Transfer fees vs disclosure fees
Hey Dennis,
I understand Disclosure fees are for documents requested/required at closing. But, doesn’t AZ law allow for “Transfer Fees” that can be a percent of the sale price or a fixed fee to be applied to capital improvements or reserves?
Thanks,
Dave
About Post Author
5 Responses
Leave a Reply
You must be logged in to post a comment.
Dave,
You are absolutely correct disclosure fees and transfer fees are separate and distinct. Disclosure fees are required by law and capped at $400. Transfer fees are allowed only if the fee is specifically identified in the CC&R’s and the purpose for those fees. There are no statutory limitations on those fees. It is my contention that most of these transfer fees are inappropriate and form an unreasonable restraint on alienation relative to the sale of private property.
Dennis
Dennis –
ARS 33-1806(C) says: “The association MAY charge the member a fee of not more than an aggregate of four hundred dollars . . . “ for resale disclosure documents. Doesn’t the word MAY suggest that a resale disclosure fee is an option which must be formally adopted by the community?
Richard
Richard,
You are absolutely correct the association is allowed to charge a fee for the disclosure statements but is not required to do so and the $400 is a maximum limit and nothing stops an association from charging less based on the cost of that service. I will note that this Arizona limit is the largest limit established in statute for all of the 50 states but the Realtors were the driving force for this limit to the strong opposition from the HOA industry. This fee is typically set by the community managers and not the board and are established in the contract with the board. Any community manager would be hard pressed to prove that the cost for providing the disclosure statement would be anything more than $50. Think of this for a minute most association records are stored electronically and producing these statement are as simple a a couple key strokes to print the documents. If it take someone more than 15 minutes to do this the manager records system is totally ineffective. How could this justify $400? Self managed associations that do not use a community manager more often then not simply charge a reasonable fee for the service or nothing at all. This is strictly a profit center for community managers none of which goes the the association.
Dennis
Dennis –
You seem to have missed the thrust of my question which is: How can an association legitimately charge members a disclosure fee if that fee is not authorized in the governing documents? ARS 33-1806 only identifies the documents which must be disclosed and the maximum ($400) which the association MAY charge members. It does not say that a fee may be charged in spite of what the governing documents allow. It does not say that the fee may be charged “the governing documents notwithstanding.” The statute does not authorize disclosure fees which are not addressed in the governing documents; it only places a limit on what those fees can be. The statute does not supersede the governing documents with respect to extra fees. The disclosure fee can only be collected from the members if the governing documents allow it. Also, the statute does not allow the association to contract with a third-party management company to collect the fees if the governing documents don’t allow the fees to be collected. Our community’s recorded CCR’s only allow for the collection of regular assessments. There are no provisions which allow for the collection of disclosure fees from the members. Neither the seller nor buyer will find anything in the governing documents which addresses disclosure fees. If the association wishes to collect disclosure fees as allowed by ARS 33-1806, then it must amend the governing documents to do so.
Here’s the scam as I see it: Our community is managed by Vision Community Management. Our board seems unaware of resale disclosure fees being collected. These fees are not listed as income or expenses on our monthly financial statements. The fees are being collected and retained by Vision “off-the-books;” out of view of the association and its members, and without authorization in the community documents. Vision’s public website shows that they manage roughly 300 communities in Arizona. Each of their individual community public web-pages show that a $400 disclosure fee will be collected on each sale within the 300 communities. This is quite a cash-cow for Vision – and other community managers. This practice is questionable at best.
Richard
Richard,
While transfer fees are allowed by law only if authorized in the CC&R’s the same does not apply to disclosure fees. The disclosure fees are allowed as a matter of law not of covenants. The law requires the disclosures and allows the association or its agents to charge a fee for that service. While that fee is truly a scam and a profit center for management companies and excessive it was limited by law in 2010 because management company’s greed drove those fees much higher than that. Still $400 is the largest maximum fee allowed in all 50 states if a maximum is specified in law. Vision and most other management companies take advantage of the law and charge the maximum fee allowed and establish that fee in their contract with the association. The get the fee directly from the escrow agent and it never passes thru the association finances. That is why you never see it. This is what happens when the only people influencing the legislature are the HOA industry interest of CAI and AACM along with the Realtors. This was my first priority for the first three years of my efforts, and I could never get reform on these statutes past the Realtors. I may try again in the future but until then unless thousands of homeowners stand up and demand reform to these subsidies to community managers, we will never get the change that we need.
Dennis