Legal Question in Real Estate Law in California

I suppose the first question is why doesn't the HOA comply with the reserve requirements? They are not just requirements of the FHA, but they are actually required by California law under the Davis-Sterling Act. If you operate the HOA out of compliance with the FHA requirements, it is extremely unlikely that anything will happen for so long as the borrower remains current. This is such a small project, and with only one loan in FHA's portfolio in the project, the odds of your HOA's non-compliance hitting their radar is extremely low. However, if he defaults on the loan, then FHA may take action IF the HOA or its representatives made representations to the FHA that it was in compliance. The problem with a two-unit condo is that either of the two owners probably have apparent authority to make representations on behalf of the HOA, so anything the FHA borrower said to FHA is probably going to be attributed to the HOA. Realistically, unless something happens - a default by the borrower, or the destruction of part or all of the units, or some major mechanical failure of the project which requires substantial special assessments, the odds are that FHA will never have any idea what is happening in the HOA.

*Due to the limitations of the LawGuru Forums, The Gibbs Law Firm, APC's (the "Firm") participation in responding to questions posted herein does not constitute legal advice, nor legal representation of the person or entity posting a question. No Attorney/Client relationship is or shall be construed to be created hereby. Further, information you provide to the Firm through this website is not confidential - it is available publicly to anyone visiting this website. The Firm shall have no obligation to keep the information you provide herein confidential in any context. The information provided herein by the Firm is general, and requires that the poster obtain specific legal advice from an attorney. The poster shall not rely upon the information provided herein as legal advice nor as the basis for making any decisions of legal consequence. As required by 11 U.S.C. �528, we must now disclose that, "We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code. Assistance we provide with respect to Debt Relief may involve bankruptcy relief under the Bankruptcy Code."