Community-Owned or Privately Maintained Streets
If the property is located on a community-owned or privately-owned and maintained street, an adequate, legally enforceable agreement or covenant for maintenance of the street is required. The agreement or covenant should include the following provisions and be recorded in the land records of the appropriate jurisdiction:
- responsibility for payment of repairs, including each party’s representative share;
- default remedies in the event a party to the agreement or covenant fails to comply with his or her obligations; and
- the effective term of the agreement or covenant, which in most cases should be perpetual and binding on any future owners.
If the property is not located in a state that imposes statutory requirements for maintenance, and either there is no agreement or covenant for maintenance of the street, or an agreement or covenant exists but does not meet the requirements listed above, the lender may still deliver the loan. However, the lender is required to indemnify Fannie Mae (as described in A2-1-03, Indemnification for Losses) against all losses incurred by Fannie Mae as a result of the physical condition of the street or in order to establish and/or retain access to the street.
For additional information, see B4-1.3-04, Site Section of the Appraisal Report.