BEWARE OF PRIVATE TRANSFER FEES WHEN BUYING REAL ESTATE
REAL ESTATE LEGISLATION, REAL ESTATE PRACTICE, TIPS FOR BUYERS, TIPS FOR SELLERS, TIPS FOR SENIORS
August 9th, 2008
Right around the time the world celebrated the turn of the 21st century, developers in California hatched 
a plan to slip private transfer fees (PTF’s) into their legal title documents imposing a fee on subsequent sales of newly-built homes in the developer’s subdivision. In many cases, the buyers of these developed properties were unaware a PTF was buried in their paperwork because they were hidden in C,C,&R’s or other documents. Only when the buyers decided to sell did they discover a PTF would have to be paid. It is usually a percentage of the sales price. The fee goes to the developer or a third party entity (sometimes created by the developer).
Effective January 1, 2008, AB 980requires any person or entity imposing a PTF must, in order to receive future payment of the fee, record a separate notice called Payment of Transfer Fee Required at the county recorder’s office in the county where the property is located. This notice must include the names of all current owners subject to the fee, the legal description and Assessors Parcel Number (APN), the amount or percentage of the fee, examples of calculating the fee, the date and circumstances of expiration of the fee, the purpose for which the fee will be used, the entity to whom the fee will be paid and contact information. PTF’s imposed prior to the beginning of this law taking effect must also abide by this requirement by the end of 2008 or they will not be able to collect the fee in the future.
The developers typically use the fees to payoff environmental group(s) in exchange for their agreement to drop any legal opposition to the development. Basically, the developer is helping the environmental group fund future battles when these properties are resold and the PTF goes into their war chest. These fees are also used to pay for mitigation measures created by the development. For example, if wetlands are being impacted, the developer may be required to buy wetlands elsewhere and place them in a “land bank” for protection into perpetuity. However, there is no law that requires these fees mitigate or reduce the effects of development. It could be used to fund the developers favorite charity or own retirement!
Realtors oppose PTF’s. Realtors sponsored legislation banning PTF’s but builders and developers fought to protect their right to impose these fees. Realtors and builders found middle ground, agreeing if such fees were going to be allowed, they must be clearly disclosed by developers creating these fees or sellers already straddled with them. Fortunately, no fees by local developers have been implemented in the Redding/Shasta County area. Here’s a short list of some of the developments that may have PTF’s:
- Lennar Homes and Freehold (statewide).
- Westpark Project (Roseville).
- Gray’s Crossing (Truckee).
- Martis Camp (Placer County).
- El Rancho San Benito (San Benito County)
PTF’s range from 0.05%-1.75% of the purchase price. Some are a flat amount not dependent on the purchase price. This can be a significant sum of money in the higher priced areas of California where these fees are imposed. Which properties are more likely to have PTF’s?
- Properties built by developers known to impose PTF’s (see list above).
- Subdivision properties.
- Properties in developments where there is or has been litigation filed by a non-profit entity regarding the development where the property is located.
- Properties built after 2000.
The following sellers are exempt from the new disclosure requirement:
- Probate sales
- Foreclosure sales
- REO Sales
- Bankruptcy sales
- Certain Trustee sales
- Sales of commercial, industrial,vacant land, and 5 or more residential unit complexes.
If you have any questions about this or any other matter, please don’t hesitate to call. Free, no obligation market analysis for sellers and loan prequalification referrals to buyers. For expert buyer or seller representation:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
25 YEARS LOCAL REAL ESTATE EXPERIENCE
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Hello,
We are fighting DMB in Redwood City and I found your article to be most enlightening.
How did you come to suspect Martis Camp and what proof do you have that this may be the case. Can you provide documentation?
Excellant work and the community owes you a debt of thanks for publishing this info.
Cynthia Denny
Wetlands Chair
Loma Prieta Chapter of the Sierra Club