Private Roads - Another Hurdle removed in Wisconsin Homeownership
Imagine that you’re on a Sunday drive off the beaten path, on a gravel road which leads past 10 houses on Lake Michigan. At the end of the road you find the perfect Cape Cod home, sunrise views, mature trees and a pole barn for the man cave. The home is for sale, you submit an Offer, Offer is accepted and you start ramping up for closing. The home passes the inspection with flying colors and with your credit scores the mortgage lenders are almost throwing cash your way. All seems perfect for your closing in two weeks and then you get the call bringing the closing to a screeching halt.
Your mortgage lender can’t lend because your forever home is on a private road. You pause and tell your lender of course you’re aware of the private road, and in fact have already talked with Bob down the road (as there’s always a Bob) who owns a trucking company and takes care of tamping gravel on the road every other year and snowplowing. Everyone on the road throws Bob a couple bucks and has done so since the beginning of time. Your lender responds that’s great, but that’s not enough, you need a written maintenance agreement signed and notarized by ALL of the owners on the private road.
Your first reaction - What? What’s a maintenance agreement? Who writes the maintenance agreement? What are we supposed to say in the maintenance agreement? And if you can answer these questions, then how can we get all of the owners to sign when half are in Florida for the winter? And what if 1 person says “No I won’t sign” or “I need more time and my attorney to review”? What does that do to your closing?
Until now the above was the reality for many Wisconsin home sales every year slowing down and halting real estate closings because of Fannie Mae underwriting guidelines providing that if the property is located on a privately-owned and maintained street, an adequate, legally enforceable agreement or covenant for maintenance of the street is required. In Wisconsin we probably have thousands of privately-owned and maintained streets, especially in Door County and the northern part of the State, but we have very few agreements recorded with the Register of Deeds office describing how these private roads are maintained.
A few years ago the Wisconsin Land Title Association (WLTA), including members of the Knight Barry Title Group, identified this issue and saw a solution. The solution - pass a law in Wisconsin that provides that if there isn’t a recorded maintenance agreement for a private road, then the law will step in to provide a framework on how property owners along a private road should share in the costs of maintaining the private road. Essentially a written law codifying the common law that everyone must pay their fair share, with the added benefit that the law meets Fannie Mae’s underwriting guidelines allowing a local mortgage lender to originate a mortgage for a property along a private road if the State has statutory requirements for maintenance of private roads. The WLTA, along with industry partners from the Wisconsin Mortgage Bankers Association, the Wisconsin Realtors Association and the State Bar of Wisconsin, wrote
the law which became a reality on December 3rd. Hurdle removed. Mortgage lending on private roads has become a little easier and new homeowners can start watching the sunrise.