Sunday, January 5, 2014

Highlands Ranch, Colorado, HOA Transfer Fee Penalizes Home Sellers $250,000 a Year

So you want to sell your home (single family, townhome, condominium) in Highlands Ranch (HR) or in any HOA in the State.  You are going nowhere unless you pay a” transfer fee”.  You never knew about it, it wasn’t in your HOA governing documents, it is not a legal requirement to close a home sale, and you first learned about it at time of closing.  The HR fee is $130 but if you live in an HR sub-community the fee can double to $260++.  The fee in other HOA’s ranges from $50 to over $400.

The law, SB 11-234, made this fee illegal on residential home sales except in HOA’s.  The law defines this fee as “. . . 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 (and self-managed HOA’s) are permitted to charge a fee related to work performed by the management company in relation to the conveyance of a unit.  What work? 

The home owner’s advocacy organization, Colorado HOA Forum, , with the cooperation of legislators has submitted a Bill to end or limit this abusive fee that has mostly been justified “because it can”. 

The transfer fee (TF) is defended by representatives of the property management (PM) and HOA industries by indicating:   1) HOA’s mandate, determine the amount, and retain the fee 2) charged to recover expenses in producing the costly status letter that indicates the sellers financial status in the HOA 3) to recover extraordinary costs associated with changing names on administrative records  4) this allows cost recovery for the special expenses incurred by a home seller that otherwise would be paid for through other homeowners dues  5) ending the fee will drive up maintenance contract amounts and HOA dues because the income from TF’s is depended upon by PM’s when submitting low bid proposals to ensure a profit and HRCA uses this “exit fee” to defray operating costs and contain HOA dues  6) it is mandated by law and 7) cost recovery to research liens on the property and verify home ownership.

The problem with this justification is that it is not supported by financial and labor costs or any legal requirement.  None of it!  In fact one or more status letters can be obtained in HR at no cost.  The cost to change administrative records takes 15 min even using an abacas.  The TF is not legally required to close on the home.  TF work is already paid for via HOA dues and Title insurance companies are paid to research ownership and liens on the property.  No evidence exists that high TF’s keep maintenance contracts and HOA dues to a minimum.  In summary, any fee above $50 (which many PM’s charge) is excessive, unwarranted, and can’t be related to tasks for conveyance of property.

If the fee isn’t justified to recover extraordinary costs, then the HR TF is a penalty and opportunistic charge imposed on HOA home sellers to finance operations and contain HOA dues.  When a TF is charged and retained by a PM in a sub-community the main purpose is to enhance income and make up for the low bid under which they obtained their contract.  This practice costs sellers in HR nearly $250,000 a year. 

This opportunistic fee holds sellers hostage in completing their sale (even if sold yourself) until the fee is paid.  The home owner can’t negotiate or shop the market for a better fee as they do with realtor commissions and title insurance. 

There is no evidence that the TF charge matches expenses.  The fee exists “because it can”.  PM’s and/or HOA’s charging $50 are successful.  In reality, the fee is used as a back door process to enhance revenue on the backs of home sellers.  It is time to end the transfer fee “because we can”.


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