New Jersey has become the 19th state to restrict the use of private transfer fees which require a percentage of a home's sales price be paid to a private third party each time the property is sold, often for up to 99 years.
The controversial fees, sometimes called a "property transfer fee," occur when the builder adds a covenant to the deed of each new home. Sometimes the recipient of the fee is a charity or government agency which provides housing for low-income families. But sometimes builders themselves pocket the money as pure profit.
Manhattan-based Freehold Capitol Partners, a leading proponent of the fees, is attempting to bundle the rights to the fees and sell them to investors on Wall Street. Community associations also are advocates for the fees, which they use to maintain common facilities like roads, walks and recreational amenities and fund needed improvements. Without them, associations say they would be forced to raise assessments.
But a full-scale war to ban private transfer fees is being led by the National Association of Realtors and the American Land Title Association, which have complained to federal authorities that not only does the hidden charge increase the cost of ownership, there is little or no oversight on how the proceeds are disclosed, how they are spent or how long the tax may be imposed.
New Jersey joins Arizona, California, Delaware, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, North Carolina, Ohio, Oregon, Texas and Utah in restricting the fees.
Dan Mays, Associate President of the New Jersey Land Title Association, praised Gov. Chris Christie for taking "swift action" in signing the new state law, which bans the fees. "The Governor stood up for New Jersey homeowners by protecting consumers from these predatory fees," said Mays. "This bill is an important step in enhancing consumer protections against these for-profit fees and safeguarding our already fragile real estate market from further abuse."
On the federal level, meanwhile, the Federal Housing Finance Agency has issued a guidance that would prevent government-sponsored entities from investing in mortgages with these fees and Rep. Maxine Waters, D-Calif., (D-CA) has introduced legislation to ban the fees outright.
