Arkansas has become the 22nd state to restrict 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.
NAR and ALTA are the lead organizations in the Coalition to Stop Wall Street Home Resale Fees, which contends that the charges amount to nothing more than a dangerous financial scheme that steals home equity, lowers home resale values and adds another layer of difficulty to selling a home.
Arkansas joins Arizona, California, Delaware, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Nebraska, New Jersey, North Carolina, Ohio, Oregon, South Dakota, Texas and Utah in restricting the fees.
On the federal level, the Federal Housing Finance Agency is moving ahead with a rule that would prohibit the government sponsored agencies from dealing in mortgages on properties encumbered by "certain" private transfer fees. The proposed rule would exempt transfer fees paid to homeowner, condominium and cooperative associations as well as certain tax-exempt organizations. But otherwise, Fannie Mae, Freddie Mac and the Federal Home Loan Banks would be barred from dealing in loans on properties saddled with fees that do not directly benefit the property.
