Transfer/Disclosure Fees and Preservation Fees

I'm toying with the idea of writing legislation regarding transfer fees and would appreciate your thoughts. Also, if your state has laws addressing this issue, please post the law or the url so I can look it up.

AZ statutes allow the assn to charge "a reasonable fee" for reproduction of a statement required to be mailed to a potential buyer but nothing is said about charging for copying the required documents. So what is a "reasonable fee"? IMO, the actual cost to copy all the docs (bylaws, CCRs, rules & regs, etc.)plus an admin fee not to exceed $50, $100, $200??? While the majority of assn's charge a transfer fee, many also charge a disclosure fee. These fees are built into the mgmt co's contract and just passed on to the seller and buyer. Incidentally, the HOA generally does not negotiate these fees with the mgmt co. The transfer fee is an admin fee charged to defray the cost of transfering the ownership of the property onto the books of the assn. The disclosure fee is a fee charged to provide the required disclosure docs to the buyer. Both of these fees are negotiable but the buyer generally pays the transfer fee and the seller pays the disclosure fee. My CCRs authorize a transfer fee to be paid by the buyer but no mention of a disclosure fee. When I purchased my home 5 yrs ago, the transfer fee I paid was $37.50 and the seller paid a $100 disclosure fee. These fees range from $50 and up (the sky's the limit!).

I'd also like your thoughts and any information on preservation, buy-in, capital contribution fees -- or whatever inventive name an assn may call it. This is really a fee charged to the buyer to subsidize the reserve fund. Some assn's may charge as much as $20,000. Frankly, I wouldn't consider a home in an HOA that charges such a fee, in fact I think this type fee should be outlawed. IMO, the reserves should only be funded from the assessments collected from every member of the assn. Many assns charge this type of a fee whether authorized by the CCRs or not. At present, there is no AZ statute addressing this type fee.

Thank you all. I'm looking forward to your astute comments. :-)

Transfer fees are actually a bit of an issue in our neighborhood. Our CC&Rs allowed an initial $250 setup fee for each lot when the association was formed, and a $100 transfer fee for every closing after that. Other neighborhoods in our area have transfer fees of $200 and more. There are a few people in our HOA who feel that we should raise our transfer fee to match what some of the surrounding HOAs charge.

The problem that I have with that is that these fees don't cover any actual costs. It doesn't cost us anything when a home transfers ownership. The management company does not charge anything to tell the title company if any dues are owed, nor do they charge us to change the names in the billing system. We don't have to provide any sort of certification that the property is clear of any violations, so there is no charge for that. Currently, I see no real reason for the transfer fee other than to bring money into the HOA. But IMO, if we need money, then we should raise it through the regular assessments or special assessments that are charged to everyone in the neighborhood. I don't feel that it is right to charge it to new people just because they won't notice it on top of all the other fees that they are paying during a home purchase.

Just to confuse the issue even more, we currently have a property where the owner transferred the title to his company's name, then a couple of months later transferred it back to his own name. Should he be charged the transfer fee twice? Again, for what purpose?

IMO, a transfer fee should cover an actual cost and shouldn't be used to let current residents avoid having to pay more into their reserve fund. That just doesn't seem like a good way to welcome new neighbors.

Dwight,

Thank you for your input.

Is the "set-up" fee still being charged and is it used to fund the reserve account? I have no problem with charging a transfer fee but I think it should be limited to the actual cost of copying the docs plus an administrative fee of $50 or $100. However, if your management company doesn't charge you for providing these docs then I agree there should be no charge made to the buyer/seller. Frankly, I'm really surprised the mgmt co. doesn't charge a fee. All the mgmt cos. here in the Phx area do. From your remarks I get the impression the transfer fee is also used to fund the reserve account. Is this correct?

Kirk,

Thank you for your input.

Looks like we're on the same page with this -- I agree wholeheartedly with your thoughts.

No. This was a one-time charge basically by the developer to recover his expenses for setting up the HOA. I think this was supposed to be for the filing expenses and the initial costs of running the HOA until there were enough homes sold to allow the association to run itself. In reality, I think the developer made out on this since the timing was good and the entire development was completed and sold in just a few years.


There really isn't anything for them to charge for. In a transfer, all they currently have to do is notify the title company of any outstanding balances (typically handled in a phone call) and update their billing records for the new owner. The title company can get the CC&Rs from the county, and even if the management company provides them it is probably done electronically. From our standpoint, there isn't much involved in a transfer.

I'm guessing that the reason our docs even have a transfer fee (besides being a general boiler-plate document) is that some management companies do charge a fee for their "administrative overhead" during a transfer. Plus I guess there is the possibility that sometime in the future we may be required to provide more services in a transfer, such as the certifications of compliance and dues that some states require. Since the fee is already in our docs, if that ever happens we won't have to amend our docs to recover those costs.


Pretty much. I don't think we've specifically targeted where it should go, but that's where it will end up.

It appears that many posters have not been involved in title transfers. Some of the duties we preform are:
1) coordinate with the seller, the seller's agent, and the title company;
2) provide copies of the controlling documents, financials, and other information;
3) provide a status letter to the title company involved with the title transfer; and most critical is that if we misquote outstanding status we are held financially responsible for any balance due.
4) update the records, make old owner inactive and add new owner;
5) draft welcome letter, prepare welcome package, and personally welcome the new owner.

How much would you charge for just the status letter and the financial responsibility involved?

Mary,
I think it should be left to the agreement between the HOA Board and the management company to establish the amount. Our Agreements state "the going rate in the area" for all of the services I listed. Currently many MCs in Colorado are in the $200 range.

Roger,

I agree there should be negotiation on these fees; however, from what I see (at least here in the Phx area), the boards do not negotiate the fee. They pay whatever the mgmt co charges. Since there are no limits imposed by state law, these fees are oftentimes outrageous.