Q: Escrow 5 – Are multi-family buildings or mixed-use properties included in the definition of “residential improved real estate” under the Regulation for which escrows are required (unless an exception applies)?
A: Yes. For the purposes of the Act and the Regulation, the definition of residential improved real estate does not make a distinction between whether a building is single- or multifamily, or whether a building is owner- or renter-occupied. Single-family dwellings (including mobile homes), two-to-four family dwellings, and multi-family properties containing five or more residential units are considered residential improved real estate.
However, with regard to mixed-use properties, the lender should look to the primary use of a building to determine whether it meets the definition of “residential improved real estate.” See Q&As Amount 3 and 4 for guidance on residential and non-residential buildings. A loan secured by residential improved real estate is not subject to the escrow requirement if the loan is an extension of credit primarily for business, commercial or agricultural purposes.