When must the builder transfer control of the HOA to the homeowners in a new condo project?

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.
 
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 Covenants, Conditions, and Restrictions (CC&Rs), declaration, master deed, condominium plat, and/or condominium site plans.
The developer/builder must relinquish control to the Condominium Association no later than the earlier of the following:
  • 120 Days after the date 75 percent of the Units in the Condominium Project have been conveyed to Unit owners;
  • three years after completion of the Condominium Project as evidenced by the first conveyance to a Unit owner; or
  • the time frame regarding Transfer of Control established under state or local condominium laws, if applicable.
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 the Condominium Association to terminate the contracts with no more than 90 Days’ notice.
 
The following documentation must be submitted for Transfer of Control:
  • documentation of the verification of compliance with the Transfer of Control requirements;
  • recorded CC&Rs, declaration, and/or master deed, and all amendments;
  • 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.
For case numbers assigned October 15, 2019 and after, additional information can be located in: Handbook 4000.1, Section II.C.2.c.iv. available at:  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh
 
For case numbers assigned prior to October 15, 2019, information is available in:
  • Mortgagee Letter (ML) 2011-22 Condominium Approval Process for Single Family Housing – Consolidation and Update of Approval Requirements and the attached Condominium Project Approval and Processing Guide provides the requirements and procedures for obtaining FHA condominium project approval.
  • ML 2012-18 Temporary Approval Provisions for FHA Condominium Project Approval provides temporary condominium project approval guideline changes to address current housing market conditions.
  • ML 2015-27 Additional Temporary Approval Provisions for FHA Condominium Project Approval
  • ML 2016-15 FHA Condominium Project Approval – Owner Occupancy Requirements modifies the Condominium Project Approval and Processing Guide, attachment to ML 2011-22, in order to implement the Housing Opportunity Through Modernization Act of 2016 (HOTMA) requirements and establish the required owner-occupancy percentage that must be met for purposes of FHA project approval.
Note: The Temporary Provisions in ML 12-18 and ML 15-27, as modified by ML 2016-15, are effective until HUD publishes and implements the Final Rule of Condominium Project Approval through publication of the Condominium Project Approval Section of HUD Handbook 4000.1, as extended by ML 2017-13.  Mortgagee Letters are available at:  https://www.hud.gov/program_offices/administration/hudclips/letters/mortgagee

For additional information see,

All policy information contained in this knowledge base article is based upon the referenced HUD policy document. Any lending or insuring decisions should adhere to the specific information contained in that underlying policy document.


Topic Number: KA-02361