FHA Legal Requirements For 55 Communities In An Aging Population

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FHA Legal Requirements For 55 Communities In An Aging Population

It is anticipated that elderly growth rates will increase dramatically over the next 20 years as the Baby-Boom generation ages.It is expected that the proportion of those over 60 years old will increase more than 23 percent in Washington from 2010 through 2030. Many of these individuals will seek “housing for older persons,” as defined in the Fair Housing Act (FHA) and under State law. This article explains the key requirements for communities to maintain their status—and special legal privileges—as “housing for older persons,” which is of greater importance as the population ages. It is of further importance because the failure to comply with the FHA can result in civil fines, damages, attorney fees and litigation costs.

FHA Specifics On Housing for Older Persons

The FHA was passed to prohibit discrimination in the housing market on the basis of race, color, national origin, religion, sex, familial status or handicap. The FHA defines “familial status” as one or more persons under the age of 18 who are domiciled with a parent or legal guardian. In other words, the FHA prohibits discrimination in housing against people living with children. Washington also prohibits discrimination based on familial status.

However, the FHA not only permits but actually encourages age discrimination in certain situations. One of those situations concerns “housing for older persons” as defined by the Housing for Older Persons Act of 1995, an amendment to the FHA.Washington also allows exemptions for elderly housing. Pursuant to the amendments, the FHA exempts housing for older persons from the prohibition against familial status discrimination in the following situations:

  • The U.S Department of Housing and Urban Development specifically determines that a particular community is designed to house elderly person under a Federal or State program;
  • The housing is occupied solely by people who are at least 62 years old; or
  • The housing has at least one person who is 55 years of age in at least 80 percent of the occupied units, with a strict policy demonstrating the intent to house persons who are at least 55 years old.

In order for this final provision to apply, three requirements must be satisfied. First, the housing must meet the 80 percent occupancy requirements for those who are at least 55 years old. Next, the community must publish policies and procedures evidencing the intent to maintain elderly housing.Third, the community must consistently follow those policies and procedures.

How to Become a 55+ Community

Under the Federal regulations, a number of factors and written materials are considered when deciding whether a community demonstrates the intent to operate as housing for residents who are at least 55 years old, such as: the description of the community to prospective residents; advertising materials; lease agreement provisions; the community’s written rules; whether there are public postings in common areas describing the community as housing for persons at least 55 years old; and the actual practices of the community, including consistency in applying its rules.

If 80 percent of the units are occupied by at least one person who is 55 or older, then the community can make its own rules as to the occupancy of the remaining 20 percent of the units, such as allowing children to live there. However, in these situations, the community must take greater steps to ensure compliance with the 80 percent requirement.These steps include the requirement that the community perform bi-annual surveys of the residents and maintain the survey records for agency inspection.

Publishing specific policies and adhering to them also helps to avoid disagreements, as uncertainty can lead to disagreements within the community. Examples abound of associations and residents ending up in litigation because elderly residents assist younger family members in contravention of published policies. At times an association or its managing agents may be tempted to turn a blind eye to these transgressions.By the time a complaint occurs, a pattern of leniency may reasonably lead younger family members and their older hosts to believe that they have a right to their living arrangement. These beliefs are not easily abandoned, and can result in costly litigation.

Keeping Your Community Informed On Intent

Under the Federal regulations, a number of factors and written materials are considered when deciding whether a community demonstrates the intent to operate as housing for residents who are at least 55 years old, such as: the description of the community to prospective residents; advertising materials; lease agreement provisions; the community’s written rules; whether there are public postings in common areas describing the community as housing for persons at least 55 years old; and the actual practices of the community, including consistency in applying its rules.

By Tony Rafel & Jason Harrington

Article first appeared in the June 2013 Issue of WSCAI Community Associations Journal.
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Federal Housing Administration’s (FHA) Condominium Guidelines

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Federal Housing Administration’s (FHA) Condominium Guidelines

The ever-changing FHA Condominium Guidelines continued to create problems for many CAI members in 2011. Despite the challenges, CAI was able to work with FHA to amend some of the FHA lending criteria even as FHA released new policy that created new obstacles for condominium associations.

In June of 2011, FHA issued major revisions to the Condominium Guidelines, which, according to FHA, would address concerns raised by CAI. While the new guidelines added some flexibility on assessment delinquencies, commercial space and rental restrictions, it also imposed new and troubling criteria on fidelity insurance, project certifications and assessment delinquency calculations.

After the release of the new Guidelines in June, CAI worked with our members to escalate our efforts to persuade FHA to engage in a more rational and transparent process in developing condominium guidelines. First, CAI sent a letter summarizing concerns about the new Guidelines to the FHA commissioner. CAI noted that the requirements FHA imposed on fidelity insurance and project certifications were in conflict with many state laws and with the best practices of condominium associations. CAI also chided FHA for putting the burden of collecting assessments from bank-owned properties on association boards rather than on the banks that get a subsidy from FHA under the condominium loan program. CAI also filed an administrative challenge against the new Guidelines, arguing that FHA failed to do minimal due diligence when drafting the new requirements. Then, working with our state Legislative Action Committees, we took our concerns directly to members of Congress in August. Additionally, when FHA announced during a public training session that it would be looking at the issue of deed-based transfer fees, CAI sent a strongly worded letter urging it to engage in outreach and research before taking any unilateral action.

The arrival of fall saw the return on the investment in our Congressional Outreach. First, FHA backed away from their costly and duplicative management company fidelity bonding mandate. This was followed a few weeks later by key members of Congress and the Senate sending letters critical of the FHA Guidelines and the lack of transparency in their development. It is through these efforts that CAI will continue to move FHA policy to more rational and fair criteria.

As the year end approaches, FHA’s financial position showed significant deterioration, with the organization well below its statutorily-mandated reserve requirements. There were whispers in Washington of a pending bailout, which would be bad news for potential condominium buyers as FHA continues to be the pre-eminent lender for condominium mortgages. This also will likely make CAI’s task for pushing for reforms of FHA lending criteria even more challenging. At the close of 2011, it looks as if 2012 will be yet another year filled with challenges on the mortgage front.

As part of our ongoing Mortgage Matters Program, CAI is working to protect homeowners in community associations and to ensure access to fair and affordable mortgage products for all current and potential community association residents. You can follow our work and share your thoughts at www.caimortgagematters.org.

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  • Porter Construction Inc - Building With Integrity - www.porterci.com
  • HUB International NW - HOA And Condo Solutions - Web Ad
  • The Copeland Group - Banner Ad
  • Rafel Law Group - Banner Ad
  • Condominium Law Group, PLLC - General Counsel & Collection Services - Partners Ken Harer & Valerie Oman - Phone: (206) 633-1520 Website: www.condolaw.net
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  • SageWater - Logo
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  • Transblue - Logo
  • ServPro Of Seattle NW - Logo
  • HUB International NW - Logo
  • Newman HOA CPA - Audit & Tax - Logo
  • Agynbyte - Logo

Chapter Magazine

Journal July-August 2022

Jul/Aug 2022 Issue

Journal Advertising Partners:

  • Newman HOA CPA Audit & Tax
  • CIT Group Inc. - Logo
  • Rafel Law Group PLLC - Logo
  • The Copeland Group - Logo
  • Bell-Anderson & Associates - Logo
  • Community Association Underwriters - Logo
  • Ruff Construction - logo
  • Charter Construction - Logo
  • Popular Association Banking
  • SSI Construction
  • Sagewater
  • RW Anderson Services - Logo
  • Pacific Engineering Technologies, Inc - Logo

  • Association Reserves of Washington - Ad
  • Pacific Western Bank - Small Ad