How Bizarre Are Transfer Fees?

Activists in Colorado are gearing up to fight one of the most bizarre expenses on your closing papers when you sell your HOA home.

Most people have no idea what that mysterious charge is that appears on your real estate documents. Transfer? From who to whom? It’s a transfer of money from your pocket to the checking account of a ‘mysterious stranger’. The fee can range anywhere from fifty bucks to several thousand. Question the fee and your closing agent will just pack up her briefcase and leave.

Some transfer fees are set up by the neighborhood developer. The fee is mandated as a permanent kickback to him whenever a neighborhood property is bought or sold. Some argue that a perpetual fee paid to the developer effectively lowers the price he charges for developed lots or built-out homes. But it’s simpler than that. It’s a slush fund set up by the developer to benefit the developer. It’s welfare payments to millionaires.

Some activists in Colorado are trying to get the State Legislature to ban transfer fees. There actually was a law passed to ban such fees a few years ago, on all residential real estate… except Homeowners Associations.

Huh?

Yep, Homeowners Associations.  This one’s a little hard to explain. In Colorado the transfer fee goes to the HOA management company. It doesn’t go into the coffers of the HOA to benefit the neighborhood, it just slides into the pockets of the community association manager. Theoretically it pays for research into the status of the homeowner who’s selling his property, such as whether his HOA dues are up to date. But that means the homeowner is paying hundreds to thousands of dollars for the thirty second act of photocopying a piece of paper.

Why would any Legislature ban transfer fees on all properties except Homeowners Associations?

The answer may have to do with the CAI (Community Associations Institute). CAI pretends to be a benign organization set up to protect homeowners. But its actually a 55 billion dollar a year referral organization which lobbies against any legislation meant to protect the property rights of individual homeowners. And CAI is currently staging a massive lobbying effort to defeat any change in Colorado law. Now why would they do that?

Follow the money.

(link to opinion column in Denver Post)

(link to Colorado HOA Forum)

 

 

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About

Ward Lucas is a longtime investigative journalist and television news anchor. He has won more than 70 national and regional awards for Excellence in Journalism, Creative Writing and community involvement. His new book, "Neighbors At War: the Creepy Case Against Your Homeowners Association," is now available for purchase. In it, he discusses the American homeowners association movement, from its racist origins, to its transformation into a lucrative money machine for the nation's legal industry. From scams to outright violence to foreclosures and neighborhood collapses across the country, the reader will find this book enormously compelling and a necessary read for every homeowner. Knowledge is self-defense. No homeowner contemplating life in an HOA should neglect reading this book. No HOA board officer should overlook this examination of the pitfalls in HOA management. And no lawyer representing either side in an HOA dispute should gloss over what homeowners are saying or believing about the lawsuit industry.

17 thoughts on “How Bizarre Are Transfer Fees?

  1. Robert

    I didn’t mention this in my book, because it was outside its scope, but my problems with Madison Hill H.O.A. Inc. started over a $100 “status letter fee” they charged me — without my knowledge — when I tried to sell my town house back in 2006.

    Since then, it has escalated into 3 lawsuits (so far), tens of thousands of dollars spent, and various crimes committed by the H.O.A. board, its business manager, and attorneys. And that’s not even considering the time, stress, and lost-opportunity costs I’ve endured.

    But right-wing blogger Billll assured me via e-mail that his wife “has been in real estate a long time, and says this is bunk. If such a thing existed, you would have found out about it when you bought the place.”

    If you want to see the Libertarian Party and Republican Party vision for America, look at H.O.A.s.

    related links:

    Sleazy Real Estate Developers’ Latest Scam Could Skim 5 Percent Off Your Home’s Value
    Slade Smith. Alternet, October 07 2010

    Homeowners Group Targets HOA Transfer Fees In Colorado
    Evan McKenzie. Privatopia, December 23, 2013

    Private Transfer Fee Covenants
    Evan McKenzie. Privatopia, August 17 2010
    (with a comment by Tom Skiba, president of C.A.I.)

    HOA Tacking On $4,000 Fee To Sold Homes
    Evan McKenzie. Privatopia, September 24 2009

    “An enormous amount of those fees get shuffled off into the pockets of lawyers and property managers. Some of that goes for necessary activities. Some goes to pay making handicapped children use the back door, forcing people to tear down their kid’s swing set or their political signs, or some other preposterous and antisocial enforcement action. Sometimes it goes to pay for elections that would shame a banana republic and quasi-judicial kangaroo courts.”

    Reply
  2. Nila Ridings

    My HOA is full of far left Democrats. It’s one of the worst HOAs in the entire country.

    I don’t think HOAs have anything to do with political parties. Those afflicted with dishonesty and corrupt behaviors come from all backgrounds, races, religions, and political parties. The needle should not be pointed in one or two directions.

    Reply
    1. Ward Lucas Post author

      Nila, I totally agree on that point. To aim HOA disgust at only the right wing, leaves out at least half of the wrongdoing. Idiotic, abusive behavior knows no political boundary lines.

      Reply
  3. Robert

    For those of you who object to my characterization of H.O.A. corporations as “the Libertarian Party and Republican Party vision for America”, riddle me this:

    – H.O.A.s are governance by private corporations under the guise of contract law.

    – The principle of “loser pays” for litigation is often enforced in H.O.A.s. In Colorado, it’s mandated by § 38-33.3-123(c) in the C.C.I.O.A.

    – There are few consumer protections. And those that exist are rarely enforced.

    – H.O.A.s are among the least regulated businesses in the United States.

    What is in that list for the Tea Partying disciples of Ayn Rand and Ronald Reagan not to love?

    It’s nice if you know a Republican who hates his H.O.A. corporation. I know plenty. But find me just one example of a prominent conservative or librarian spokesperson who has been critical of private governance by unregulated corporations under the guise of a some-document-called-a-contract. Just one. I don’t think it’s a coincidence that an epicenter of this whole H.O.A. mess has been the red state of Texas, where they keep re-electing John Carona (Republican), the owner of the largest H.O.A. management company in the nation.

    It’s not as though the Democrat Party has been a friend to home owners. They either offer band-aid fixes or the illusion of reform, without addressing the perverse incentives and moral hazards built into the H.O.A. system. The Community Associations Institute (C.A.I.) has no better friend in the Colorado legislature than state Senator Morgan Carroll (Democrat-Aurora). And as Ward documented in his book (p.111-118), it was a duo of Democrat officials who stole property in an adverse-possession case in the liberal city of Boulder, Colorado.

    But H.O.A. corporations are where conservative and libertarian ideas about privatization are put into practice, and the result has been a disaster. And every time I discuss H.O.A. corporations with conservatives and libertarians, they always come back to “it’s a contract the home owner agreed to, and the government shouldn’t regulate that.” As Evan McKenzie has pointed out, “Anybody who espouses the philosophy of ‘privatism,’ claiming that the so-called private sector is superior to government, has to answer for the obvious and growing problems of homeowner and condo associations.” And those people tend to be Libertarians and Republicans.

    There’s an old Vulcan proverb that says “Only Nixon could go to China.” And if the Republican Party were smart — waits for the laughter to die down — they could not only be on the right side of, but actually lead, this generation’s civil rights struggle. See here (PDF) ; a printable 2-page, 1-double-sided-sheet, flier I’ve put together for distribution at “town hall” meetings with my elected representatives, and those who want their jobs, this year. Or, read Chapter 10 of my book, where I go into my policy proposal in more detail.

    Reply
  4. Robert

    “I support homeowner associations…As far as the real-estate transfer fee goes, I no longer support any government programs for buying open space. America has open space in abundance and government has far more critical things to worry about. However, if a homeowner association decided to impose such a fee on its members in order to improve the neighborhood, as some do in Texas, I wouldn’t have any problem with it.”

    – Randal O’Toole
    comment in response to a review of his book, American Nightmare
    at http://oregoncatalyst.com/17300-book-recommendation-randal-otools-american-nightmare.html ( scroll down )

    Reply
  5. Nila Ridings

    The “red” state of Kansas passed the Kansas Uniform Common Interest Owners Bill Of Rights Act. And one aspect of it allows the homeowner that sues the HOA to request reimbursement of his/her legal fees. So far, a number of homeowners have prevailed against the HOA and received 100% reimbursement of their legal fees.

    Again, I don’t think political parties play a role in HOAs. The bad ones I know of are a mix of political party supporters and all others have the potential to become bad with one vote. In some situations, I’m not even sure the board members are conscientiously aware that we have political parties in our country because they have played the role of a dictator for so long in their own private HOA government.

    Reply
  6. Robert

    Which groups have the following visions for America? More than one answer is possible.

    01. Governance by a private corporation under the guise of contract law.

    [ ] Ayn Randians
    [ ] conservatives
    [ ] Democrat Party
    [ ] Green Party
    [ ] liberals
    [ ] Libertarian Party
    [ ] libertarians
    [ ] progressives
    [ ] Republican Party
    [ ] Socialist Party
    [ ] Tea Party
    [ ] other __________

    02. “Loser pays” rules for litigation.

    [ ] Ayn Randians
    [ ] conservatives
    [ ] Democrat Party
    [ ] Green Party
    [ ] liberals
    [ ] Libertarian Party
    [ ] libertarians
    [ ] progressives
    [ ] Republican Party
    [ ] Socialist Party
    [ ] Tea Party
    [ ] other __________

    03. Absence of consumer protections.

    [ ] Ayn Randians
    [ ] conservatives
    [ ] Democrat Party
    [ ] Green Party
    [ ] liberals
    [ ] Libertarian Party
    [ ] libertarians
    [ ] progressives
    [ ] Republican Party
    [ ] Socialist Party
    [ ] Tea Party
    [ ] other __________

    04. Unregulated corporations.

    [ ] Ayn Randians
    [ ] conservatives
    [ ] Democrat Party
    [ ] Green Party
    [ ] liberals
    [ ] Libertarian Party
    [ ] libertarians
    [ ] progressives
    [ ] Republican Party
    [ ] Socialist Party
    [ ] Tea Party
    [ ] other __________

    Reply
    1. Ward Lucas Post author

      Robert, your posts are always challenging. But this one missed the mark. If you included the category “Lawyers” in each of your points I bet you’d find your final results were massively skewed away from what you’d expect. Should “Lawyers” be considered a political party? Well, when 99% of trial lawyers vote and donate to the same political party, I think you’d have to admit that they’re a massive political force. Where am I wrong?

      Reply
    2. Robert

      Ward,

      Am I to understand that your position is as follows:

      Lawyers donate to Democrats. Therefore, H.O.A. corporations are not consistent with conservative and libertarian ideology regarding privatization“?

      Because you don’t actually come out and say it, but I think it’s what you’re implying. If I’m wrong, let me know.

      Lawyers are not a political party, nor ideology. They are a special interest group. That’s why they weren’t included in the list.

      By the way, what answers did you get for my check-list above? Are you denying that

      – Governance by a private corporation under the guise of contract law
      – “Loser pays” rules for litigation
      – Absence of consumer protections
      – Unregulated corporations

      are conservative and libertarian ideas? And that those ideas are expressed by H.O.A. corporations?

      [ Because my answer is so long, I’ve broken it up into 4 comments. Continued in Part 2 below ]

      Reply
      1. Ward Lucas Post author

        No, Robert. What I’m saying is that if an activist, special interest group like trial lawyers spends 99% of its money trying to get members of a single political party elected and supports everything that party does, then at some point those lawyers look a heck of a lot like the party itself.

        Reply
      2. Ward Lucas Post author

        No, my position continues to be that the HOA nightmare was not created and is not supported mainly by one political wing. It was created by greedy unethical people in all parties. By criticizing Republicans, Libertarians and Ayn Randians for the HOA mess, you miss out on taking aim at many on the left who are also reponsible for this national scandal.

        Reply
      3. Ward Lucas Post author

        I think privatization of many parts of the economy is a good thing. But privatizing neighborhoods and restricting the Constitutional rights of the most private thing any family has (their house) has turned out to be an American disaster.

        Reply
    3. Robert

      “99% of trial lawyers vote and donate to the same political party”

      Lawyer/Law Firm Donations to Party
      in Millions of Dollars

      1990 D 017.5 R 008.0 69% Democrat
      1992 D 041.0 R 015.8 72% Democrat
      1994 D 037.1 R 012.8 74% Democrat
      1996 D 055.0 R 023.7 70% Democrat
      1998 D 044.6 R 016.8 73% Democrat
      2000 D 080.2 R 035.4 69% Democrat
      2002 D 072.6 R 025.3 74% Democrat
      2004 D 138.5 R 047.6 74% Democrat
      2006 D 090.3 R 036.3 71% Democrat
      2008 D 191.8 R 056.8 77% Democrat
      2010 D 105.6 R 031.3 77% Democrat
      2012 D 134.5 R 056.1 71% Democrat
      2014 D 022.5 R 009.5 70% Democrat

      source: OpenSecrets.org, “Lawyers/Law Firms
      scroll down to the “Party Split” graph

      So what types of lawyers are donating money to Democrats? The National Law Journal (October 19, 2010) says

      “Trial lawyers are holding steady as one of the Democratic Party’s biggest sources of campaign contributions, providing a cushion for the party as it struggles to maintain control of Congress in the midterm elections.

      Lawyers who represent plaintiffs in securities class actions, personal injury cases and consumer protection lawsuits have donated millions of dollars this election cycle to Democratic campaigns.”

      Those don’t sound like H.O.A. collections attorneys.

      [ Because my answer is so long, I’ve broken it up into 4 comments. Continued in Part 3 below ]

      Reply
    4. Robert

      “Where am I wrong?”

      You’re conflating “trial lawyers”, who usually represent individuals against corporations, with H.O.A. attorneys and collections attorneys, who usually represent corporations against individuals. That‘s where you’re going wrong. I don’t think anyone is going to accuse H.O.A. lawyers of “representing plaintiffs in consumer protection lawsuits”.

      Here’s 3 exercises to test your theory:

      Ex. 1. Let’s do what you suggested, and add a checkbox for “Lawyers who donate to Democrats” to the 4 items above, and see if it changes anything.

      01. Governance by a private corporation under the guise of contract law.
      [ ] Lawyers who donate to Democrats

      02. “Loser pays” rules for litigation.
      [ ] Lawyers who donate to Democrats

      03. Absence of consumer protections.
      [ ] Lawyers who donate to Democrats

      04. Unregulated corporations.
      [ ] Lawyers who donate to Democrats

      Which of those boxes would you check? Without any evidence that H.O.A. attorneys are overwhelmingly Democrat, I wouldn’t check any of them.

      And how would that change what you checked (or didn’t check) in the other boxes (e.g., [ ] Ayn Randians, [ ] conservatives, [ ] Democrat Party, etc)?

      Ex. 2. Find out who the H.O.A. lawyers and H.O.A. law firms are donating to. I honestly don’t know the answer to this one.

      Ex. 3. OverLawyered.com is a conservative/libertarian web site that describes itself as “Chronicling the high cost of our legal system”. Try to find a story critical of H.O.A. attorneys. Good luck. Unlike exercise 2, I do know the answer to this one. The answer is “zero”; and only 4 links to H.O.A. stories since 1999. It’s not as though there’s a shortage of materials for Messrs. Olson and Frank to draw from. The concern they express for consumers is as sincere as Al Gore’s concern for the environment.

      [ Because my answer is so long, I’ve broken it up into 4 comments. Continued in Part 4 below ]

      Reply
    5. Robert

      Conservatives and libertarians also favor “loser pays” rules, which creates the perverse incentives and moral hazards that drives so much litigation by H.O.a. corporations against home owners.

      The other conservative and libertarian response to litigation for trivial amounts and reasons isn’t to reign in the H.O.A. lobby and its lawyers, but to deny the home owners access to the courts via arbitration. “Courts are for the wealthy and Wall Street” (see also here). For some strange reason, many H.O.A. reform activists take the same position.

      Despite their anti-lawyer rhetoric, conservatives and libertarians don’t really hate lawyers. They just hate the lawyers who represent individuals against corporations. Lawyers who represent corporations against individuals — like H.O.A. collections attorneys — are serving justice, representing the interests of and protecting the rights of their clients. The disingenuousness of the so-called “tort reform” movement is one of the ugly truths about conservative and libertarian thought I discovered after getting involved in H.O.A. issues five years ago. I actually wrote several pages about this in the pre-publication copy of my book, but had to cut that section out to make room for other material. You can read the material about John Stossel that I had to cut out of my book on my blog.

      No other industry litigates against its (so-called) “customers” as much as H.O.A. corporations, especially for trivial amounts and reasons with such dire consequences. If H.O.A. attorneys are as one-sidedly Democrat as you claim, where is the Republican Party response?

      Reply
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