Condominium associations operate as legal and financial stewards of their communities, tasked with managing budgets, enforcing policies, and protecting the collective interests of unit owners. But behind every operational task lies a governance framework—one that defines the authority, structure, and procedures by which an association functions. For associations seeking FHA, VA, Fannie Mae, or Freddie Mac approval, governance standards are more than internal policy concerns. They directly influence a project’s eligibility for financing programs and can either support or derail the approval process. Associations with unclear, outdated, or non-compliant documents face increased scrutiny and risk of rejection. Understanding the function and content of these governance standards is essential to maintaining eligibility, financial accessibility, and long-term community stability.
What Are Governance Standards?
Governance standards refer to the combination of legal documents and operational protocols that define how a condominium association is run. These include the declaration of covenants, bylaws, rules and regulations, and any amendments recorded with the county. Together, these documents establish everything from voting procedures to board authority, leasing restrictions, financial responsibilities, and ownership rights. Agencies like FHA and Fannie Mae evaluate these standards closely during the approval process because they reflect the health, transparency, and legal enforceability of a community’s structure. For example, if an association’s documents give the board excessive control over ownership or contain ambiguous language about assessments or litigation rights, lenders may view the community as a risk. On the other hand, a well-written and legally sound governance structure demonstrates a strong foundation for the project and improves its chances of approval.
Common Governance Issues That May Affect Approval
Many associations unknowingly maintain provisions in their documents that conflict with agency requirements. One of the most common issues involves leasing restrictions. While it’s acceptable to regulate rental activity to some extent, agencies will not approve projects that completely ban leasing, require board approval for all leases, or mandate lease terms that are unreasonably long or short. Another problematic area involves board powers. Provisions that allow the board to approve or deny purchasers, foreclose without lender consent, or impose penalties without due process often trigger red flags during review. Agencies also review litigation clauses that waive or restrict owners’ legal rights, particularly if those rights pertain to challenging the association or developer. Fees collected upon sale or transfer, such as capital contributions or right of first refusal processes, must comply with federal and state law as well as agency-specific guidelines. If any of these elements are too aggressive, vague, or restrictive, the project may be deemed ineligible until amendments are made.
What Agencies Are Looking For
Each agency—FHA, VA, Fannie Mae, and Freddie Mac—maintains its own criteria, but their core expectations around governance are largely aligned. They are looking for governing documents that are clearly written, legally enforceable, and protective of both unit owners and lenders. For example, FHA and VA require assurance that no language will interfere with a lender’s ability to foreclose. Fannie Mae and Freddie Mac review governance for compliance with fair housing practices, transparency of financial operations, and consistency across declarations and bylaws. Agencies expect the board of directors to have sufficient legal authority to manage the property, enforce rules, and adopt budgets, but not at the expense of owner rights or lending protections. Restrictions on resale, limits on occupancy, or ambiguous language around assessments and insurance responsibilities can all raise questions during review. In essence, the governing structure must support long-term community viability while upholding standards that reduce lending risk.
Strengthening Governance for Compliance
Associations that take a proactive approach to governance are far more likely to secure and maintain agency approvals. The first step is a full legal review of all governing documents, ideally with the support of a qualified condominium attorney and an experienced approval consultant. This review should identify outdated clauses, ambiguous language, and provisions that may conflict with current FHA, VA, or conventional lending guidelines. If issues are found, associations should begin the amendment process promptly. While amendments often require owner approval, the long-term benefit of maintaining access to federally-backed loans and broader buyer pools outweighs the short-term administrative work. Boards should also ensure that their operating practices—such as election procedures, budget ratification, and meeting documentation—align with what’s written in the governing documents. Transparency and consistency matter during the review process, and any discrepancies between what the documents say and how the board operates can create unnecessary complications. Ultimately, the stronger the governance framework, the fewer barriers an association will face when applying for or renewing its approval.
Work With Experts Who Understand the Process
Navigating the complexities of condominium governance is difficult enough without the added pressure of meeting evolving agency standards. That’s why associations turn to Condo Approval Professionals. We specialize in reviewing declarations, bylaws, and association procedures through the lens of agency compliance. Our team understands the fine print that FHA, VA, and conventional lenders are evaluating and can help identify issues before they become roadblocks. Whether your documents need minor updates or a complete overhaul, we coordinate closely with your legal team and board to streamline the process. For communities that have never been approved, or those that were approved years ago under outdated standards, now is the time to review and realign your governance. Contact us today to begin a tailored review and ensure your association is structured for long-term success.