approval” for any Homeowners Association.

To read the complete article – please use the link below.

Don’t Get Sued