How do I submit an exception request for a mixed-use condominium project?

The guidance in this FAQ is effective for case numbers assigned on or after October 15th, 2019.

No more than 35 percent of the Condominium Project’s Total Floor Area may consist of Commercial/Non-Residential space (excluding Live/Work Units). Commercial/Non-Residential Space refers to floor area allocated to:

  • retail and commercial square footage (excludes Live/Work Units);
  • multi-level parking garage square footage that is separate from multi-level 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.
Exception
The Condominium Project’s Commercial/Non-Residential space may exceed 35 percent up to a maximum of 49 percent if it is determined that the residential character of the Condominium Project is maintained. 

The following documentation must be reviewed and analyzed by the Mortgagee under Direct Endorsement Lender Review and Approval Process (DELRAP) to support its decision or submitted for HUD Review and Approval Process (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.
Exception requests will be considered on a case-by-case basis.  If submitted under HRAP the request must be submitted to the jurisdictional Homeownership Center (HOC).  To identify the jurisdictional HOC for the state where the condominium project is located go to: https://www.hud.gov/program_offices/housing/sfh/sfhhocs

Exception requests may be rejected. Based on the review, additional information and/or documentation may be required. Granting an exception does not change the requirements.

For additional information regarding eligibility of a Condominium Project containing Commercial/Non-Residential Space refer to:  Handbook 4000.1 II.A.8.p.iii(D)(9)-(10) and II.C.2.c.ix-x available at:  https://www.hud.gov/program_offices/administration/hudclips/handbooks/hsgh


For more information regarding condominium projects refer to:

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-03952