Midway through the month, February was looking like a yawn for Condo Association news. Then several stories came out in rapid fire that caught my attention. Without further ado, here is your February 2016 Condo Association News Roundup!
Kenneth R. Harney, News OK, Feb 19 2016
By far the biggest and best news for Condo Owners, prospective Owners, and Associations was that the House voted in a landslide 427-0 (seriously, when do those folks ever agree on anything) on the Housing Opportunity through Modernization Act. The Act’s goal was to ease many of the restrictions around Federal Housing Administration (FHA) financing availability for Condos.
Perhaps most important of the changes this bill makes is lowering the minimum owner-occupancy ratio from 50% to 35%. This is the number of people who use their Condo as their primary residence, as opposed to investors. Often Owners who move out want to rent their Condo rather than sell it. This has the unintentional side effect of pushing a Condo Association down in owner-occupancy ratio, which then affects FHA eligibility for the building, hurting everyone. Not being FHA-eligible can affect home values, as buyers like the FHA loan mechanism due to low down payments. There is, however, a caveat to this change: the FHA has 90 days to select and justify a different percentage if the agency so chooses. There were also changes easing restrictions on transfer fees, which Condo Associations use to fund reserves and other projects, and paperwork reduction requirements for FHA loans.
Overall these are great changes. One can debate the FHA’s role in housing, but the current restrictions clearly have a detrimental effect on Condo Associations. My Board was actually recently debating what to do as our owner-occupancy ratio fell, so I share the same sigh of relief I imagine many Associations are giving at this news. Hopefully this bill smoothly moves through the Senate and is signed by the president soon.
Scott Sowers, Washington Post, Feb 11 2016
This article discussed how the low supply of new Condos in Washington, DC, is causing buyers to purchase Condos prior to a building breaking ground or having units to show. These new Owners are making decisions are based completely on renderings and plans. Because the market is so hot, developers are able to get away with this. The article also provided some tips on how to select a Condo where a prospective buyer isn’t seeing anything more than a 3-D rendering and plans, and the article discussed some of the sales tactics used by Developers in such situations.
Reading this article made me cringe. There are many concerns about buying a unit where the project may not have even broken ground. First, you have no idea what quality of workmanship you’re getting or the skill of the builder, beyond their reputation. With a building sold before the project has begun, the builder has less incentive to do a good job. New Condos are already a tricky business because of liability protections to Developers that makes recourse from Owners difficult if not impossible.
I worry about these new Condo Associations, as well. You’ve got Owners who jumped in without even seeing a physical unit, many of whom are buying their first Condo. I worry they aren’t aware of what it means to live in a Condo Association, how to be a good Owner, and how to get things running.
But hey – supply and demand are what they are. If people are comfortable with the information provided and understand what they’re getting into, then good for them – in a hot real estate market, sometimes you have to take risks to get the home you want.
William Z. Kolobaric, Michigan Community Association Law Blog, Feb 15 2016
I am very intrigued to see the constantly evolving legal issues around service animals, emotional support animals, and the like. There is no doubt that service animals are a godsend for those who legitimately need them. Service animals should be allowed in every place that someone who requires their aid would go. However, people are starting to abuse both service animals and emotional support animals, using unscrupulous doctors or even online services to procure licenses to evade Condo (or other) regulations prohibiting animals. Think I’m a callous, mean person? Given the emotional support turkey that flew Delta last month, I feel comfortable in saying things are flying the coop.
In Michigan, newly signed Senate Bills 298 and 299 and House Bills 4521 and 4527 update identification and licenses of service animals and also criminalize certain behaviors. A driver behind the laws is that because so many people were bringing questionable service animals into public places, those who really needed service animals were being refused service or interrogated as to their medical need, both of which were illegal. The new laws should help clarify things, although they only pertain to service animals, not emotional support animals.
From a Condo perspective, per Mr. Kolobaric’s excellent analysis, the impact is minimal, unless your Association rents out amenities, in which case some accommodations may need to be made. The laws also make it easier to check for valid registration, which will make identifying Owners with legitimate service animals easier.
I expect to see more laws popping up around the country and even at the federal level. Once people start bringing turkeys on board a flight, it shows that things are being abused, and Condo Associations often face the same highly contentious battle when it comes to pets.
That’s it for February Condo Association news. Join us next month to see what’s the latest and greatest.