Are you aware when you purchase a property in an HOA that you are being assessed a fee called a “Transfer Fee?”  Most buyers purchasing a HOA home are totally unaware of the transfer fee until they are signing documents at escrow, which is when the fee is collected. Many may over look this fee as being part of the closing process without really realizing what a Transfer Fee really is.

What is a transfer fee?  A transfer fee is a fee charged by HOA property management companies to issue a status letter concerning financial standing of the home seller in the HOA, property compliance with the rules and regulations of the HOA, and to change names on records.  Private transfer fees have been banned in many states except in the case of HOA’s. HOA’s are exempt from these laws. Why are HOA’s exempt from the ban on transfer fees? Well, we are still trying to figure that out. Perhaps it is the strong lobby sponsored by HOA’s and the management companies because in fact there really is no need for these fees.

These fees vary from state to state. The transfer fee can be a flat amount from $50 to $500, or it can be assessed by multiplying the property value by some percentage. In states where there are no regulations, the management company can define for itself the amount that they charge for this fee.This fee can be quite large compared to the work that the management company has to do to put these documents together. The management company is well aware of the financial status and condition of a property. So what additional work are they really doing to justify this fee?  How much effort is there to type in contact information into a database?

There are some HOAs and management companies that will say that the Transfer Fee is allowed by the restrictive covenants. However, the management company is not a party to nor a beneficiary of the restrictive covenant and has no right to point to the restrictive covenant as the rationale for demanding that the homeowner pay a fee to the management company.  Again, the fees demanded by the management companies are not “expenses” or “costs” ever incurred by the HOA. These fees do not benefit the owner’s property, nor the owner.

In some states where regulations have put limits on the transfer fees, such as Nevada, management companies are now going around these laws by renaming and creating new fees such as the “Asset Enhancement Fee” to collect their money.

Shouldn’t this cost just be built into the base fee that a management company assesses against an association in an annual contract? The management company is already being paid a monthly fee for “services” and homeowners are already paying assessments to the HOA which is supposed to be paying for these services. Properties will be bought and sold all the time.  A management company should not profit when a property is sold.

It is time to end the hidden costs of HOA’s, especially those taking advantage of new homeowners by adding unnecessary costs to closing. Contact your legislature and representatives, at the local, state and national level, requesting an end to transfer fees, by whatever name they go by in your region.