The Transfer Fee Fact Sheet that Prompted CAI National Attention

Access the HOA Transfer Fee Fact Sheet that prompted the CAI to bring out its' national lobbyists to the Colorado legislature in an attempt to kill a Bill that would limit the abusive, costly, and unwarranted fee on HOA home sales.  The transfer fee can range from $50 to over $1,000, has no relationship to the work performed or the authorized use of the fee and costs Colorado HOA home sellers $15 million a year. 

CAI playing Whack-a-Mole with Home Buyer’s Money

A Bill to limit the unjustified and costly HOA transfer fee is being introduced to the Colorado legislature this year.  Expect the Community Association Institute (CAI), the trade group for HOA property managers (PM), to play the “whack-a-mole justification” game with legislators in opposing this Bill: one empty explanation after another.  However, this is no game for HOA home sellers who shell out $15 million a year in transfer fees to PM companies for services already and almost always paid for through their HOA dues.  The fee is authorized by law (not required by law) and assessed by property managers on HOA, mobile home park, and timeshare property sales.  The fee is intended to reimburse PM’s for work in the conveyance (home sale) of property for which they are not compensated for by the HOA.  The fee can range from $50 to over $1.000, has little to do with work performed, and/or is not used in accordance with the law.  The fee seems mostly used to supplement PM income allowing for low bids on HOA contracts in anticipation of receiving high transfer fees later.  Worse yet, there are no limits on the fee, it is not negotiable, can’t be shopped for in the market place, and if you don’t pay the fee you can’t sell your home.   

Defending this fee has included the contention that HOA’s mandate it, determine it, and retain it.  Wrong, PM’s do all this.  Then is it justified because PM’s incur extraordinary, costly, and uncompensated expenses when a home is sold.  Really?  This costly work involves: 1) completing a Status Letter (basically a form letter indicating the home seller’s financial status with the HOA).   It is now known that many HOA’s don’t charge for this task and the work takes minutes not hours .   2) costs to change HOA records.  Truth told this requires no more work than when someone gets married, divorced, or upon a resident’s death all which require no extraordinary work or special charges to homeowners.  Both these tasks are already paid for by HOA dues and to payments from the HOA to the PM.  Also note, transfer fee costs are not for providing HOA governing documents, researching property ownership, or researching liens and encumbrances, period.  These are paid for via Title insurance, direct payment to the HOA from the seller/buyer, and or involve no cost.

What’s next in the CAI defensive play book on this fee?  Appears they are trying to convince lawmakers to allow DORA to address this abuse through ambiguous and unrestrictive “guidelines” when licensing property managers in 2015 vs modifying the law authorizing the fee which is the proper means to rein in the abuse and high fees.  Note, SB 11-234 and HB 12-1277 authorizing the transfer fee and licensing respectively, have nothing to do with each other.  Neither Bill even remotely mentions the other.  DORA is not directed to address transfer fees in either Bill.  Note, DORA can’t make or change the law or limit fees!  Thus, this last ditch effort to defend this fee lacks merit, fact, enforcement, and is unsupportive of any good business practice. 

Playing whack-a-mole justification has worked for the CAI on this issue in the past.  This fee has yet to be even remotely defended based on CAM expenses incurred and not reimbursed or that it is used as intended under the law or why there is such a disparity in fee amounts.   The concept of the transfer is not complicated.  You can expect more diversions and deflections from the CAI on repackaging and redefining the transfer fee.  However, it all comes down to reining in a fee that never could be justified by other than the fact that it exists and continues “because it can” and should end “because it can”

Transfer Fee or Taxes: I’ll Take a Tax Any Day of the Week

If you are against excessive and unjustified taxes, fees, and assessments and would be infuriated to see this power extended to a private company please consider my comments below when the HOA Transfer Fee Bill is considered this legislative session:

Governments at all levels can legally levy taxes, fees, and assessments on citizens, services, and things.  All such actions must be defined legislatively as to application and purpose and how the levy is computed.  Taxes and fees must be applied without bias, consistently, and their use well defined.  Penalties for non-compliance are defined.  This powerful tool of government must be selectively, cautiously, and judiciously used and periodically reviewed for relevance, need and continuance.  This authority over commerce and citizens should be limited to government entities and not extended to private companies.

NOW CONSIDER THE HOA TRANSFER FEE (TF).  IT EXTENDS THIS TAXING POWER OF THE GOVERNMENT TO HOA PROPERTY MANAGEMENT COMPANIES AND MAKES TAXATION LOOK BENIGN.  AN OUTRAGEOUS STATEMENT BUT PLEASE READ ON.

SB 11-234 makes it legal for a property management company (also known as a Community Association Manager (CAM)) with a contract with a Homeowners Association (HOA) to charge the home seller a TF upon the sale of their home.  It doesn't make the TF a legal requirement nor does it extend a legal right for the CAM to force this fee upon a home seller without their acceptance and to impose penalties upon the seller if the amount is not paid (by precluding sale of the home).

The real estate home closing environment, however, enables a CAM to act as a tax agent exercising a self-assigned authority to compute and collect a TF with mandated payment and penalties for non-payment and with no ability for the home owner to challenge the assessment.  This is done by the CAM with: 1) no oversight, rules, limits on amounts assessed, or consistency in levying the fee, 2)  no statutory/legal authority to impose a TF without acceptance by the consumer and 3) no authority to impose a penalty on the seller if they object to the TF (if they don't pay the sale is suspended). 

Why does a CAM essentially have taxing authority over HOA home sales?  The legislature found this de facto taxing authority illegal on all residential home sales  in SBF 11-234 except for community association properties (HOAs).  This exceptional and questionable power extended to CAMs is and has been open to abuse and misuse.  Mandatory TFs range from $50 to over $1,000 with charges having little if anything to do with the described use of the TF in the law and work completed. 

It is time to limit the ability of CAMs to act in the capacity of taxing agents and rein in the use and abuse of TF's.  If I had to choose between a tax and a transfer fee, give me the tax as at least I know the rules to play and can understand the why's, what's, and amounts involved in the financial obligation:  NOT SO WITH TRANSFER FEES. 

I urge you to support limits on HOA TFs (that also includes mobile home and timeshare sales) to save Colorado home sellers/buyers $15 million a year in unwarranted fees and assessments.

Read About HOA Transfer Fees

The Colorado HOA Forum  www.coloradohoaforum.com posts its' explanation of HOA transfer fees and why legislation should be changed to end or limit this fee.

http://www.coloradohoaforum.com/files/Transfer_fee_FINAL3.pdf

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, www.coloradohoaforum.com , 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”.

 

CAI Continues to Misrepresent Costly HOA Transfer Fee

CAI Continues to Misrepresent Costly and Unjustified Transfer Fee

Denver Post Article:  Dec 24, "Homeowners grouptargets HOA transfer fees as costly, unjustified"

Transfer fees exemplify an abusive fee (tax) on HOA home buyers that continues "because it can" and not because it adds value or integrity to a real estate transaction. Molly-Polly from the CAI has no pride in defending this fee on HOA home sales. She says others, not current HOA home owners, should pay for tasks associated with the conveyance of property such as administrative tasks and confirming the financial status of a homeowner with the HOA . Think about this. When someone dies, gets married, has someone else move into a home, gets divorced, or requires a routine status letter on a credit check there is no separate fee: this is part of what an HOA does and pays the property management company to do. Are there separate fees for each resident who uses the swimming pool, billiards tables, or clubhouse lounge? NO! She also mentions that DORA will take this issue up when licensing property managers. No it won't! DORA can't change the law and the law states the fee can be charged and in any amount. DORA can make any guideline it wants but it can't make or change laws, it follows the law. Her claiming that the transfer fee is high because a month's HOA dues are in the fee is unsupported.  In fact the law, SB 11-234, states this is not an appropriate use of the transfer fee and the fee is retained by and charged by the management company. If it includes dues why does the property manager retain the money! This fee is illegal on most all other residential home sales except for HOA's due to a "one-liner" in the law without any justification other than "it should continue because it can". Home buyers believe this fee is legally imposed, mandated by the HOA, and the amount set by the HOA, all not true. What a tangled web some continue to weave on this issue and unfortunately to date have gotten away with it.

 

The Colorado HOA Forum   www.coloradohoaforum.com  will continue in its' effort to end this abusive and costly fee on HOA home buyers.

HOA Dispute Resolution Study: opportunity lost or recognized

Got an HOA problem, read on.  Colorado's State HOA Office through HB-1134 was directed to perform a study to recommend an optimal HOA dispute resolution process for homeowners.  Due date, December 31, 2013.  The result of this study will either make Colorado's many extensive and definitive HOA laws effective or endorse a continuation of the empty HOA law enforcement environment that has been in place for the past two decades.  Depending on the outcome of this study, home buyers may continue to have a legitimate reason for not moving into an HOA: their HOA by-laws and State laws will continue to provide little protection from abusive practices of HOA Boards from a homeowner’s perspective.

 

Colorado HOA laws provide homeowners with our courts as the primary means of dispute resolution: costly, litigious, time consuming, and out of reach for most homeowners.  State HOA law also advocates the processes of mediation and arbitration.  Mediation, unfortunately, is a process that asks homeowners to gamble hundreds of dollars on a process that doesn't guarantee a binding outcome.  Additionally, any mediated agreement can subsequently be ignored by either party without prejudice sending the homeowner back into the unworkable court system for a decision.  Who is kidding whom by advocating mediation as a workable process?

 

Colorado law (CCIOA) includes a process for settling disputes, providing decisions, and avoiding court.  It's called arbitration.  It has been avoided like the plague for over 20 years.  Arbitration for HOA disputes would simply empower mediators to render enforceable decisions for most cases.  This is called med-arb: a recognized legal process and profession.  It can be implemented at no cost to taxpayers, requires no additional staffing in the State's HOA Office, and can financed through a combination of funding through HOA registration fees and litigant filing fees.  The accessibility, affordability, and fairness of such a system would immediately make HOA laws enforceable from the homeowner’s perspective.  All homeowners would have a venue to file complaints and gain decisions to pursue their rights.  No advantage to the HOA that has unlimited resources and lawyers to fight the ordinary HOA resident.  This type of system would also relieve our court system of cases that don't belong in court and can and should be resolved in a more informal setting.  Litigating such cases out of court will save the homeowner and HOA in legal costs and reduce court operational costs.  Med-arb would not require a homeowner to give up their right to a court case.  The homeowner can opt to go to court or use the State med-arb process.  Decisions would be legally binding.  Note, med-arbs (mediators empowered to render decisions) would be trained in HOA law, mediation, and receive the required training in arbitration.  Those making decisions on HOA complaints would do so based on HOA law and their training in this subject matter vs a court judge who most likely is totally unfamiliar with these matters.  Med-arb brings finality to HOA homeowner complaints as opposed to mediation that is built on a platform of maybe’s, if’s, and hope; a process that guarantees no decision is reached; adds costs and time to home owner dispute resolution; and over its’ twenty years as a recommended solution for resolving complaints has failed homeowners.

 

Note this fact about mediation in Colorado and another reason it doesn’t serve homeowners well.  Mediators, well, anyone can be a mediator.  Mediators are not licensed or regulated.  Kickboxers, hair stylists, tow trucks, and investment advisors are regulated but a mediator for resolving HOA complaints has no minimum qualifications, rules, or regulations under which to operate.  Mediators are not required to be certified in the topic they mediate.  You could get a divorce or labor mediator for your HOA complaint: what is wrong with that picture.  So, using mediators to gain a competent, informed, based on HOA law, satisfying decision may be something promoted by that trade group but simply can’t be supported by the professionalism of the industry.  We advocate med- arbs that are required to be educated in mediation skills, arbitration skills to the level needed in these simple HOA cases, and in HOA law.

 

Then there is the strong argument that if one is to mediate a dispute why not simply set the mandatory goal, as in med-arb, to reach a decision based on economic factors.  Specifically, it will cost several hundred dollars to mediate with no guarantee of a decision.  Most will avoid and can’t afford to gamble on mediation for a result.  Does it really cost anymore or only a few dollars more to empower the mediator (med-arb) to finish off the deal and render a decision when mediation doesn’t result in an agreement.  NO! 

 

One state, Virginia, has a system for resolving most HOA complaints out of court.  Other states, such as Nevada offer dispute resolution under the titling of "referee program" that is a nothing more than mediation disguised by a fancy title (uncreative at best).  Some states have moved towards mandating mediation prior to presenting a case in court: this only mandates the pitfalls of mediation.  Other than the Virginia type process, the other states seem to set the bar for dispute resolution through mediation at resolving at best 50-60% of the complaints leaving a good number of homeowners out in the cold.  Also, with any mediation system there are many more not filing claims due to the weaknesses of that process and the requirement for a homeowner to gamble hundreds of dollars and their time on a hope of a decision. 

 

Colorado recently passed HB 1277 that will license and regulate HOA property management companies.  As a result, the State (DORA) will review, process homeowner and HOA complaints, and render decisions and penalties for violations.  All out of court and low cost!  This is in effect a med-arb environment that is good enough to settle most complaints against property managers but such a process has to date not been offered for homeowner HOA complaints with their HOA?

 

The legislature has recognized the need for change in HOA law enforcement through HB 1134.  I doubt the expectation of the study mandated under this Bill is to continue with our failed system of courts and mediation.  I also doubt that legislators want the current processes simply re-labeled and dressed-up and offered as a creative solution.

 

Colorado HOA homeowners await the results of the State HOA Office's study.  The opportunity for Colorado to lead in HOA governance has arrived.  The Colorado HOA Forum www.coloradohoaforum.com has been a leader in promoting a process of out of court binding dispute resolution to make our good laws effective and provide both the HOA and homeowner with a venue to resolve conflict that is fair and workable.  We hope the State’s study will result in opportunity recognized and not lost?