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July 10, 2007
HOA Transfer Fees, What Charges Are Legal, Proper and Acceptable?
A common question, dare I say complaint, of purchasers of property in homeowner associations and realtors who sell them is: “Why are the transfer fee and document costs so high? All you have to do is send over the association documents and they can’t cost that much to copy things - 6 cents a page should do it.”
There have been two cases in the past three years in California (one very recent) providing binding authority, upholding the concept that although there are some restrictions on homeowner association spending and charges for assessments and other costs, the fees that are charged by a management company for transfer of title and the administrative work performed to assist an association in honoring its obligations under Civil Code Section 1368 are not limited by those statutory restrictions. What does this mean? It means that management companies may include in the costs that are charged to the association (or to the seller, for whom the service is provided) a profit margin and sellers (thye usual party responsible to pay the transfer fee) must pay when these costs.
It makes sense and the court discussed this: the ability to include a profit margin applies to all services that are provided to the association, and all vendors are so entitled. The judges in the cases made it clear that neither the laws nor the case decisions said the vendors that serve associations are required to operate as nonprofits (even though the association is a nonprofit organization) with fees charged to associations for services that are provided including services related to transferring title records and rights from one owner to another. They also opined that the market place and competition would provide a sufficient mechanism to keep these costs effectively under control.
So what is a commonly accepted “transfer” fee? I have asked around, and have come up with a range of numbers that seem to be fairly common: around $100 for documents and $225-$250 for the work related to transfer of title and all that entails for companies or vendors under contract to provide services for the HOA. Of course, if there are keys, key cards, vehicle registrations and a host of paperwork outside the usual - or litigation requiring extra disclosures - or the like - these fees could be higher. One might suggest the standard for self-managed associations should be less as a profit margin would not be allowed according to the cases. In other words, associations are more limited in charges that can be made than vendors who have a right to expect a profit. Essentially, the limitations on associations are the cost of copies and the actual cost to the association of providing the Civil Code Section 1368 information.
My information on the common fee estimates comes from speaking with realtors, title officers, reading the cases, and I myself have had personal experience involving purchase of and sale of condominiums. The recent Berryman case confirmed that this range seems to be in the ballpark. Merit is a very large management company and was charging $100 for documents and $225 each for the transfer of title work in two associations, a master and sub-association, because in the case of the Berrymans’ property, it was located in two different associations. The court did not condemn these amounts nor question the reasonableness of them and I think that has some significance. $100 for the cost of the documents may be high for an association to charge unless it orders the documents from a provider, such as condocerts.com, that provides this service, as the cost of copies and mailing alone probably would not add up to $100. The $225-$250 range may be high for associations as well, since, at least as to the case of Berryman v. Merit, the fee included a profit margin and administrative costs that a self-managed association may not incur.
The two cases on this fee issue are:
2007 - Berryman v. Merit Property Management, Inc. and
2005 - Brown v. Professional Community Management, Inc.
Although these cases proved successful for the management companies required to defend claims of unreasonable behavior, don't think this is the end of the inquiry. For each of the past several years and currently, the California legislature is again reviewing several pieces of legislation dealing with proposed limitations on transfer fees of various types
Posted by Beth Grimm at July 10, 2007 9:47 PM