Battling Private Transfer Fees

You can thank your Texas Realtors that in Texas this hidden fee is not allowed when buying or selling a home.

In real estate, the fewer things that stand in the way of transfer of clear title the better. Of course, as a practical matter, we accept that some properties come with some encumbrances. For example, we might buy a property that includes a utility easement. Because we accept the value of that easement, we buy the property and accept the restriction it places on our use of the property.

But what if the property comes with an encumbrance that provides no public good? That’s what buyers increasingly are facing because of the growth of private transfer fees. These are encumbrances imposed on the title of a new property by the developer to generate a future income stream, whenever the property is bought and sold. Specifics will differ with each encumbrance, but in general, for the term of the restriction (up to 99 years, typically), the developer imposes a fee—say 1 percent of the purchase price—payable before there can be clear transfer of title.

Six states have already taken action against these fees (including Texas).

NAR is making free help available for drafting proposed state legislation seeking their ban. NAR has model legislation already available, but it also is working with a law firm to draft at no charge to associations proposed legislation to meet their state’s needs. State associations then have a solution to offer their lawmakers when they let them know of their concerns.

In the six-minute video above, Gerry Allen of NAR Community and Political Affairs talks about the growth of the fees, what states are doing to stop them, and how NAR’s assistance can help. [where: 75230]