Homeowners in HOA communities often encounter various fees during property transfers and ownership, leading to questions about their necessity and value. While these charges may seem like unnecessary expenses, they serve important purposes in maintaining accurate records, ensuring proper disclosure, and protecting both buyers and sellers during property transfers. Understanding these different fees and their purposes can help homeowners better prepare for transactions and maintain proper documentation throughout their ownership.
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Understanding Transfer Fees
The term “transfer fee” often creates confusion in HOA communities because it’s used to describe several different charges. By legal definition, a transfer fee is a charge payable upon transferring real property ownership. In North Carolina, transfer fee covenants that require payment to developers or other parties upon property transfer are now prohibited by law, with some exceptions for older agreements established before 2010.
Resale Package Fees
When selling a property in an HOA community, owners often encounter resale package fees. While some may question these charges, they serve essential purposes:
What’s Included
A resale package is a comprehensive legal document that includes:
- Current assessment information and pending special assessments
- Association’s financial status and outstanding loans
- Legal or pending litigation details
- Existing covenant violations
- Up-to-date governing documents with recent amendments
- Board meeting minutes (usually the last six months)
- Current budgets, audits, and reserve studies
- Certificates of insurance
Why These Fees Are Necessary
Resale packages require significant staff time and resources to prepare because they:
- Must be individually prepared with current information
- Require regular updates to maintain accuracy
- Often need physical property inspections
- Involve third-party service costs for document management
- Provide legal protection through full disclosure
Insurance Documentation Fees
The annual request for insurance documentation from banks and mortgage companies often creates confusion and frustration among homeowners, particularly when they discover they must pay for these certificates. This process exists because of the unique nature of HOA insurance coverage and documentation requirements. The association’s master policy operates as a business policy rather than a traditional homeowner’s policy, creating a specific relationship between the insurer and the association rather than individual owners. This structure prevents homeowners and their mortgage companies from being listed as additional insured parties on the association’s policy, as doing so would create significant complications in processing claims for multi-unit buildings.
Homeowners can better manage these documentation requirements by understanding their insurance options. For townhome owners with deeded lots, an HO-3 policy often provides the most comprehensive solution, potentially eliminating yearly insurance documentation requests from mortgage companies. Condominium owners typically need an HO-6 policy, which covers interior elements, personal property, and any upgrades or improvements made to the unit. This policy type provides crucial coverage for additions, alterations, and betterments that might not be included in the association’s master policy.
Just as with resale packages, the cost of preparing and verifying insurance documentation falls to individual homeowners rather than the entire association. This approach ensures that all owners only pay for the services they specifically need, rather than building these administrative costs into everyone’s regular assessments. While this may seem like an additional burden, it represents a fair distribution of costs based on actual usage of these services.
Working with a Professional HOA Management Company
Understanding why certain fees exist and how they benefit the community helps homeowners better prepare for property transfers and maintain proper documentation. While these fees may seem burdensome, they help ensure smooth transactions and protect all parties involved in property transfers within HOA communities. Community Association Management helps associations and homeowners navigate these various fees and requirements efficiently. Contact us online or call 888-565-1226 to learn more about our customized management solutions for HOAs.
The content on this website is provided without any warranty and does not constitute legal advice. For legal advice specific to your community or issue, please consult an attorney specializing in Association Management.
