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16-A.01 Requirements Applicable to All Properties in Common Interest Communities
Introduction While only condominiums must be approved by VA, lots or units securing VA loans
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in condominiums and other planned unit developments must meet both title and lien-related VA regulatory requirements. The lender is responsible for ensuring that these requirements are met for each VA loan. Although there is no specific VA requirement that lenders maintain evidence in the loan file that these requirements are met, they may wish to be guided by the advice of their legal counsel in this regard.
Acceptable Title
The title requirements for every VA loan, whether or not the property is located in a common interest communities, are stated in VA regulations (38 CFR 36.4350). These requirements indicate
· the estate must not be less than fee simple, except under certain circumstances (38 CFR 36.4350(a))
· title must to be subject to unreasonable restrictions o use and occupancy, except under certain circumstances (38 CFR
36.4350(b)), and
· certain minor title limitations will not be considered by VA, to the extent described, as materially affecting the value of
the property
· (38 CFR 36.4350 (c)).
[38 CFR 36.4350] [38 CFR 36.4350
(a)] [38 CFR 36.4350 (b)] [38 CFR
36.4350 (c)]
Superior VA Lien
VA regulations require that every VA loan be secured by a first lien on the property, except under certain circumstances. (38 CFR 36.4351 and 38 CFR 36.4352)
When a property is located in a condominium or planned unit development, the lender must ensure that any mandatory homeowner association assessment is subordinate to the VA- guaranteed mortgage.
[38 CFR 36.4351]
[38 CFR 36.4352]
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Appraisal Related
Fee appraisers will use
· Freddie Mac Form 70/FannieMae Form 1004, Uniform Residential Appraisal Report, for properties located in a planned
unit development, or
· Fannie Mae Form 1073, Individual Condominium Unit Appraisal Report, for properties located in a condominium. .
Requirements specific to properties located in a condominium are outlined in 38 CFR 36.4360a, Appraisal Requirements.
If there are any commercial or other non-residential ownership interests in the condominium, the appraisal report must include them and their impact on the value of the residential units.
In declarant/developer controlled condominium conversions, the appraiser must
· ascertain the degree to which the converted structure and unit(s) has been or will be rehabilitated
for condominium use. The structure may have been, or is proposed to be, remodeled, renovated,
rehabilitated, modernized, or “cosmetically’ refurbished, and
· provide a description of the type of work completed or proposed to be completed in the conversion
being appraised for declarant/developer sales. This information is not required in spot resales by
sellers other than the declarant/developer.
[38 CFR 36.4360a]
Notice of Value-Related
The notice of value for all properties in a PUD or condominium will be conditioned: “This property is located in a development with mandatory membership in a homeowners’ association. The lender is responsible for ensuring that title meets VA requirements for such property and that homeowner association assessments are subordinate to the VA-guaranteed mortgage.”
In addition, the notice of value for a property in a condominium which has not been approved by VA or for which VA approval-related requirements remain to be satisfied, will be conditioned “The lender is responsible for ensuring that this condominium is acceptable to VA and that any condominium-related
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special conditions or requirements have been met. There may be additional information in ‘Other Conditions/Requirements’, below.”
Reference: See
· “Acceptable Title” and :Superior VA Lien,” in this section;
· Section 16-A.02, and
· Chapter 13, Exhibit 1, “LAPP Lender’s Notice of Value”, Items 3 and 4.
Note: There are other regulatory-related requirements for a property in a condominium. For example:
· pre-sale requirement per 38 CFR 36.4360a(c)
· warranty requirements for the unit and common elements per
· 38 CFR 36.4360a(d), and
· a wood-destroying insect inspection is required in low rise and high rise units only when the fee appraiser observes a
potential problem.
[38 CFR 36.4350]
[38 CFR 36.4352]
[38 CFR 36.4360a(c)]
[38 CFR 36.4360a(d)]