Can They Charge Transfer Fees?Jul 31, 2023
By Kelly G. Richardson, Esq., CCAL
Kelly, thank you for your column. Someone who just moved told me that there is an HOA transfer fee of over $800, however it was reduced to just over $500 when he questioned the price. Even the escrow person questioned the $800+. We were involved with 2 HOAs in Washington State before we moved here and no transfer fee with either. Is this something just in California? Is it designated by the state? What is there to transfer, a piece of paper? This makes no sense at all. Or is it a tax? Thank you very much. J.S., Cathedral City.
Dear J.S.: There are four different originators of transfer fees seen in California: Developers, Community Service Organizations, HOAs, and management companies. In the past 15 years, the law has cracked down on fees charged by the first three, but no law bans (or authorizes) a management company’s transfer fees.
In years past, some creative subdividers would add special deed restrictions which required them to receive a transfer fee payment any time one of the properties in the subdivision was sold. In 2008, Civil Code 1098 and 1098.1 took effect, requiring specific disclosures for transfer fees. Developer transfer fees created in 2019 or later are banned by Civil Code Section 1098.6. Some older developer transfer fees may be still enforceable if they meet the statutory requirements.
Community Service Organizations (“CSOs”) are organizations that typically provide either additional benefits to the residents of an HOA community or perform environmental preservation functions. Each time a residence subject to a CSO changes ownership, a fee is paid to the CSO to help fund its activities. CSOs formed on or after February 19, 2003 are not allowed to charge transfer fees.
HOAs are permitted to charge transfer fees only in a very limited fashion, pursuant to Civil Code Section 4575. HOAs can charge their actual costs to change its membership records and charge its actual costs to prepare documents under Civil Code Section 4530 which sellers give to buyers. However, those fees can only be charged to the seller and not the buyer, and if the records already exist in electronic form, the HOA cannot charge for emailing the records to its member.
Civil Code Sections 4528 and 4530 arose out of legislation sponsored by the California Association of Realtors and require a detailed list of charges by the HOA for the various disclosures buyers are entitled to demand from sellers (and sellers are entitled to demand from their HOAs) that charges must be reasonable per Section 4530(b). These charges most often are simply what the management charges the HOA for the documents.
Some management companies charge buyers a “transfer fee,” submitting those fees to escrow. I can find no law authorizing such fees, which often can be hundreds of dollars per transaction. Boards are often unaware of such fees since they are paid by the buyer, and buyers rarely complain about or question those fees. I assume management transfer fees are listed among the various escrow transaction costs as part of the real estate purchase and nobody questions it because the fee is usually not large. Sometimes the fees are listed in the management contract schedule of fees, but they are typically overlooked.
Thanks for your question, Kelly