Happy New Year to Washington Condos and HOAs!

2010 has admittedly been a difficult year for many Washington condominium and homeowners associations from a financial point of view. Associations have faced unprecedented struggles in collecting unpaid dues or assessments, funding new reserve accounts, and maintaining existing levels of services. It is impossible to know whether 2011 will be a better year for associations' finances, but there are encouraging signs that this will be the case. My office stands ready to assist your association if it is dealing with delinquency issues or needs guidance with regard to any other legal question. We look forward to helping our current and future clients solve their problems and improve their communities in the year to come.

New Law Limits Scope of Red Flags Rule

A new federal law has significantly limited the scope of the Red Flags Rule, a federal law that requires many businesses and organizations to implement a written identity theft prevention program. There has recently been a substantial amount of confusion about whether the Rule imposes new obligations on various persons and organizations (including community associations), and this new law clarifies who must comply with the Rule. The Red Flags Rule now applies to financial institutions and creditors that:

1) obtain and use consumer reports in connection with a credit transaction,

2) furnish information to consumer reporting agencies in connection with a credit transaction, or

3) advance funds to or on behalf of a person, based on an obligation of the person to repay the funds or repayable from specific property pledged by or on behalf of the person.

The third category is apparently intended to cover businesses like payday loan companies that sometimes lend without using consumer reports. Creditors who advance funds on behalf of a person for expenses incidental to a service provided by the creditor to that person are specifically exempted from the Red Flags Rule. Other types of creditors may be required to comply with the Rule if an agency determines that they offer or maintain accounts that pose a reasonably foreseeable risk of identity theft.

The Red Flags Rule does not appear to apply to condominium and homeowners associations under the new law. However, such associations may still choose to adjust their record-keeping procedures to comply with the Rule if they are concerned that it might be interpreted or amended to apply to them or if they want to obtain a heightened measure of protection against identity theft. More information about the Red Flags Rule is available here.

FHA Condominium Recertification Deadline Has Been Extended

The December 7, 2010 deadline for condominiums that were placed on the FHA approved list before October 1, 2008 to obtain the recertification necessary to allow them to maintain their FHA approved status has just been extended. Here are the new re-certification deadlines:

If approved between 1972 and 1985, deadline is 12/31/10.
If approved between 1986 and 1990, deadline is 5/31/11.
If approved between 1991 and 1995, deadline is 7/31/11.
If approved between 1996 and 2000, deadline is 8/31/11.
If approved between 2001 and 2005, deadline is 9/30/11.
If approved between 2006 and Sept. 2008, deadline is 3/31/12.

Condominiums must meet a number of requirements to qualify for FHA approval. For example, they must be at least 50% owner-occupied, and no more than 15% of their units may be delinquent. Their budgets must fund reserve accounts in an amount equaling at least 10% of those budgets. They must maintain property insurance in an amount equal to 100% of the current replacement cost of the condominium and comprehensive general liability insurance covering the common elements as well.

For more information regarding the FHA recertification process, please refer to my past posts on this subject:

New Requirements for FHA Condominium Loans Delayed and Revised

FHA Loans Will Soon Require Ongoing Approval of Entire Condominium