Selling Guide

Published April 07, 2021

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What is required to be reviewed in the legal documents for units in new and newly converted condo projects?

Condo Project Legal Document Review Requirements for Units in New or Newly Converted Projects

The table below provides Fannie Mae's requirements for the review of the condo project's legal documents for units in new and newly converted condo projects containing more than four residential units.

Condo Project Legal Document Review Requirements - For Units in New or Newly Converted Condo Projects
Limitations on Ability to Sell/Right of First Refusal

Any right of first refusal in the condo project documents will not adversely impact the rights of a mortgagee or its assignee to:

  • foreclose or take title to a condo unit pursuant to the remedies in the mortgage,

  • accept a deed or assignment in lieu of foreclosure in the event of default by a mortgagor, or

  • sell or lease a unit acquired by the mortgagee or its assignee.

Rights of Condo Mortgagees and Guarantors

The project documents must give the mortgagee and guarantor of the mortgage on any unit in a condo project the right to timely written notice of:

  • any condemnation or casualty loss that affects either a material portion of the project or the unit securing its mortgage;

  • any 60-day delinquency in the payment of assessments or charges owed by the owner of any unit on which it holds the mortgage;

  • a lapse, cancellation, or material modification of any insurance policy maintained by the homeowners’ association; and

  • any proposed action that requires the consent of a specified percentage of mortgagees.

First Mortgagee’s Rights Confirmed

No provision of the condo project documents gives a condo unit owner or any other party priority over any rights of the first mortgagee of the condo unit pursuant to its mortgage in the case of payment to the unit owner of insurance proceeds or condemnation awards for losses to or a taking of condo units and/or common elements.

Amendments to Documents

Required provisions related to amendments to project documents are as follow:

  • The project documents must provide that amendments of a material adverse nature to mortgagees be agreed to by mortgagees that represent at least 51% of the votes of unit estates that are subject to mortgages.

  • The project documents must provide for any action to terminate the legal status of the project after substantial destruction or condemnation occurs or for other reasons to be agreed to by mortgagees that represent at least 51% of the votes of the unit estates that are subject to mortgages.

  • The project documents may provide for implied approval to be assumed when a mortgagee fails to submit a response to any written proposal for an amendment within 60 days after it receives proper notice of the proposal, provided the notice was delivered by certified or registered mail, with a return receipt requested. Notwithstanding the foregoing, project documents that were recorded prior to August 23, 2007, may provide for implied approval to be assumed when a mortgagee fails to submit a response to any written proposal for an amendment within 30 days after it receives proper notice of the proposal, provided the notice was delivered by certified or registered mail, with a return receipt requested.

For additional information, see B4-2.2-03, Full Review: Additional Eligibility Requirements for Units in New and Newly Converted Condo Projects.

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