PUD question

[Thomas J Kirchmeyer]

Just because a homeowner pays an HOA fee, does that automatically clasify the property as a PUD (planned unit development) and the appraiser must check the PUD box? Would the title even mention a PUD? The borrower pays an HOA fee for use of common area and pool. Its a typical single family fee simple subdivision. Appraiser state PUD because of the HOA fee. The lender says no because its not on the title. How can the appraiser prove his point that it is a PUD? The town doesnt even know. What if the HOA fee was optional? Do the homeowners actually own a share of the common area? Even the borrower is clueless.

 

[Joyce Potts]

Don't confuse zoning with a PUD. In Florida, GENERALLY SPEAKING WITH FEW EXCEPTIONS I'VE ENCOUNTERED, if the association dues are MANDATORY, it's a PUD.

The legality as to whether or not the borrower actually owns a share of the common amenities or the association they belong to does--is a good question, but what real difference does it make?

 

[Don Clark]

Just because a homeowner pays an HOA fee, does that automatically clasify the property as a PUD (planned unit development) and the appraiser must check the PUD box? Would the title even mention a PUD? The borrower pays an HOA fee for use of common area and pool. Its a typical single family fee simple subdivision. Appraiser state PUD because of the HOA fee. The lender says no because its not on the title. How can the appraiser prove his point that it is a PUD? The town doesnt even know. What if the HOA fee was optional? Do the homeowners actually own a share of the common area? Even the borrower is clueless.

Tom,

This is what fannie mae says:

XI, 302: Units in PUD Projects (11/01/05)
A planned unit development is a project or subdivision that consists of common property and improvements that are owned and maintained by an owners’ association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners’ association must require automatic, nonseverable membership for each individual unit owner, and provide for mandatory assessments. Zoning should not be the basis for classifying a project as a PUD.
The appraisal of an individual unit in a PUD requires the appraiser to analyze the PUD project as well as the individual unit. The appraiser must pay special attention to the location of the individual unit within the project, the project’s amenities, and the amount and purpose of the owners’ association assessment since the marketability and value of the individual units in a project generally depend on the marketability and appeal of the project itself.

 

[Joyce Potts]

Fannie Mae. The leading authority and a testament to how well their guidelines work.

 

[Mike Boyd]

Don't confuse zoning with a PUD. In Florida, GENERALLY SPEAKING WITH FEW EXCEPTIONS I'VE ENCOUNTERED, if the association dues are MANDATORY, it's a PUD.

The legality as to whether or not the borrower actually owns a share of the common amenities or the association they belong to does--is a good question, but what real difference does it make?

Some projects are split with madatory fees for some of the amenities and additional optional fees for others. Technically, whether optional or mandatory, it should be classified as a PUD. However, zoning does not always reflect this. If the property owner owns a percentage of the amenities, usually a stock certificate is issued. If ownership is reflected in a percentage and part of the legal description, a certificate is not needed. In one project that I know of, ownership of ALL amenities (mandatory or optional) was retained by the developer. Therefore, two stock certificates were issued if the owner elected to participate in the optional amenities.Obviously, there is not one answer for all areas.

 

[Restrain]

If there's a mandatory fee for the maintenance of HOA amenities, be they ever so minor (entry landscaping and the occasional block party) it's a PUD. There may not be any actual ownership of the HOA amenities, but rather a required maintenance of the amenities. It goes from there to the extreme where streets, etc are all owned by the HOA, even with individual lot ownership. Condos, etc usually have undivided ownership of the amenities spelled out in the HOA docs.

So, the question answer is, if there's a fee, there's a HOA, and a PUD.

Why is this important? I'll give you the answer as it relates to Texas. HOAs can and do sue for and gain foreclosure for the failure to pay the HOA dues. There's a case here in the DFW area where a family investment firm was able to finagle control of the HOA, require emergency repairs to the facility, billed everyone $3200 payable within 30 days, then began foreclosure on the units. It appears it's to gain total control of the condominium project. There's a big lawsuit, but it happens. A retired woman near Houston had her $100K home foreclosed on for $900 in HOA dues. The lender wants to know about HOA dues just because of these issues.

 

[Thomas J Kirchmeyer]

On the lenders side, I believe the loan may fall under a different program with different (higher) rates if the appraiser calls it a PUD vs not a PUD. Thats why the lender wants the appraiser to uncheck the box. Hmmm.

 

[David Beasley]

This is a sticky wicket Thomas. Technically, mandatory HOA dues should make it a PUD. However, I've been round and around with builders, lenders, underwriters and even the VA on this topic for years. Usually, it ends up being a PUD, but there have been instances where the non-PUD side of the argument has won as well (even on VA cases).

In those areas, specific neighborhoods that is, I have stopped marking PUD because of past weeks/months of arguing among the parties that was eventually settled with "it isn't a PUD". I've sent in numerous ones in these areas since the original arguments, not marked as PUD, and have gotten no further grief.

The short answer is, there are apparently mandatory-dues subdivisions out there that are not PUD. The long answer is, in my experience, those non-PUD subdivisions that indeed have mandatory dues typically have ultra low dues (<$50 per year) and those dues are for nothing more than mowing the grass around and repainting the entryway sign every year.

I rue every assigment I get that has mandatory dues, that is a new subdivision (not rare around here) when the developer immediately states "THIS IS NOT A PUD" even though the dues are high (say $100 a month) and covers more than just cosmetic upkeep of the entryway. I know that I am going to mark the PUD box, and spend hours on the phone with everyone from the buyer, builder, developer, lender, lender's underwriter and even the Atlanta VA RLC...so I give the party line/definition (mandatory dues = PUD) and let the higher ups argue it out, and mark it however it is the highest of the higher ups in the argument says to mark it - which in my case, is usually the Dept of VA or the local HUD/FHA rep. It's their guarantee, so let them worry about it - is my defense. I qouted the book, made my case, that's all I can do.

 

[Non Sequitur]

On the lenders side, I believe the loan may fall under a different program with different (higher) rates if the appraiser calls it a PUD vs not a PUD. Thats why the lender wants the appraiser to uncheck the box. Hmmm.

I don't think so. The lender cares because if it's in the chain of title and non-severable unpaid HOA fees can prime the mortgage; similar to unpaid real estate taxes.

 

[LACKLAND27]

You used the 2 phrases that make it a PUD. "HOA" and "common areas". It's most certianly a PUD if the owner or bank know it or not, which is not uncommon. I know a builder who constructed 5 townhouses that had a common rear area and sewer line with HOA fees. I told him it's a PUD he says really whats that mean.
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