Private Road Agreements

Private Road Agreements

It is nice to have property and decide to share road access, wells, and other amenities with your neighbors. It is the American Way.

But what happens when it’s a handshake agreement, and a new buyer may not have rights or may be required to maintain part of the road or driveway they are sharing?

If you come across this, here are the rules for each agency.

FANNIE MAE
Requires a legally enforceable agreement or covenant for street maintenance. This applies to community owned or privately owned property. The agreement must be recorded in the land records of the county that it’s in and contain the following:

• Who is responsible for payment and repairs and the percentage of their share of these items.
• What happens if one party does not own up to their part of the agreement.
• What the term of the agreement is, if not forever, and how it impacts future owners.

FREDDIE MAC
Freddie does not require a separate agreement. Good to know! But Freddie does require a recorded easement for egress and ingress into the subject property. In addition, the road must be maintained in a manner proper to community standards. Likely the appraiser would comment on this.

Freddie is also going to prefer comps with similar properties. If none exist, then the appraiser must explain the impact of the private vs public road on the marketability of the property.

VA LOANS
Property must have adequate all-weather access to the property for vehicles and pedestrians. Private roads MUST be protected by a recorded easement AND a recorded right of way to a public road.

USDA LOANS
Must have a permanent recorded easement which shows maintenance and who is responsible or if an HOA maintains the street.

Shared driveways must be all weather and include a recorded easement for ingress and egress of the property.

FHA LOANS
Private roads do not require a joint maintenance agreement. FHA does require a permanent recorded easement with ownership interests or if HOA manages.

FHA requires the following for access to property:
• All weather road that vehicle and emergency vehicles can access at any time.
• Appraiser must notate adequate access AND safety and marketability.
• Appraiser must comment on permanent recorded easement.
• Appraiser must comment on condition of road and ask if private maintenance agreement exists.