Board Buying Condominium Governance Legal Mortgage Selling

Forcing a Unit Owner to Sell to Make Association Fannie Mae Compliant

M.B. from Southern California writes:

Dear Mister Condo,

There are 51 units in my building in Southern California. I am aware of a Fannie Mae Guideline that states that no one owner can own more than 10% of the units. In my building, there is an owner who owns 13 units which is 25%+. Because of this, several sales (5 in the last 3 months) have fallen out because the buyers cannot get financing. Question is: is there a legal way for the HOA to sue that unit owner to get him to sell his units until he owns only 5 since he is preventing the sales of any units in the building which, in turn, is also preventing the prices of our units from going up (depressing the building)? Do the other unit owners have any recourse?

Mister Condo replies:

M.B., as you know, I am not an attorney nor am I an expert is California state law so please accept my advice as friendly and not legal. For a legal opinion, you need to consult with a local attorney who is verse in your state’s laws regarding HOA and condo association law. My first blush answer to you is that this owner has not done anything wrong. Unless your by-laws state that no one person may own more than 10% of the units, you likely don’t have a leg to stand on. The unit owner didn’t cause Fannie Mae to set its guidelines. In fact, Fannie Mae could change its rules tomorrow to 5% and then other owners would be effected. Unless you could prove that this unit owner was maliciously trying to prevent sales of other units within the HOA, I don’t think there is too much you can do. Non Fannie Mae mortgages do exist. They aren’t as easy to find and they don’t always have as favorable a rate but that really isn’t the concern of the unit owner who simply purchased units as he saw fit. I am sorry I don’t have more positive advice for you but I don’t think there is too much to be done here. Good luck!

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