source:
  type: guide
  id: hud-4000-1-ii-c-general-condominium-project-approval-requirements
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. General
    Condominium Project Approval Requirements (08/19/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. General
    Condominium Project Approval Requirements (08/19/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-c-general-condominium-project-approval-requirements-full
  canonical_id: hud-4000-1-ii-c-general-condominium-project-approval-requirements-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. General
    Condominium Project Approval Requirements (08/19/2024)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. General
      Condominium Project Approval Requirements (08/19/2024)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. General Condominium Project Approval Requirements (08/19/2024)
      These general requirements apply to all construction types, including Existing
      Construction Condominium Projects. Additional or different standards may apply
      for certain construction types. To be eligible for Condominium Project Approval,
      the Condominium Project must: • be primarily residential in nature and not be
      intended for Rental for Transient or Hotel Purposes; • consist only of one-family
      Dwelling Units; • be in full compliance with all applicable federal, state,
      and local laws with respect to zoning, fair housing, and accessibility; • be
      complete and ready for occupancy; and • be reviewed and approved by the local
      jurisdiction. In addition, the Condominium Project must also meet the following
      requirements in this section. i. Form HUD-9992, FHA Condominium Project Approval
      Questionnaire (A) Definition Form HUD-9992, FHA Condominium Project Approval
      Questionnaire, refers to a set of questions designed to collect pertinent Condominium
      Project and Unit information for Condominium Project Approval and FHA insurance
      endorsement. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium
      Project Approval 2. Project Eligibility Handbook 4000.1 780 Last Revised: 11/26/2025
      (B) Standard Form HUD-9992 must be completed, signed, and dated by an eligible
      submission source or a DELRAP Mortgagee. ii. Recorded Documents (A) Definition
      Recorded Documents refer to the Condominium Project’s legal, project, and governing
      documents that are required to operate legally as required by state and local
      law. (B) Standard The Condominium Project’s Recorded Documents must be recorded
      in accordance with applicable state and local law to ensure the Condominium
      Project meets the legal and operational requirements in the local jurisdiction.
      (C) Required Documentation Copies of Recorded Documents must be submitted. iii.
      FHA Insurance Concentration (A) Definition FHA Insurance Concentration refers
      to the number of FHA-insured Mortgages within a Condominium Project. (B) Standard
      FHA may suspend project eligibility of Condominium Projects where the FHA Insurance
      Concentration is greater than 50 percent of the total number of Units in the
      Condominium Project. iv. Owner Occupancy Percentage (A) Definition Owner Occupancy
      Percentage refers to the percentage of Units considered owner- occupied as shown
      in the calculation. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium
      Project Approval 2. Project Eligibility Handbook 4000.1 781 Last Revised: 11/26/2025
      (B) Standard (1) Existing Construction The acceptable level of Owner Occupancy
      Percentage is at least 50 percent of the total number of Units. (2) New Construction
      - Complete Condominium Projects For Complete Condominium Projects and Gut Rehab
      conversions, the acceptable level of Owner Occupancy Percentage is at least
      30 percent of the total number of declared Units in the Condominium Project.
      (C) Exception for Existing Construction Existing Construction Condominium Projects
      that are greater than 12 months old, with an Owner Occupancy Percentage of at
      least 35 percent and less than 50 percent are eligible for approval with the
      following conditions: • applications must be submitted for processing and review
      under the HRAP option; and • no more than 10 percent of the total Units are
      Units in Arrears (does not include late fees or other administrative expenses).
      (D) Required Documentation Form HUD-9992 must be submitted. (E) Calculation
      For the sole purposes of calculating the Owner Occupancy Percentage, the numerator
      of the calculation for a multi-phased Condominium Project includes the total
      number of the following Units in the first declared Legal Phase and cumulatively
      in subsequent Legal Phases, or for a single-phased Condominium Project, all
      of the following Units in the numerator of the calculation: • any Unit that
      is occupied by the owner as their place of abode for any portion of the calendar
      year and that is not rented for a majority of the calendar year; • any Unit
      listed for sale, and not listed for rent, that was previously occupied by the
      owner as their place of abode for any portion of the calendar year and that
      is not rented for a majority of the calendar year; or • any Unit sold to an
      owner who intends to occupy the Unit as their place of abode for any portion
      of the calendar year and has no intent to rent the Unit for a majority of the
      calendar year. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium
      Project Approval 2. Project Eligibility Handbook 4000.1 782 Last Revised: 11/26/2025
      For the sole purposes of calculating the Owner Occupancy Percentage, the following
      Units are included in the denominator of the calculation for a: • multi-phased
      Condominium Project, the total number of Units in the first declared Legal Phase
      and cumulatively on subsequent Legal Phases; or • single-phased Condominium
      Project, all Units. A Unit owned by the builder/developer is not an owner-occupied
      Unit. v. Transfer of Control (A) Definition Transfer of Control refers to the
      shift of existing control over the Condominium Association from the developer/builder
      to the Unit owners. Control of the Condominium Association refers to the ability
      to directly or indirectly control, direct, modify, or veto any action of the
      Condominium Association. (B) Standard The legal documents must: • require Transfer
      of Control from the developer/builder to the Unit owners; • specify the conditions
      for Transfer of Control; • indicate the number of Units in the Condominium Project;
      and • be recorded, as applicable, in the CC&R, declaration, master deed, condominium
      plat, and/or condominium site plans. The developer/builder must relinquish control
      to the Condominium Association no later than the latest of the following events:
      • 120 Days after the date 75 percent of the Units in the Condominium Project
      have been conveyed to Unit owners; or • three years after completion of the
      Condominium Project as evidenced by the first conveyance to a Unit owner. Any
      time frame regarding Transfer of Control established under state or local condominium
      laws takes precedence. Any contracts entered into by the builder/developer prior
      to the Transfer of Control and subsequently assigned to the Condominium Association,
      must give the right to Condominium Association to terminate the contracts with
      no more than 90 Days’ notice. (C) Required Documentation The following documentation
      must be submitted for Transfer of Control: • form HUD-9992; • recorded CC&Rs,
      declaration, and/or master deed, and all amendments; II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project Eligibility
      Handbook 4000.1 783 Last Revised: 11/26/2025 • signed and adopted bylaws; and
      • articles of incorporation, articles of association, declaration of trust,
      or other governing documents, if applicable and in accordance with state law.
      vi. Financial Stability and Controls (A) Definitions Financial Stability refers
      to the ability of the Condominium Association to meet the Condominium Project’s
      needs in the future through positive cash flow and adequately funded reserves.
      Financial Controls refer to the financial policies and procedures that a Condominium
      Association has in place to protect its funds from fraud and mismanagement.
      A Financial Distress Event refers to a Condominium Project or builder/developer
      that has: • sought protection under bankruptcy laws; • been placed into receivership
      (mandated or voluntary); • been subject to foreclosure or any seizure of assets
      by creditors; or • offered a DIL of Foreclosure. Resolution of Financial Distress
      Event refers to: • bankruptcy discharge; • termination of receivership; • issuance
      of foreclosure judgment; or • execution of DIL of Foreclosure. (B) Standard
      (1) All Projects To demonstrate Financial Stability, FHA requires Condominium
      Projects to have financial documents that itemize and address income and expenditures
      that are sufficient and pertinent to the Condominium Project including: • an
      operating income that demonstrates a stable income stream over the past two
      years with decreases of no higher than 15 percent; • ability to cover the cost
      of insurance coverage and deductibles; • a reserve account for capital expenditures
      and deferred maintenance that is funded with at least 10 percent of the aggregate
      of 12 months of Unit assessments, unless a lower amount is deemed sufficient
      based upon an acceptable reserve study; • evidence that the budget provides
      for the periodic funding to maintain the reserve account balance of at least
      10 percent of the aggregate of 12 months of Unit assessments, unless a lower
      amount is deemed sufficient based upon an acceptable reserve study; II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project
      Eligibility Handbook 4000.1 784 Last Revised: 11/26/2025 • evidence that no
      more than 15 percent of the total Units are Units in Arrears (does not include
      late fees or other administrative expenses); and • financial records that are
      consistent with the application package, including special assessments, loans,
      or other financial variations. If a reserve study is required to justify a reserve
      account funded less than 10 percent, it must: • be 36 months old or less; •
      include a site visit; • demonstrate that the Condominium Project has adequate
      funded reserves that provide financial protection for the Condominium Project
      equivalent to the reserve requirements; • demonstrate that the Condominium Project’s
      funded reserves meet or exceed the recommendations included in the reserve study;
      and • be prepared by an independent third party that has demonstrated knowledge
      of and experience in completing reserve studies. The Condominium Project demonstrates
      Financial Controls by: • maintaining separate accounts for operating and reserve
      funds; • requiring the Condominium Association’s management company to maintain
      separate records and bank accounts for the Condominium Association; and • restricting
      the management company from drawing checks on, or transferring funds from, the
      reserve account of the Condominium Association without approval from the Condominium
      Association. (2) Financial Distress A Condominium Project or builder/developer
      that has completed a Resolution of Financial Distress Event within 12 months
      prior to the application date is not eligible for initial approval or recertification.
      If the Resolution of Financial Distress Event was completed more than 12 months
      but less than 36 months, the application package must be submitted through HRAP
      for evaluation. If there has been a Resolution of Financial Distress Event within
      the last 36 months, the Condominium Project or builder/developer must demonstrate
      the cause has been resolved and a Financial Distress Event is unlikely to recur.
      (3) Individual Owner Concentration (a) Definition Individual Owner Concentration
      refers to the percentage of Units owned by a single owner or Related Party.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval
      2. Project Eligibility Handbook 4000.1 785 Last Revised: 11/26/2025 Related
      Party includes, but is not limited to: • an individual serving as the Unit owners’
      officer, director, or employee; or • a Unit owner’s direct parent company, subsidiary,
      or any related entity with which the Unit owner shares a common officer or director.
      (b) Standard For Condominium Projects with 20 or more Units, the Individual
      Owner Concentration must be 10 percent or less. For Condominium Projects with
      fewer than 20 Units, the Unit owner may not own more than one Unit. No Related
      Party may own a Unit. Exception Affordable housing Units owned by an eligible
      governmental or nonprofit program defined in 24 CFR § 203.41 are not subject
      to the Individual Owner Concentration requirements. The affordable housing Units
      must be identified by recorded legal documents. (c) Calculation For the Individual
      Owner Concentration calculation: • on a multi-phased Condominium Project, the
      Individual Owner Concentration is calculated based on the total number of Units
      in the first declared Legal Phase and cumulatively on subsequent Legal Phases;
      or • for a single-phased Condominium Project, all Units are used in the denominator
      when calculating the Individual Owner Concentration, except that unoccupied
      and unsold Units owned by a builder/developer are excluded from the numerator
      and denominator in the Individual Owner Concentration calculation. The total
      number of declared Units in the Condominium Project for Complete Condominium
      Projects and Gut Rehab must be used to calculate the Individual Owner Concentration.
      (d) Required Documentation Form HUD-9992 and if applicable, the recorded legal
      documents identifying the affordable housing Units must be submitted. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project
      Eligibility Handbook 4000.1 786 Last Revised: 11/26/2025 (4) Phasing For Condominium
      Projects that are subject to additional Phasing, the Condominium Project must
      contain arrangements that guarantee the future completion of all facilities
      and Common Elements. The Condominium Project must demonstrate positive cash
      flow from the revenue and expenditures of the completed Legal Phases and Common
      Elements. (5) Projects with Commercial/Nonresidential Space (a) Definition Commercial/Nonresidential
      Financial Independence refers to the ability of the Residential Space and Commercial/Nonresidential
      Space of the Condominium Project to be independently sustainable such that neither
      portion of the Condominium Project is financially reliant on the other. (b)
      Standard For projects with Commercial/Nonresidential Space, the Mortgagee must
      verify there is Commercial/Nonresidential Financial Independence. (C) Required
      Documentation The following documentation must be submitted: • form HUD-9992;
      • current year’s budget approved by the Condominium Association board; • year-to-date
      income and expense statement dated within 90 Days if the prior year-to-date
      actuals are more than 90 Days old; • income and expense statement(s) for the
      previous two years actual year end results; • current balance sheet dated within
      90 Days prior to the date of submission; • if applicable, documentation supporting
      any loans or special assessments, including information regarding the purpose,
      term, payment status, total amount of the assessment, amount of the assessment
      per Unit and overall impact on marketability and value of the Property; • if
      applicable, a dated legal document evidencing Resolution of Financial Distress
      Event and a letter of explanation describing the cause of the event and measures
      taken by the Condominium Association to prevent a future Financial Distress
      Event; and • evidence of financial arrangements that guarantee the future completion
      of all facilities and Common Elements, as applicable. II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project Eligibility
      Handbook 4000.1 787 Last Revised: 11/26/2025 vii. Insurance Coverage The Condominium
      Project must be insured to FHA standards as well as any applicable state and
      local condominium requirements. The insurance policies must list the Condominium
      Association as the named insured, or in the case of an affiliated Condominium
      Project or Condominium Association, the name of the affiliated Condominium Project
      or Condominium Association may be listed as a named insured. (A) Hazard Insurance
      (1) Definition Hazard Insurance refers to insurance coverage that compensates
      for physical damage by fire, wind, or natural occurrences. (2) Standard The
      Condominium Association must have a master or blanket Hazard Insurance policy
      in place for the entire Condominium Project. The Condominium Association’s master
      or blanket Hazard Insurance policy must be in an amount to fully cover the insurable
      replacement cost of all Units and all insurable Common Elements in the Approved
      Condominium Project. Any policy with a coinsurance clause must include an agreed
      amount endorsement, selection of the agreed value option, or an amount of coverage
      to fully cover the insurable replacement cost of all Units and all insurable
      Common Elements in the Approved Condominium Project. Any pooled insurance policy
      must satisfy the insurance coverage standard for each Condominium Project insured
      under the policy. (3) Required Documentation The following documentation must
      be submitted: • form HUD-9992; • certificate of insurance or a complete copy
      of the insurance policy; and • if applicable, acceptable evidence of the replacement
      cost value. (B) Liability Insurance (1) Definition Liability Insurance refers
      to insurance that protects against legal claims. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      C. Condominium Project Approval 2. Project Eligibility Handbook 4000.1 788 Last
      Revised: 11/26/2025 (2) Standard The Condominium Association must maintain comprehensive
      Liability Insurance for the entire Condominium Project, including all Common
      Elements and areas, public ways, and other areas that are under its supervision,
      in the amount of at least $1 million for any single occurrence. (3) Required
      Documentation The following documentation must be submitted: • form HUD-9992;
      and • certificate of insurance or a complete copy of the insurance policy. (C)
      Fidelity Insurance (1) Definition Fidelity Insurance refers to insurance that
      protects the Condominium Association against employee dishonesty, crime, or
      other fraudulent acts conducted by one or more employees. (2) Standard For all
      Condominium Projects with more than 20 Units, the Condominium Association must
      maintain Fidelity Insurance for all officers, directors, and employees of the
      Condominium Association and all other persons handling or responsible for funds
      administered by the Condominium Association. This insurance coverage must be
      the greater of either: • three months of aggregate (12-month) assessments on
      all Units plus reserve funds (up to the maximum permitted by state law); or
      • the minimum amount required by state law. For existing policies, an uninsured
      amount within 3 percent of the above calculation or $10,000, whichever is less,
      is acceptable. If the Condominium Project engages a management company, it must
      have a policy that covers both or separate policies. The policy or policies
      must demonstrate that they specifically meet the standard for both the Condominium
      Association and the management company. (3) Required Documentation The following
      documentation must be submitted: • form HUD-9992; and • certificate of insurance
      or a complete copy of the insurance policy from the Condominium Association
      and/or from the management company. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      C. Condominium Project Approval 2. Project Eligibility Handbook 4000.1 789 Last
      Revised: 11/26/2025 (D) Flood Insurance (Existing Construction) (1) Standard
      Flood Insurance for Condominiums must meet the requirements in Flood Insurance.
      The Condominium Association must have Flood Insurance in place for property
      improvements in the Condominium Project that are located within Special Flood
      Hazard Areas (SFHA) including “A” or “V” zones, which are determined by the
      Federal Emergency Management Agency (FEMA). The Condominium Association must
      have Flood Insurance for all Condominium Units in buildings that are located
      in an SFHA. The Condominium Project must be located in a community that participates
      in the National Flood Insurance Program (NFIP) and has NFIP available, regardless
      of whether the Condominium Association obtains NFIP coverage. Coverage must
      be equal to the replacement cost of the covered improvements or the NFIP maximum
      per Condominium Unit multiplied by the number of Condominium Units, whichever
      is less. (2) Required Documentation The following documentation must be submitted:
      • form HUD-9992; • FEMA flood map with the Condominium Project location clearly
      marked; • if applicable, the Letter of Map Amendment (LOMA), Letter of Map Revision
      (LOMR), or FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152); and
      • if applicable, the certificate of insurance or a complete copy of the Flood
      Insurance policy. (E) Exception for FHA Insurance Requirements This exception
      applies to Manufactured Home Condominium Projects, Detached Condominium Housing
      Projects, and Common Interest Housing Developments unable to satisfy the current
      insurance requirements. (1) Standard The Unit owners and Condominium Association
      or HOA of the Condominium Project must comply with FHA insurance coverage requirements.
      (a) Manufactured Housing Condominium Project MHCPs are eligible for this exception
      if the: II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project
      Approval 2. Project Eligibility Handbook 4000.1 790 Last Revised: 11/26/2025
      • governing documents designate the insurance coverage maintained by the Unit
      owners and the Condominium Association; and • MHCP is unable to satisfy FHA
      insurance requirements. If the governing documents require the Unit owners to
      maintain all applicable property insurance coverage for the dwelling, site area,
      and any Personal Property contained within, the MHCP is not required to maintain:
      • a blanket Hazard Insurance policy, provided the governing documents require
      the Unit owners to maintain individual Hazard Insurance; • a Liability Insurance
      policy, provided the governing documents require the Unit owners to maintain
      individual Liability Insurance; and • a Flood Insurance policy, provided that
      the governing documents require the Unit owners to maintain individual Flood
      Insurance if the Unit has been identified as located in a Special Flood Hazard
      Area (SFHA). (b) Detached Condominium Housing Project If the governing documents
      require the Unit owners to maintain all applicable property insurance coverage
      for the dwelling, site area and any Personal Property contained within, the
      DCHP Condominium Association or HOA is not required to maintain: • a blanket
      Hazard Insurance policy, provided the governing documents require the Unit owners
      to maintain individual Hazard Insurance; • a Liability Insurance policy, provided
      the governing documents require the Unit owners to maintain individual Liability
      Insurance; and • a Flood Insurance policy, provided the governing documents
      require the Unit owners to maintain individual Flood Insurance. The Condominium
      Association or HOA must carry master or blanket insurance for Structures/improvements
      that are considered common areas of the project outside the footprint of the
      individual site. (c) Common Interest Housing Development If the governing documents
      require the Unit owners of the detached Single Family homes, Site Condominiums,
      duplex, or two- to-four units within the project to maintain and carry property
      insurance for the dwelling, site area and any Personal Property contained therein,
      the Condominium Association or HOA is not required to maintain: • a blanket
      Hazard Insurance policy, provided the governing documents require the Unit owners
      to maintain individual Hazard Insurance; • a Liability Insurance policy, provided
      the governing documents require the Unit owners to maintain individual Liability
      Insurance; and • a Flood Insurance policy, provided the governing documents
      require the Unit owners to maintain individual Flood Insurance. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project
      Eligibility Handbook 4000.1 791 Last Revised: 11/26/2025 The Condominium Association
      or HOA must maintain and carry master/blanket Hazard, Flood, and Liability Insurance
      for the Structures that contain the attached units and the common areas of the
      project. (2) Required Documentation The Condominium Project must have form HUD-9992
      and certificates of insurance or complete copies of the insurance policies from
      the Unit owners and Condominium Association. viii. Projects in the Coastal Barrier
      Resources System and Special Flood Hazard Areas (A) All Projects in the Coastal
      Barrier Resources System If any part of the Condominium Project is located within
      the Coastal Barrier Resources System (CBRS), the Condominium Project is not
      eligible for FHA project approval. (B) Special Flood Hazard Areas (1) Complete
      Condominium Project If any portion of the Structures or equipment essential
      to the value of the Condominium Project is located within an SFHA, then the
      Condominium Project is not eligible for Condominium Project Approval, unless
      the Condominium Project: • obtains a final LOMA or final LOMR from FEMA that
      removes the Property from the SFHA; or • obtains a FEMA NFIP Elevation Certificate
      (FEMA Form FF-206-FY-22- 152). The Elevation Certificate must document that
      the lowest floor, including the basement of the residential building(s), and
      all related improvements/equipment essential to the value of the Property is
      built at or above the 100-year flood elevation in compliance with the NFIP criteria,
      and Flood Insurance is obtained. (2) Manufactured Housing If any portion of
      the Structures or equipment essential to the value of the Manufactured Housing
      Condominium Project for both new and existing Manufactured Homes is located
      within an SFHA, the Property is not eligible for FHA mortgage insurance unless
      the following is submitted: • a FEMA issued LOMA or LOMR that removes the Property
      from the SFHA; or • a FEMA NFIP Elevation Certificate (FEMA Form FF-206-FY-22-152)
      showing that the finished grade beneath the Manufactured Home is at or II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project
      Eligibility Handbook 4000.1 792 Last Revised: 11/26/2025 above the 100-year
      return frequency flood elevation, and Flood Insurance is obtained. (3) Required
      Documentation The following documentation must be submitted: • if applicable,
      FEMA LOMA; • if applicable, FEMA LOMR; or • if applicable, FEMA NFIP Elevation
      Certificate FEMA Form FF-206-FY- 22-152. ix. Commercial/Nonresidential Space
      (A) Definitions Commercial/Nonresidential Space refers to floor area allocated
      to: • retail and commercial square footage (excludes Live/Work Units); • multilevel
      parking garage square footage that is separate from multilevel parking garage
      square footage allocated to residential Unit owners; • building common areas
      not reserved for the exclusive use of residential Unit owners; and • any square
      footage that is owned by a private individual or entity outside of the Condominium
      Association. Residential Space refers to floor area allocated to: • all Unit
      square footage; • all building common area square footage exclusively for the
      use of residential Unit owners; and • all parking garage square footage allocated
      to residential Unit owners. Parking lot square footage is not considered Residential
      or Commercial/Nonresidential Space. Total Floor Area refers to all Residential
      Space and Commercial/Nonresidential Space. (B) Standard The Condominium Project’s
      Commercial/Nonresidential Space must not exceed 35 percent of the Condominium
      Project’s Total Floor Area. (C) Exception The Condominium Project’s Commercial/Nonresidential
      Space may exceed 35 percent of the Condominium Project’s Total Floor Area up
      to a maximum of 49 percent if it is determined that the residential character
      of the Condominium Project is maintained. To determine that the residential
      character is maintained, the economy II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      C. Condominium Project Approval 2. Project Eligibility Handbook 4000.1 793 Last
      Revised: 11/26/2025 for the locality of the Condominium Project or specific
      to the Condominium Project and the total number of residential Units in the
      Condominium Project must be considered. The following documentation must be
      reviewed and analyzed by the Mortgagee under DELRAP to support its decision
      or submitted for HRAP: • an opinion from a certified residential appraiser that
      addresses market acceptance of the Condominium Project as residential in character;
      • a current market study performed by an independent third party that addresses
      factors relating to the economy for the locality of the Condominium Project
      or specific to the Condominium Project; and • the total number of residential
      Units in the Condominium Project. (D) Required Documentation The following documentation
      must be submitted for Commercial/Nonresidential Space: • form HUD-9992; • budget
      and financials; • recorded condominium site plans; • CC&Rs; or • if applicable,
      exception documentation. x. Live/Work Units (A) Definitions A Live/Work Condominium
      Project refers to a Condominium Project that allows space within the individual
      Unit to be used jointly for nonresidential and residential purposes. A Live/Work
      Unit refers to a Unit in a Live/Work Condominium Project. (B) Standard The Condominium
      Project’s governing documents must allow Live/Work arrangements. All individual
      Live/Work Units must not contain more than 49 percent Commercial/Nonresidential
      Space. (C) Required Documentation The following documentation must be submitted:
      • form HUD-9992; and • recorded CC&Rs. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      C. Condominium Project Approval 2. Project Eligibility Handbook 4000.1 794 Last
      Revised: 11/26/2025 xi. Leasehold Interest (A) Definition Leasehold Interest
      refers to real estate where the residential improvements are located on land
      that is subject to long-term lease from the underlying fee owner, creating a
      divided estate in the Property. (B) Standard Condominium Projects with Common
      Elements owned under a Leasehold Interest are eligible if the Condominium Project
      meets the following requirements: • the Condominium Association must be the
      lessee under the lease; • the lease of the Common Elements provides that a default
      of the Condominium Association does not result in a disturbance of any rights
      of the Unit owners; • the lease provides that the Mortgagees receive notice
      of any monetary or Non- Monetary Default by the Condominium Association and
      be given the right to cure any defaults on behalf of the Condominium Association;
      • the lease provides for the payment of taxes and insurance related to the land,
      in addition to those being paid for the improvements; • the Condominium Association
      must not be in default under any provisions of the lease; and • the lease does
      not include any default provisions that could result in forfeiture or termination
      of the lease except for nonpayment of the lease rents. (C) Required Documentation
      The lease must be submitted. xii. Additional Requirements (A) Management Agreement
      (1) Definition A Management Agreement refers to an agreement between a third-party
      company and the Condominium Association to manage the Condominium Project. (2)
      Standard If the Condominium Association employs the services of a management
      company, the Management Agreement must give the Condominium Association the
      right to terminate the Management Agreement with no more than 90 Days’ notice.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval
      2. Project Eligibility Handbook 4000.1 795 Last Revised: 11/26/2025 (3) Required
      Documentation The current, executed Management Agreement must be submitted.
      (B) Existing Contracts (1) Definition Existing Contracts refer to contracts
      executed prior to the Transfer of Control to the Condominium Association. (2)
      Standard Any contracts entered into by the builder/developer prior to the Transfer
      of Control and subsequently assigned to the Condominium Association, must give
      the Condominium Association the right to terminate the contracts with no more
      than 90 Days’ notice. This does not apply to ground leases or contracts in which
      the Condominium Association or Unit owners are granted a possessory or ownership
      interest in real estate. (3) Required Documentation The following documents
      must be submitted: • form HUD-9992; and • copies of contracts entered into by
      the builder/developer prior to the Transfer of Control. (C) Recreational Leases/Easement
      (1) Definitions Recreational Leases refer to separate ownership of recreational
      facilities at a Condominium Project with the owner leasing its use to the Unit
      owners. An Easement refers to an interest in land owned by another person, consisting
      of the right to use or control the land, or an area above or below it, for a
      specific limited purpose. (2) Standard Condominium Projects with Recreational
      Leases/Easements are acceptable under the following circumstances: • if the
      Recreational Lease or Easement holder is a nonprofit entity under the Control
      of the Condominium Association; or • if each Unit owner has the right to cancel
      the membership with no more than 90 Days’ notice and without penalty. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project Approval 2. Project
      Eligibility Handbook 4000.1 796 Last Revised: 11/26/2025 (3) Required Documentation
      The following documents must be submitted: • form HUD-9992; and • Recreational
      Leases, Easements, or contracts for use of recreational facilities. (D) Litigation
      (1) Definition Litigation refers to a current or pending lawsuit or proceedings
      in a court, arbitration, or mediation involving the Condominium Project or Condominium
      Association, or those concluded within 12 months of the application date. Litigation
      does not include foreclosure or actions to collect past due assessments brought
      by the Condominium Association or Condominium Project as plaintiff. (2) Standard
      The Condominium Project or Condominium Association must not be subject to pending
      Litigation in which the project sponsor is named as a party that relates to
      the safety, structural soundness, habitability, or functional use of the Condominium
      Project. The Condominium Project or Condominium Association must not be subject
      to any other Litigation risk not covered by insurance or that exceeds the amount
      of insurance coverage relating to the potential losses for that matter. (3)
      Required Documentation The following documents must be submitted: • form HUD-9992;
      • a signed and dated explanation from the Condominium Association, management
      company, or an attorney representing the Condominium Association that includes
      at least the following information: o reason(s) for the Litigation; o risk of
      the Litigation; o anticipated settlement/judgment date, if any; o sufficiency
      of insurance coverage to pay out a settlement/judgment, if applicable; and o
      impact of the Litigation on the future solvency of the Condominium Association;
      and • the following documents, which must be attached to the signed and dated
      explanation, if applicable: o complaint filed with the court, arbitrator, or
      mediator; and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium
      Project Approval 2. Project Eligibility Handbook 4000.1 797 Last Revised: 11/26/2025
      o all engineering or expert reports commissioned by the Condominium Association
      or their attorneys, which must include evidence of the safety, structural soundness,
      habitability, or functional use of the Condominium Project and evidence of the
      cost of the repair of any construction defect and status of the repairs. (E)
      Legal Restrictions on Conveyance (Free Assumability) (1) Definitions Legal restrictions
      on conveyance have the same meaning as defined in 24 CFR § 203.41. (2) Standard
      The Condominium Project must not contain Units encumbered by restrictions on
      conveyance in violation of the requirements contained in 24 CFR § 203.41, subject
      to certain enumerated exceptions provided below. The Condominium Project’s organizing
      documents may contain one or more of the following provisions: • All leases
      must be in writing and subject to the declaration and bylaws of the Condominium
      Project. • The Condominium Association may request and receive a copy of the
      sublease or rental agreement. • The Condominium Association may request the
      name(s) of all tenants including the tenants’ Family Members who will occupy
      the Unit. • Unit owners are prohibited from leasing their Units for an initial
      term of less than 30 Days. • The Condominium Association may establish a maximum
      allowable lease term. • The Condominium Association may establish a maximum
      number of rental Units within the project; however, the percentage of rental
      Units may not exceed the current FHA Condominium Project owner-occupancy requirement.
      • The Condominium Association may not require that a prospective tenant be approved
      by the Condominium Association and/or its agent(s), including but not limited
      to meeting creditworthiness standards. • The Condominium Association may have
      the right of first refusal to purchase or lease any Unit only if it does not
      violate discriminatory conduct prohibitions under the Fair Housing Act regulations
      at 24 CFR Part 100. It is the responsibility of the submitter to address any
      questions regarding eligibility issues with their attorney or the appropriate
      agency. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT C. Condominium Project
      Approval 2. Project Eligibility Handbook 4000.1 798 Last Revised: 11/26/2025
      (a) Exceptions for Affordable Housing Units Legal restrictions on conveyance
      for eligible government or nonprofit affordable housing programs are acceptable
      if: • the government or eligible nonprofit program restriction meets the exceptions
      defined in 24 CFR § 203.41(c)–(d); and • the affordable housing units are identified
      by recorded legal documents, specifying the Units that are covered under the
      program. In accordance with 24 CFR § 203.41(d)(1)(ii), FHA considers a reasonable
      share of appreciation to be at least 50 percent. HUD does not object to affordable
      housing programs whereby the homeowner’s share of appreciation is on a sliding
      scale beginning at zero, provided that within two years the homeowner would
      be permitted to retain 50 percent of the appreciation. If the program sets a
      maximum sales price restriction, the Borrower must be permitted to retain 100
      percent of the appreciation. (b) Exceptions for Private Transfer Fees Notwithstanding
      the policy of free assumability with no exceptions contained in 24 CFR § 203.41,
      properties with private transfer fee covenants are acceptable provided such
      covenants are Excepted Transfer Fee Covenants as provided in 12 CFR § 1228.
      (3) Required Documentation The following documents must be submitted: • form
      HUD-9992; and • recorded legal documents.'
  judgment: false
