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 to be paid as a result of the 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).) However, an association cannot charge an amount that exceeds its actual costs to change its records (Civ. Code § 4575(a)) or 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 proportionality between the fees charged and the association's actual costs.)
Transfer of Membership
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