Transfer Fees
We have a home in Continental Country Club, Inc in Flagstaff AZ. In 2017 they initiated a $1,000 transfer fee in addition to the $400 allowed for document preparation. There is no provision in the governing documents, including the CC&Rs for such a fee. If they can initiate a fee for $1,000, they could do it for $50,000.
The homeowners are concerned that this in violation of the State Statutes and will have to be repaid. The HOA filed bankruptcy once in 2020, prior to having an open meeting with homeowners, made threats against homeowners who ask questions in an open meeting, The Board also redacts Board meeting minutes eliminating critical information for homeowners. They have meet in violation of ARS 33-1804. How would you deal with an out-of-control Board?
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John.
If your CC&Rs have no provision allowing the association to charge a transfer fee than Arizona law specifically ARS 33-442 calls those transfer fees illegal. HOAs with authorization in the CC&Rs can charge a transfer fee. The open meeting violations are the most common violation of law across the state. If you want this to stop you have two choices organization a recall to remove the board who is not willing to do their job according with the law. Or you can sue the association for violating the law and breach of duty to the homeowners and the association. Breach of duty could result in the individual board members being held liable for ll legal cost and any fine awarded by the court.
I try to revise the laws to provide better accountability but I need the help of homeowners willing to work for better laws protecting fairness in these communities.
Dennis
I would just like to take a moment to expand on one more possibility in addressing issues with a HOA board that is not in compliance with your CC&Rs or the ARS laws.
A breach is most simply defined as ” an act of breaking or failing to observe a law, agreement, or code of conduct.” Basically when an HOA board is in violation of almost anything required of them it is a breach of their agreement as defined in your CC&R’s and often times may violate ARS law as well. Either way, the Arizona Office of Administrative Hearing may be a viable third option. The big question to ask yourself in this scenario is: can you prove it to a hearing judge with solid written evidence. If you have seen evidence that a board is doing anything outside of an open meeting or anything else for that matter that does not fall within the ARS laws that protect your rights, track it carefully. The BOD previous & current meeting minutes, agendas and other HOA records are available to members on request. All HOA boards have to keep a record of their actions taken via meeting minutes.
I know that the AZ office of Administrative Hearings is not a for sure thing. However if a HOA board is so far out of bounds as your story indicates, undoubtedly there should be an trail here that can be tracked and documented.
A $500 dollar investment is a bargain is you have a case that is well documented, and unambiguously violates your governing documents or ARS law. I have won in this arena as well as many others. Many have also loss as well. Read the cases online and many times you will clearly see the reasons for those wins and losses. When I succeeded with my petition against the HOA immediately following that decision two of the three board resigned their positions. I then realized that I shouldn’t have waited so long to file a petition. Keep in mind if you prevail with your petition the HOA has to repay you your $500 filing fee. It’s a huge learning experience for sure, and one that I found worth the effort. I know there is a lot of help and insight available through this coalition.
Robert,
I totally agree with you on this issue. However, I no longer have any faith in the competency of the current stock of administrative law judges since the pandemic. Case after case has clearly demonstrated the bias of these judges to anything presented by the attorney from the association. Clearly, the burden of proof lies in the homeowner filing the petition; if the homeowner is not prepared to present and satisfy that burden of proof, they will lose their case. The association has no burden to prove that they did not violate the law or their governing documents, which all lie squarely on the shoulders of the petitioner. If you want to hire an attorney for your case, you will at least have a chance of getting the proper ruling from the ALJ, but if you are going to hire an attorney, it is cheaper to make your case before a superior court judge and have the entire basis of both statutory and case law at your disposal, that you cannot argue before the ALJ.
I’ve spoken to the acting director of the Office of Administrative hearing on this performance issue of his judges but to no avail. When that office’s sunset review is before the legislature, I will testify that the office has no beneficial value to any homeowner. $500 is a lot of money for some homeowners, and to have a clear and well documented, and proven case presented before a judge and lose the petition because the judge does not know or even understand the law and defers to the arguments of the HOA attorney. That money is wasted.
Dennis
I have contacted the Arizona Department of Real Estate and the attorney generals office. They have suggested I send a letter to the Duty Agent at the AG as this likely may be a criminal complaint. HOAs cannot arbitrarily start charging transfer fees that are not in the governing documents. If this were the case, HOAs in AZ could start charging fees of $100,000 or more every time a house were sold/transfer.
I am finalizing my letter to mail. What makes this even my concerning is that when the question was raised in an open meeting, the President of the Board publicly threatened to meet me in the parking lot.
John,
You are actually correct. Arizona law in ARS 33-442 prohibits all transfer fees but allows an exception for HOAs and condominiums only if the CC&R’s specifically allow the association to apply a transfer fee and to apply that fee only as authorized. There are no limits established in law on these fees and while I’ve often seen fees as high as $5000 or a percentage of the sale price, I’ve never seen a fee of greater than $10,000. As the price of homes increases you can be assured that the transfer fees will also increase. This law was first put in place in 2010 and modified in 2016 to also allow exceptions for recreation associations like Sun Cities Recreation Association. We were able last year to again modify this statute to prevent association from charging transfer fees for title transfers between related parties. While these fees are quite beneficial to association to build up reserve funds there needs to be some type of limit as to how high these fees get. The problem is that if an upper limit of say $5,000 is applied to law every association that currently changes a lower fee will suddenly raise that fee to $5,000, because attorneys will tell association to raise their fees to the max. Attorneys don’t care about what that means to any homebuyer or to the members of the community.
In general, I believe that if applied reasonably these fees are actually a buy-in to the contributions to the reserve accounts that previous homeowners paid into but never realized any benefit from those investment in the future. New homebuyers get the advantage to those previous payments for improvements that will be made to common property during their home ownership.
Unfortunately, common sense and reasonableness go out the window in these communities based on the misguided and careless advice of attorneys and community manager.
ADRE will and cannot do anything relative to these issues and neither can the AG. They are allowed by law. Currently everything related to these communities other than embezzlement and violation of federal law, is a civil issue and not criminal. I’m not saying that some behaviors and actions should be criminal, i’m just saying that currently none are.
Dennis
Dennis,
In regard to your comments on my previous reply I totally agree with you regarding the petitioners burden of proof responsibility. On most of the cases that I have carefully reviewed that preparation stage is often the biggest determining factor that results in loss cases.
If I may ask, to your knowledge can a petitioner use previous closed cases within the Arizona Department of Administrative Hearing as it relates to ones own petitions? I will be filling a petition soon for the same ARS violation that I filed two years ago and won, (same HOA board.
Thanks again
Bob
Yes you can many cases have directly used my open meeting law case from 2011 in their individual petitions and arguments and all have won their petitions.
Dennis.