What’s in a Transfer Fee-That is the Question?

David A. Firmin | Wednesday, January 22, 2014 | State Legislation

Last week it was reported that Rep. Jeanne Labuda indicated that she would be introducing legislation taking aim on management company transfer fees.  This sparked tremendous debate on both sides of the issue and the value of a transfer fee. 

In response to the debate, it is being reported that the bill may be amended prior to its introduction.  The supposed changes would raise the cap on transfer fees from $50.00 per transfer to $150.00 per transfer with an option for the management company to negotiate a higher fee with the association, if it explains the need for the higher fee.  This amendment would address the concerns of both sides of the issue regarding the amounts of the fee and also give justification to this fee.   By justifying the fee amount, at a general meeting, the management company and the members of the association will be able to discuss the matter and arrive at a mutually acceptable transaction cost.

The Colorado Division of Real Estate is also looking at the issue and has the power to mandate management companies list their fees on its website to create further transparency.  One thing seems certain, the legislation is coming and that the legislature seems willing to work to craft a bill that works for everyone. 

Comments

Of course, the bill will be amended! And many-more times before it is finally voted on. This is actually more of a status-letter charge than a transfer fee. As a manager, I know the importance of these statements, and they they have to be accurate, because they are legally binding. To assist one owner in conveying his unit is a personal obligation, not something that should be a common expense. I have seen outrageous amounts charged by different companies, and it would be fair to cap those. Most of the charges I've seen have been between $100 and $200, and I think a $200 cap would be reasonable. My issue is that the money goes to the management company, and not to the association. This is usually by contract. Because of this, management companies view it as a chance to earn additional income, along with all the other ancillary fees that they charge to associations above and beyond their normal management fee. Some even charge to "store" the records of an association. When I give a bid to an association, that price includes everything, except for the actual cost of supplies. With an elimination of status-letter fees, or a cap thereon, what would happen to third-party vendors, to whom some management companies have turned to provide the statements? (Companies such as Condocerts.) The vendor has to make some money, and the management company wants its cut, so limits on these fees would not allow a suitable "profit" for either of them. Honestly, I do not see the need for outside parties to perform this service. It should be able to be done by the person or department who does the bookkeeping. (I have always done them myself.)

I am a Metro Broker Realtor. But, I owned an HOA management business for 29 years and am very familiar with both sides of the need for a transfer fee. What I have realized over the years, is that the association boards and members rarely know that the sellers and buyers are being asked to pay a transfer fee at closing. If they do know it is levied, they are unaware of the amount. Most transfer fees are profit to the management company and not the association. $150 is probably an acceptable fee for transfering the information from one owner to another, bookkeeping work, etc. Once the information format is set up, it is a matter of filling in the blanks and keeping the new information. Only when there is a foreclsoure, or the owner is in a legal battle/ arrears in dues, are there complicated paper trails to deal with. Too many management companies are charging $250- $500 for a simple transfer of ownership transaction. To me, this is a hardship on the sellers and buyers. I have long thought there should be more disclosure to the actual association board members of fees charged to buyers and sellers. Perhaps this legislation will accomplish proper disclosure.

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