October 31, 2012

Court Grapples with Distinction Between Repairs and Capital Improvements

The Washington Court of Appeals issued an unpublished opinion earlier this month concerning a condominium association's authority to fund a major construction project without a prior vote of its owners.  The project involved the installation of a $2 million "rain screen" building envelope system (an upgrade over the previous system) following the discovery of significant water intrusion. The court ruled that the project funding concerned "repair" of the building, which did not require owner approval, rather than a "capital improvement", which required owner approval over a certain amount.   

The court's analysis relating to the meaning of the term "repair" in the condominium's declaration is noteworthy.  The court first points out that the declaration contains a section investing the board with broad authority to acquire goods and services for the proper functioning of the condominium, including repair of units if necessary in the board's discretion to protect the common area or preserve the appearance and value of the condominium.  The court then concludes on the basis of that section that a "repair" includes anything necessary in the board's discretion to protect the common area or preserve the appearance and value of the condominium.
Establishing the meaning of terms used in condominium declarations sometimes requires legal interpretation.  Attorneys can help boards ensure that they are understanding their declarations correctly. A condominium board that wants to fund a construction project without obtaining owner approval should strongly consider asking an attorney whether the declaration permits this.

October 22, 2012

I Will Appear on Local Radio Show Brashenomics Thursday Afternoon!

I had the privilege of guesting on local radio show Brashenomics this morning.  I joined a panel of local professionals to discuss issues related to the Puget Sound real estate market.  The show airs on Thursday, October 25 at 4:00 on 1150 AM.   

UPDATE: My Brashenomics segment can be viewed here. 

October 3, 2012

HUD Announces Changes to FHA's Condominium Approval Policies

The U.S. Department of Housing and Urban Development (HUD) recently announced changes to the Federal Housing Administration's (FHA's) condominium approval policies. Among other adjustments, HUD altered its policies governing the maximum levels of delinquency and leasing in FHA-approved condominiums.

Under the new FHA standards, no more than 15% of the total units in a condominium can be more than 60 days past due on assessment payments. This percentage includes units that are occupied, bank-owned, or vacant. HUD warned that it will not grant exceptions to this rule. 

The new FHA standards retain the requirement for completed condominiums that are over a year old to be at least 50% owner-occupied. For condominium projects that are proposed, under construction, or less than a year old, however, HUD now requires a minimum owner-occupancy percentage equal to 30% of the condominium’s declared units.

HUD's letter describing the complete set of changes to the FHA condominium approval policies can be found here.