Real Estate Journal Online

Although many homeowners’ associations (HOAs) and developers argue differently, the state of Colorado believes that private HOA transfer fees “pose a risk to fragile housing markets” and Colorado lawmakers and taking steps to ban what they are calling an “investment scheme”[1]. While private transfer fees are nothing new, one developer who currently collects on sales in multiple areas thanks to fees in neighborhood covenants is trying to sell the right to collect those fees to other investors. Although this is not illegal, critics of the process argue that not only does this separate the fees even further from those who would actually benefit from their collection (as in the case of HOAs collecting them for neighborhood benefit) but the fees also “steal home equity, lower resale values and add another layer of difficult to selling a home,” said Rachel Wolf, a representative of the Land Title Association of Colorado.

Colorado senate bill 11-234 would ban private real estate transfer fees but would not impact traditional HOA fees, which “provide a direct benefit to the community in which a home is located.” Arizona, Arkansas, California, Delaware, Florida, Hawaii, Illinois, Idaho, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Nebraska, New Jersey, North Carolina, Ohio, Oregon, South Dakota, Texas, Utah and Virginia have all already passed legislation, calling private transfer fees “dangerous.” The FHA is proposing a rule that would prevent government-controlled entities from investing in mortgages tied to properties with these fees, which could have a dramatic impact on neighborhoods’ with covenants containing these fees ability to keep houses occupied and off the market.

Do you think that private transfer fees are fair under any circumstances?

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[1] http://summitcountyvoice.com/2011/04/13/colorado-to-block-new-real-estate-investment-scheme/