What are HOA Transfer Fees, HOA disclosure fees, and HOA Working Capital Fees?
Which party is responsible for providing HOA governing documents to new home buyers in a planned community?
How does the buyer acknowledge receipt of the HOA governing documents?
How might the Board verify that each new homeowner was presented with the governing documents?
What are HOA Transfer Fees, HOA disclosure fees, and HOA Working Capital Fees?
Where can I find more information about what these fees include and how they are used?
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While these are all good questions there are no simple answers. In Arizona in Condos or HOA of 50 units or less the seller is required to provide the disclosure information to the buyer. If the community has greater than 50 units or homes the association is required to provide the disclosure information. The buyer is required to sign a document at closing that he/she has received and read the community documents. I’ve never know of any board ever being concerned about the member/ buyer getting any of the information required in state law. The disclosure fee is a very sour subject for me. In 2010 the current state law on this subject was enacted, in an attempt to curtail the totally out of control and unreasonable fees being charged for this service by management companies. That law set a limit at $400, but did nothing to base that fee on actual and direct cost to provide that service. In fact if the home seller provides the disclosure information the association management company is entitled to charge the seller for the service that they did not provide. This is what happens to state law when left in the hands of the self serving trade groups and why I build this organization and directly lobby for the homeowners interest with the legislators. What my research has determined is that Arizona’s fee at $400 is the highest fee allowed in the country, and it is also the only fee that is not based in any way on the actual cost of providing that service. The state laws are essentially subsidizing these community management companies out of the pocket of every home seller in the state. This absolutely has to change and I will attempt to do that with one of my proposal this coming legislative session.
As for the transfer fees or operating capital fee, most CC&R’s provide and describe many types of fees some of which are triggered by a transfer of title on the units or homes in these associations. The names of those fees is limited only by the imagine of the attorney that drafted the CC&R’s. The real issue here is they are all schemes to get more money from either the buyer or the seller, to augment the already unlimited power of the association to raise whatever money they need to pay the expenses of the association. When a home is sold a lot of money changes hand as part of that transaction and the HOA and Condominium simply wants a piece of that pie, because they can. In 2010 plus or minus a year or two, 44 of the 50 states declared all private covenants transfer fees by any name void and unenforceable. However thru the influence of CAI the HOA Industry Trade group managed to get an exception to all these state laws enacted in every state that allow HOA’s and Condominium to continue to charge transfer fee.
While not an attorney it is my contention that any working capital fee is illegal under servitudes law because they require either the buyer or the seller to make a contribution to the operating fund so that they have more working capital. Remember the association develops its budget for the year based on what it will need to operate and then charges each homeowner their appropriate share of that cost in assessments. The timing of payments is what generates working capital to pay the bills until the next installment is due. The only condition affecting these assessments is that they must be applied to everyone equally. So when they charge either the buyer or the seller this working capital fee they are unfairly asking those individual to pay more than their fair share of the associations cost. While the fundamental case law in this area is called Servitudes Law allows transfer fees they have 4 qualifiers, they must be paid to the association only, they must be reasonable, rational and fair. Anyone that does not meets that test is invalid and unenforceable.
Once again I have provisions in my legislative proposals for this year to attempt to fix and clarify these issues.
I apologize on the length of this response I’ve been trying to fix these laws for three years now and this hits very close to home for me.
I hope I’ve answered your questions. As to who get these fees and what are they used for that will truly vary for each association, because once they have your money they can and often do whatever they want with the money irrespective of the stated purpose of the fees.
Dennis