Sample Ineligible Characteristics for Condominiums

Table of Contents

This section includes:

 Ineligible Characteristics

 Investment Securities

 Legal/Financial

 Ownership

 Rental Agreements

 Mixed or Commercial Use

 Project Types

 Hotel/Condotel

Ineligible Characteristics

Condominium projects that exhibit any of the following characteristics are ineligible for delivery:

Investment Securities

 Project documents are on file with the Securities and Exchange Commission

 Unit ownership is characterized as an investment security

Legal/Financial

 Project is legal, but does not conform to current zoning requirements and if damaged or destroyed cannot be rebuilt to replicate current design (e.g., cannot be rebuilt to current density)

 Project is in dispute either by litigation, arbitration or mediation where the reason involves the safety, structural soundness or habitability of the project

 Multi-dwelling unit - projects that permit an owner to hold title (or stock ownership and the accompanying occupancy rights) to more than one dwelling unit, with ownership of all of his or her owned units (or shares) evidenced by a single deed and financed by a single mortgage (or share loan)  New projects where the sale/financing structures is in excess of market norms. These excessive structures include, but are not limited to, builder/developer contributions, sales concessions, HOA or principal and interest payment abatements, and/or contributions not disclosed on the HUD-1 Settlement Statement

Ownership

 Projects where a single entity (the same individual, investor group, partnership, or corporation) owns more than 10% of the total units in the project

 Common interest apartments or community apartment projects are projects or buildings that are owned by several owners as tenants-in-common or by a homeowners' association in which individuals have an undivided interest in a residential apartment building and land, and have the right of exclusive occupancy of a specific apartment in the building

Rental Agreements

 Projects with mandatory rental pooling agreements that require unit owners to either rent their units or give a management firm control over the occupancy of the units

 Note: These formal agreements between the developer, homeowners’ association, and/or the individual unit owners, obligate the unit owner to rent the property on a seasonal, monthly, weekly, or daily basis. In many cases, the agreements include blackout dates, continuous occupancy limitations, and other such use restrictions. In return, the unit owner receives a share of the revenue generated from the rental of the unit. Recreational facilities are leased.

Mixed or Commercial Use

 Must not be part of an overall mixed-use project with multiple classes of unit owners and with a commercial entity as the manager over the entire project

 Projects with non-incidental business operations owned or operated by the homeowners' association such as, but not limited to, a restaurant, spa, health club, etc.

 Projects where more than 20% of the total square footage of the project is used for non- residential purposes

Project Types

 Timeshare or segmented ownership projects

 Houseboat projects

 Manufactured Housing

 Continuing Care Retirement Community  Hotel or motel conversions (or conversions of other similar transient properties)

Hotel/Condotel

 Project is managed and operated as a commercial hotel, even if the units are owned individually

 Projects that restrict the owner's ability to occupy the unit

 Project legal documents refer to "condominium hotel" or "condotel" (if the project name includes the name of a "branded" hotel, this is an indication that the project is likely a condotel)

 The project operates or advertises itself as a hotel, resort, inn, motel, lodge or similar type of hospitality entity.

o Includes such terms in its name

o Has a web site that presents itself as a hotel, resort, inn, motel, lodge or similar type of hospitality entity

o Has units available or advertised for rent through a web site that offers travel services, or

o Is located at the same address or within the same project as a hotel, resort, inn, motel, lodge or similar type of hospitality entity

 Project has affiliation or agreement with a hotel, resort, inn, motel, lodge or similar type of hospitality entity and the entity offers rental management or registration services for any unit owner within the project

 Location of the project is in a resort area

 Unit owners of the project share common elements including amenities with a hotel, resort, inn, motel, lodge or similar type of hospitality entity or if the unit owners pay additional fee for use of such common element if unit owner is not part of a rental management agreement with an entity associated with the project

 Hotel type operations including but not limited to:

o Access to individual units is controlled through a centralized key system

o Restrictions on interior decorating or furnishings, or the units are sold "fully furnished," or the purchasers must choose from a list of "approved" furniture, floor and wall coverings for the units

o Units have interior doors that adjoin other units

o Units contain lockable storage closets, cabinets, safes or mini-bars o Room service or food and beverage services are available to unit owners

o Signage is present indicating whether there are vacancies

o On-site hotel-type registration services supporting daily rentals

o Advertising for rental rates

o A central telephone system

o Daily unit-cleaning service

o Units in the project do not contain full-sized kitchen appliances

o Franchise agreements

o Owner-occupancy density where the project may have few or even no owner occupants

 Revenue-sharing agreements allow the unit owners to receive either

o A share of the net rental income applicable to the individual owner's unit, or

o A share of the income from the net aggregate income produced from the rental of the units in the project or rental pool (or other commercial activities of the project)