Monday, December 2, 2013

HOA Transfer Fees on Home Sales Must End

One issue we can all agree upon is that unjustified, opportunistic, and excessive fees and taxes should end.  A “transfer fee” on residential home sales was prohibited through HB 11-234 except on community association properties (HOA’s).  HOA transfer fees can range anywhere from $75 to over $500+.  The HOA does not demand, authorize, or receive the fee.  The fee is charged and received by a Community Association Manager (CAM) also referred to as a property manager.  The exception was allowed into law to ensure CAM’s are reimbursed for extraordinary records maintenance and administrative costs related to HOA home sales (not present with non-community property home sales).    

Some misinformation needs to be cleaned up on this issue.  The transfer fee is not an advance payment of HOA dues, a “contribution” to the HOA to raise revenue for capital improvements, an amount determined/mandated by the HOA to be charged the homeowner, required by a financial institution or HUD for loan approval, a cost to provide HOA governing documents/by-laws, or a type of “buy-in” to the community.  Most of all, 1) it is not revenue to the HOA and 2) the HOA home sale transfer fee continues because it can.
Now consider the operating environment of most HOA’s.  They contractually compensate CAM’s to perform a variety of services such as snow removal, lawn service, painting, and administrative and financial services.  This work can include maintaining HOA records on the names, telephone numbers, and addresses of residents and completing collection activities related to HOA dues. 
So what “extraordinary” expenses are incurred by the CAM that warrants this transfer fee?  Extraordinary meaning:  such work completed that is not routine or expected under the CAM’s contract with the HOA; work that is not already paid for in the CAM’s contract with the HOA; or work that imposes an unexpected financial burden or excessive work effort on the CAM?
Lobbyist justifying this fee argue:   “. . . a one-time fee paid to a . . . management company for an association of unit owners . . . for services rendered in connection with the conveyance for which the fee is earned . . .”  In other words, management companies are permitted to charge a fee related to work in relation to the conveyance of a unit.  They should have added in their justification “they charge because they can”. 
The CAM HOA home sale transfer fee is meant to charge for issuing a financial “status letter” and changing personal identifying information in HOA records.  The status letter is a form letter completed using existing data in possession/accessible to the CAM documenting the homeowner’s financial status with the HOA (are dues current, special assessments paid, any liens on the property).  Work related to changing personal records due to a home sale is similar to day-to-day tasks required when couples divorce, upon the death of a resident, when a property is rented, a resident changes their telephone number or contact information, etc.   These tasks are completed through computer applications and require very little research or coordination among others (if any) making the work effort minimal and routine.  Additionally, home sales in any given community are not in a volume as to justify and impose any extraordinary expense upon a CAM or cost to a home buyer. 
HB 11-234, in rescinding most transfer fees, found no reason to continue the practice.  It was found to be no longer required to reimburse any entity for extraordinary cost.  No justification was offered by CAM’s or their trade organization to continue the fee based on extraordinary costs or relating the work performed to the fee imposed.  It continued because it could and ever since homeowners have been led to believe this is imposed by law, it is the HOA who imposed and/or receives the fee, or is compensation for unique HOA related work not paid for through any of the many costs incurred when closing on a home and/or unique work at a level that requires imposing hundreds of dollars of cost on the home buyer.
HOA homebuyers, who represent most home sales in the State, would save an estimated $20 million dollars for every 100,000 home sales by repealing the HOA transfer fee or $15 million if this fee was capped at $50.  It’s time to end this unjustified fee “because we can”.

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