The final rule shows those efforts were an enormous success. FHFA, which adopted nearly all of CAI’s recommendations, will continue to allow deed-based transfer fees charged by community associations. In addition, the agency has clarified that any such fee that benefits the community in which it is levied will continue to be allowed under the new rules.
Under the final rule, private, deed based transfer fees that directly benefit property are considered “excepted transfer fee covenants,” which the agency defines as covenants that require payment of private transfer fees to a covered association. FHFA’s rule limits the use of such fees exclusively to purposes that provide a direct benefit to the property. All private transfer fees created on or after Feb. 8, 2011, must prove the fees provide direct benefit.
Allowable uses for the transfer fee funds include maintenance and improvements to the property, administration costs and acquisitions. Transfer fees also can be used for cultural, educational, charitable, recreational, environmental, conservation and other purposes provided they are conducted in or protect the community, adjacent property or property used primarily by community residents.
This FHFA victory is just part of the story. In 2011, model legislation introduced in state legislatures across the country would have banned any and all transfer fees. This model bill would have included all deed-based transfer fees charged by management companies or other business partners in conjunction with the sale of a property in a community association. CAI worked with the National Association of Realtors and the American Land Title Association, sponsors of the model bill, to amend the language to exempt transfer fees charged by associations and their agents from the proposed statutory ban. As a result of this outreach and the hard work of CAI state legislative action committees, nearly all of the 32 states that banned transfer fees now have statutory exemptions for community associations and their agents.
It is unprecedented for an organization like CAI to achieve such a clear victory in such a short time across the spectrum of state and federal law.
Go to www.caimortgagematters.org for the latest federal and state legislative activity.