Private Road Maintainance Agreement

[Kim Bell]

This is my first questions here after wandering around for quite some time and enjoying the forum. This issue I have has me baffled and I am curious about if anyone else has had this happen: I completed a URAR in a gated PUD and confirmed with reliable sources that the roads within the PUD were private. The section on the URAR allows for a checkmark to indicate private or public road, which I did, marked private. Now the underwriter is requiring the mortgage broker to provide a Road Maint. Agreement (seems fair to me) and the mortgage broker is harassing me to provide it! After 15 years in real estate, I have never had anyone basically demand that I provide this document. I thought my job was to report the data.... am I wrong?!? Thanks!

 

[Abester]

For a small fee, you may be able to help them out.

 

[Ultraviolet]

Kim,

In my area all subdivision dedication plats are available online. The dedication plat specifically designates the streets as public or private, signed by the city/county official.

Do you have something similar in your area that you could obtain?

 

[hastalavista]

The lender has a legitimate concern and wants to see if there is a written maintenance agreement for the road. My assumption is that your subject is located in a small development with an informal agreement and no HOA dues; otherwise, as a rule, road maintenance is included in the typical HOA dues (please post if your subject does pay HOA dues but the road maintenance is not included in those dues; that would be unusual in my market).

However, although the lender's concern is legitimate, it isn't your problem (kinda). As a rule, if the roads are private and there are no HOA dues, I would have asked the borrower/owner if there is a written maintenance agreement. If not, I note in the report that the there is no formal maintenance agreement for the..... (you name it here) and suggest that the lender obtain the agreement from the appropriate source (with the strong implication that such source is not me :new_smile-l: ).

The appraiser is always the easy one to ask for something when nobody is sure where to get it and it relates to the property. Your client is going to have to get it from the borrower (IMO), or, you may consider providing an addendum that no private maintenance agreement was provided to you and leave it at that.
Sometimes, a lender will not loan if there isn't a formal agreement in place. It can become nasty among the neighbors (depending how many have to sign-up) if there are hold-outs. I've heard of cases where the one property owner will take on full responsibility for the maintenance just to get the loan.

Like you, I learned this the hard way. And, like me, chances are good in the future if you are doing another private road scenario and there are no mandatory HOA dues, you'll ask if there is a formal maintenance agreement prior to completing the report.

Good luck!

 

[Pat Butler]

You need to ask your client about what part of assumptions/limiting conditions #1 they don't understand. The lender should have access to the title report which shoud indicate the relevant document that they will need to order from the title company.

 

[BOB PADRICK]

It isn't uncommon for them to ask

in the areas that I cover, there are a lot of private roads-so many in one county that they get road signs provided by the county, just of a different color.

Generally, those roads are dirt, and someone just occasionally runs a tractor with a grader attachment over the road once a month or so.

When I get asked, I say there is no agreement, and that that is common for the subject's market area. If they want more, then they have to ask the borrower-nothing I can do in the absence of an agreement.

If this is a gated community with paved roads, its a bit different-but the procedures are the same. Either the maintenance is included in the hoa dues, or it isn't-if it is, are they high enough to be realistic?

 

[The Dog]

Also check your state laws. In Oregon for example, there is a law that governs maintenance of private roads if no maintenance agreement exists. So check the deed records for a recorded agreement, then talk to the owner for a non-official agreement, and finally check the state laws as some might govern it.

Or you can just pass the buck to the underwriter and have them come up with a way of verifying maintenance.

 

[Tom McDowell]

It is your job to report it is.

 

[Kim Bell]

I appreciate the input and suggestions. Thank you. The subject is located in a gated community with a HOA, I suggested that the lender call the HOA to ask for a budget and look for something there allocating funds for this. Also suggested that they call the original developer (and provided their name, number and email). I also provided them with a list of homes that have sold within the PUD in the prior 12 months with the Realtors names and numbers for any suggestion/advice since they obviously got those loans closed! So, I believe I have done everything I can do and will do at this point! Oh, I had called the municipality where the subject is located to confirm and verify it is indeed a private road. Aren't we required to do that on every report?!? Thanks for helping! KB

 

[CANative]

The California Civil Code requires the cost of maintenance for privately maintained roads to be shared equitably by the landowners benefiting from those roads. Lacking a formal agreement between landowners, the Code requires an equal share contribution from each landowner. This is enforced through civil action, in other words by neighbor suing neighbor.