Transfer Fees Defined
Associations are allowed to charge transfer fees. (Corp. Code § 7140(g)), A “transfer fee” is any fee affecting the transfer or sale of real property that requires a fee be paid as a result of transfer of the real property. (Civ. Code § 1098.) It does not include Assessments, charges, penalties, or fees authorized by the Davis-Stirling Common Interest Development Act. (Civ. Code § 1098(a)(7).) Howerver, an association cannot charge an amount that exceeds itsw actual costs to change its records (Civ. Code § 4575(a)) or to to defray the costs for which they are levied (Civ. Code § 5600). Nor can it impose an assessment or fee in connection with the marketing of an owner’s interest in an amount that exceeds the association’s actual or direct costs. (Civ. Code § 4730(b)(1).)
Escrow Documents. Upon written request, associations must provide documents to an owner or any other recipient authorized by the owner (such as an escrow officer). (Civ. Code § 4530(a).) Documents provided to a prospective purchaser are specified in Civil Code § 4525. Associations can charge a reasonable fee "based upon the association’s actual cost for the procurement, preparation, reproduction, and delivery of the documents requested." (Civ. Code § 4530(b).) If the production of documents is handled by the association's management company, the company is allowed to include a profit component to its fees. (Berryman v. Merit Management; Fowler v. M&C Mgmt.)
Document Disclosure Form. Associations must use a form prescribed by statute to list the documents being delivered to escrow and the fee for each document. The form is found in Civil Code § 4528. The seller is responsible for compensating the association, person, or entity that provides the documents. (Civ. Code § 4530(b)(8).)
Fee Justification
Associations should be prepared to provide an itemized breakdown to support their fees. Reasonable expenses might include the following:
- Copy costs for governing documents (Civ. Code § 4525),
- Copy costs for the financial documents per § 5300 (as required by Civ. Code § 4525),
- Copy costs for a preliminary list of construction defects provided to members (Civ. Code § 4525(a)(6)),
- Copy costs for a general description of defects the association believes will be corrected or replaced and an estimate of when the defects will be corrected per § 6100 (as required by Civ. Code § 4525(a)(7)),
- Copy costs for meeting minutes,
- Document delivery fees,
- Cost to close out old files,
- Cost to set up new files, including emergency information and/or security cards,
- Cost of attorney litigation disclosure letter (if any),
- Fee to change security systems (if any),
- Fee to inspect the property and/or documents for rules violations (Civ. Code § 4525(a)(5)),
- Fee to answer lender forms,
- Fee to answer escrow forms, and
- Fee to certify assessments (Civ. Code § 4525(a)(4)).
Reasonable Approximation Allowed. Because it may be impossible to establish an exact incremental cost for each element of a transfer fee, an approximation is allowed. Once a reasonable average has been established, the fee can be uniformly applied to all persons who move in or out of the development. (Watts v. Oak Shores, it is sufficient if the association demonstrates a rough proportinatlity between the fees charged and the association's actual costs.)
Reserve Funding
Because of the limitations imposed by the above statutes, associations cannot impose a fee on the transfer of property for the purposes of funding their reserves.
Transfer of Membership
ASSISTANCE: Associations needing legal assistance can contact us. To stay current with community association issues, subscribe to the Davis-Stirling Newsletter.