Management Company & Transfer Fee Compensation

I live in a small HOA and a few years ago we passed a Transfer fee in the amount .3% of the townhome sales price. It was recently brought to our attention, that the management company has been taking $195 our of that transfer fee and the balance goes into our general fund. This action by the management company was never approved by our BOD or general membership. When the management company was confronted with the action, he claims that there was a law passed for him to do this. In addition, the management company also charges a HOA Disclosure fee of $195. That fee allow him to supply the necessary documents to the new property buyer. Can someone please give me clarification on this.

Joanne,

Who wrote up this "sales/lease agreement"? Many mgmt. co's do charge a transfer fee; but it should be stated in their contract with the HOA. There is no AZ state law which says a transfer fee must be charged, much less paid to the mgmt co. The applicable statutes are: ARS 33-1260 for condos and ARS 33-1806, both titled "resale of units; information required; definitions".

So I am guessing that you think the management company should provide the services for free????

They have some real expenses and some potential liabilities that they take on and deserve compensation for the transfer. But the place to look for this is in the contract with the management company. And if the contract doesn't address it, then the area is open to negotiation.

Robert, it sure flies in Texas. Our covenants clearly obligate an owner to purchase a resale certificate. In the event that the buyer does not, then the responsibility falls to the buyer. And we just voted to hold a buyer to it this month. The buyer has recourse through all of the following:

• The seller.


• The title company (if used)


• The attorney paid to go over the sale (if used)


• title insurance (if purchased on behalf of the buyer)

Now if a buyer doesn't avail themselves of the bottom three, then the amount charged by us is a very small amount in the scheme of what they could end up paying. A competent title search though will show that a resale certificate needs to be acquired. And the association has no responsibility to those who don't have enough sense to have a proper title search done.

What bothers me is that the HOA believes that funding itself through owners selling their property is fair or just. To be honest, the cost of resale to the association should be equal to the cost of the association. Thus, if the management company charges $195 to take care of this, then the cost to the owner should be $195. Anything else is not fair.

Kirk,

What are the "real expenses" that the managemnt company has and the only liability the company has is if they report assessments are paid up to date when they aren't.

I stand corrected......In most cases, the seller and buyer are splitting the .3% transfer fee, but since it is such a great buyer's market, the seller has had to eat it a couple of times. We are not opposed to the management making money, but when no one is aware of the way it is being taken or taken in the first place.....my antennas go way UPPPPPPPP!! Joanne

In looking over your document, I am glad I didn't purchase there. You have presented your board with the authority to create a very expensive lawsuit and federal investigation. I would work hard to remove the "right of first refusal." This language is a throwback to the days of housing discrimination and should be removed.

Does your Board actually vote on the issue? If so, how do they decide if they want to allow the proposed sale or choose to purchase the property? Whatever their process, it most likely represents either a waste of time or huge liability. The first time the board either disapproves or exercises its "right of first refusal" there will be an open season for fair housing investigation.

(Unless perhaps your Board has instructed the management company to do some sort of background investigation to base the decision on, they should just say yes. And if they are going to just say yes, they should not bother.

By the way, you should not count on recouping the expense of an investigation no matter how misguided you believe the Board might have been should this ever happen. Instead count on paying up the hefty special assessment to cover the expense.

Kirk...I appreciate your response. I have talked to someone since reading your response. That is poart of the problem....no one from the BOD has ever seen this "sales/lease agreement" until we started checking out some of the numbers on our proposed budget.

Thanks for the input Ellen. This management company nickels and dimes everyone that it can. We recently did a HELOC(line of credit on our home). Because we carry structural insurance on the townhome through the association, my banker requested a statement that we had that insurance. I received an email from the bank stating that the management company charges $25 for faxing over a letter of insurance. The baner also said that they would not take a personal check and cited to me that they thought it was odd. I called the board president and blew my stack. Should not that be part of his job. I feel like they are "double dipping" at every opportunity. The management company also has something that they call a statement fee and some of the closing on sales include this 25.00 fee and some don't. I will get to the bottom of this if it is the last thing I do. Joanne PS. I have looked at the state statues and can't find one that supports the managment company's claim that he can take mone out of OUR transfer fee.

Ellen,
You mentioned you sent a form letter to the M/C prior to closing to fill in blanks.

Any chance of seeing a Form. As I posted I think someone is telling me stories, being very very cautious, abiding by polices or just plain want to be difficult.

Joanne,

There's nothing wrong with the mgmt co taking their fee from the transfer fee collected at closing. But, ONLY, if it is spelled out in their contract with the HOA that they charge a transfer fee in the amount of $$$. (BTW, this is not addressed in statute.) It sounds to me like the board is allowing the PM to do whatever he/she chooses w/o first checking with the board. It's not uncommon for the PM to run the show instead of the BOD. The PM should be working for the board, not the other way around. I would certainly be looking at the mgmt co's contract to see exactly what the board agreed to. Someone on the board should have read the contract thoroughly b/4 the Pres. signed on the dotted line. Incidentally, I've not heard good things about Heywood -- the board may want to check out other mgmt. co's.

There are 3 types of fees the assn's routinely charge:

1) Disclosure fee: sometimes split by the buyer and the seller, charged to defray the cost of providing certain disclosure documents required by state law and perhaps the gov. docs.
2) Transfer fee: sometimes required by the gov. docs; charged to defray cost of eliminating seller and adding buyer info to the assn records.
3) Capital Improvement Fee (may be called a buy-in fee): this fee is charged simply to beef up the reserve fund. This fee is not charged by the majority of assn's, as is the transfer and/or disclosure fee. IMO, this fee should be outlawed! I heard of one AZ assn that charges $10,000!!!

I'm looking for future legislation that will regulate the amount that can be charged for a disclosure or transfer fee and elimination of a capital improvement or buy-in fee. In the meantime, the assn can charge all of these fees if they so choose and can set the fee as they see fit. Also, they will have to pay their mgmt co whatever they've agreed to in their contract. IMO, it's a real racket!!

Mary, You are a God send!! When we had our budget meeting last Sunday and when we raised the question about the MC taking the fees directly out, the BOD didn't even know that was happening so if there was a contract signed, they were not aware of what they were signing. I have heard that Heywood was let go from another HOA and I need to talk to someone from that BOD to see if they will disclose the reason. Our BOD is so SLOW to react to anything it drives me crazy. We have our first foreclosure here and the owner was delinquent on this dues for 9-10 months before they reacted. I am so angry I could spit!!! When I smell a rat, I go a little crazy and this place elected 4 out of 5 BOD who only are here 3-4 months of the whole damn year and that in itself in another story. Thanks so much for giving me the needed energy to pursue this. I wish I knew more about who you are. Sincerely Joanne

Thanks for the support Robert. There is a small group of us who are hot on this trail and if there is anything funny, and I suspect there is, we are going to expose ALL of it. We have some very fat cats living here and that is part of the problem......they want to spend money like there is no recession.....and then there are the rest of us peons who have lost so much in our retirements that it is seriously impacting our lives. Can't sell our homes without losing so we are stuck. By, the way the other scary thing is that the BOD allows this MC to get all the bids on work and I can hardly think about what is going on with that. Funny how his bids are high, higher and highest!!! Will keep you in the loop on this. Sincerely, Joanne

Mary, Do you have any MC names that you could share with me. We are in Scottsdale, so Phoenix and any of the surrounding areas would work. Thanks! Another interesting thing that the BOD has done....they allow Heywood to get bids on projects. The last project was one I refused to let him do so I volunteered and for a fountain rejunvenation, I saved this community over $1500 and got a better looking fountain base than what was proposed by Heywood's bidder. I can't even begin to tell you some of the wierdness. Sending us an inferior contractor and having to do jobs twice. After I screamed loud enough, the BOD finally said the contractor was not allowed back on any jobs. It is the history here that no one is paying attention to that is making me crazy. It is seeing the news with this Maddoff guy who had a ponzi and took 50B from people because no one was watching and there were no laws to protect people. As Rush Limbaugh said, "People are out of control".

Joanne,
You are right about me being a doll. Albeit, a little (lot) long in the tooth. (Know where that expression comes from?)

Anyway I shall solve your board telephone meeting problems and anyone else that wants to do it. Just send me a large check for info. Serious. Google "Skype", you can set up and use free of charge a telephone conferencing system. Cell phone work as do regular phones. You (I suggest) tell them you will offer it free but you have to set it up. Take your Laptop, I bet you $100 you have one, get registered, follow the directions, the day of meeting set up your Laptop with remote speakers and mike, log in all who want to listen in or participate by dialing their # and telling them it is show time. We do it, it is not flawless but the newer the Laptop the better the calls. Our system is wireless.

After you have veted the system, motion the Board to amend your docs to approve the use. But if they are using a cell phone share program there should be no objection.

Any problem, click help button on Skype.

Robert,

We sent a form that asked if the assements were up to date, how assessmets were collected (monthly, quarterly or whatever), when was the next assessment was due, were there any special assesments due or any pending special assessments or lawsuits. I am retired and do not have a form but common sense will let your hoa know what info to provide.

Ellen,
Set me straight here.

You as the closing agent had a form with questions on it about the financial condition of any HOA you are working on. You asked if there were any indebtedness by the HOA (special Assessments). You then used this information to help clear the title to allow for closure. This act you all did was not connected to any Bank or Mortgageor. Is all that right?

Now when I first started to look at this I went to a lawyers office that closed on my place and asked what kind of information they requested. It has been a while ago,but I seem to recall that she said all the financial information is supplied by the Bank or Mortgage folks. I have recently gone to a Mortgage lender and was told all their form were not available for distribution as they were company files.

I really have no issue with any of these folks but I am trying to find out what information is routinely provided by the associations and does the association have any liability to see that this information is distributed and how they should handle that particular part of it.

In Colorado, those HOAs which fall under the Colorado Common Interest Ownership Act are required to provide to a potential buyer several items of information. DARCO provides the CC&Rs, Articles of Incorporation, Bylaws, Rules and Regulations, ACC request form, and past year's minutes and financials to the Seller or to the seller's agent. The seller then provides it to the potential buyer's agent or buyer. Our management agreements authorize us to handle HOA matters related to home sales. This also includes providing a status letter to the title complany and any correspondence with the parties to the sale and the title company. If we screw up (has never happened) then we would pay the costs involved. The seller and/or the buyer share in payment to us as per their agreed upon closing charges. DARCO has a licensed real estate broker who is involved in such transactions.

To all,
Hear is what I am trying to worry about and maybe I should forget it.

Time after time we have read on this site that Boards cannot release any personal information about who is in arrears, etc, etc. Many times we have read of the resistance the BOD (some) present if an owner asks for specific financial data, even to include who signs the check and who uses plastic in their Board business. The Boards position about releasing or printing names of owners behind in their fees, have fine oustanding, have liens on property; is one of trepidation because it may come back and bite them. Yet they can release all this information to God knows who reads these closing papers. If fact our manager says there is no standard form he knows of and some information is released over the phone. Is there a problem here, aside from the phone bit which I am sure would never be provable anyway.

John,

You use the same logic as I've heard from others who's assn has a "buy-in" fee. Frankly, I don't "buy" it! Anyone moving into the assn will be paying the same fees as everyone else. Why should they have to pay a fee for all the years they didn't live there? You could say the same things about the assessments, which you've been paying since 2001. Should a new h/o have to pay a "catch-up" fee for assessments too? I still say these "capital contribution", "buy-in" fees or whatever other catchy names some assn's use should be outlawed. It's like paying for the privilege of living in the assn.

Mary, I want you to know that we have compiled a list of 20 transactions and there are only a couple where the settlement statements seem consistent from one to another. I have written a stern letter of concern to the BOD and told them they need to regard this matter as urgent and of TOP priority. I think we have some things to think about....like the transfer fee etc. When our owners first inacted a transfer fee....they did at .5% and that gets expensive really fast when you are talking about million dollar properties. We had a real battle getting it lowered to .3%. The BOD never gave us a choice to go lower. I specifically asked the BOD about a contract and any clause in there that allow the MC to take fees directly out of our transfer fee. Thanks again for you help. Sincerely, Joanne

It seems to me that many of the comments on this thread are speculation; things sometimes appear to be postulated that are not correct. For example, a status letter is provided to a title company but never to a prospective buyer. The title company needs this information in order to collect any delinquent assessments from the seller at the closing (title transfer) and to be aware if the current owner is in violation of a restriction in the CC&Rs.

Anything dealing with title transfers which a management company is involved for an HOA need to be their management agreement. This prevents many of the concerns expressed on this thread.

Mary asks:

>>>Why should they have to pay a fee for all the years they didn't live there?<<<

Because it sez so in our docs (which I didn't write). Matter of fact, in our CCRs (page 18), which would require a 2/3 vote of Membership to change. Recalling it took us months to get enough (simple majority) to change on of our ByLaws this year TO SAVE THEM $$$, should I write:

"Dear Kids,

Remember when you had to pay 1 Q dues into our Reserve Fund when you bought your homes? Well, Mary (not her real name) thinks this should be outlawed for future purchasers, so how 'bout we eliminate that from our CCRs and give them a free ride. It will only take a 2/3 vote. Please sign the attached ballot and return it to the PO Box.

Thanks for your generosity,

The Board"

Right. When pigs fly!

Mary,

I'm sure you'd agree that HOAs are private organizations that folks can choose to join by purchasing a chunk, or choose not to if they don't like the terms. Some private golf clubs charge in the $100,000s to become a member. Is that improper? Should that be outlawed? I don't think so. As for the AZ HOA you mention with the $10K ante, so what? Apparently its well-heeled traffic can bear (and choose) the cost of joining. Who's to complain and on what basis?

Free to be You and Me. Thus spoke Margo Thomas.

Equating the HOA buy-in fee to the fee to join a private golf course is like comparing apples to oranges. People don't mind paying the golf course fee in most instances because it's a matter of prestige. There shouldn't be a required "buy-in" fee to purchase a home. These buy-in fees are generated as a means to subsidize the reserve fund, which should be subsidized by the members' monthly assessments. IMO, any set of covenants that has this requirement built in was done so by the declarant so he wouldn't have to fund a reserve fund. Just my opinion, of course, and also my opinion that these buy-in fees should not be allowed. BTW, I don't give a hoot what Marlo Thomas says!

Kirk writes:

>>>Here is how I see your logic
1. The developer placed some improvements to increase the sales price.
2. The developer then charged a fee on top of the increase in costs to which someone paid.
3. The person now sells their property (having paid upkeep all these years).
4. You believe that even though the items have now been paid for three times, this new person owes something for what happened before.
The only thing that makes it "fair" is that you agreed to pay it and think the next person should to.<<<

Not quite. My logic derives from Article 14.3 of our CCRs which states:

“Contribution to Capital. Each Owner, at the time he acquires title to the Unit shall be obligated to pay to the Community Association a one-time working capital contribution equal to one-fourth (1/4) of the then currently estimated Common Assessments for the Unit, which contribution shall not be refundable or transferable and may be used for any lawful purpose which the Board deems appropriate.”

Dat’s da rule here. What other HOAs choose (or don’t) to levy, charge, or otherwise collect is not my concern, it's theirs, and potential Acquirers can choose to Acquire or Not Acquire.