In Accord with the Law?
Two years ago I wrote about what I believed to be overcharging on many
condominium, planned unit development, and planned residential development
property transfers. Even though this article was published in the San Diego
REALTOR, and the San Diego Union, with copies forwarded to licensing and law
enforcement agencies . . . two years later the situation continues unabated.
Basically, what I�m talking about are the amounts charged for homeowner
documents and transfer fees to California sellers of condos, planned unit
developments and planned residential developments.
Is
$80 for photocopies of 21 pages of homeowner documents just a tad high? What
about a transfer fee of $250? These are just two actual examples of what could
be millions of dollars annually being fleeced from unsuspecting sellers.
The sad fact is that the seller, who pays for the copies of documents, and in
most cases the transfer fee, really does NOT know how much they are being
charged until, and if, they review their closing statement. This is of course,
after the property has closed! By then, in many cases, the seller has relocated
out of the city or state, and are not about to question one of many fees in
connection with their sale. Plus, even if questioned, is an individual really
going to pursue a possible $75 excessive charge? Obviously, and especially for a
relocated seller, this would not be cost effective. What is really sad, is that
from my inquiries, it seems that this blatant overcharging is occurring on a
statewide basis on the majority of common interest property transfers.
This trend continues in part, because it is assumed by sellers, REALTORS and
escrow officers, that these fees are �standard.� Although, the transfer and
document fees are �standard� it�s their costs that are in question!
So, should the question arise, to both escrow officer and REALTOR, �what is this
fee?� although the explanation given is correct, the amount of the
fee is almost NEVER questioned.
Every time I have questioned condominium management companies on what I feel is
an excessive fee, they back off and reduce the fee for my client. What about all
the thousands of other sales where the �transfer and document� fees are never
questioned?
Under Section 1368 of the California Corporation Code, item 5b clearly states
the document copy fee �shall not exceed the association�s reasonable cost to
prepare and reproduce the requested items.� Also, in this same section part
5c states: �An association shall not impose or collect any assessment,
penalty, or fee in connection with a transfer of title or any other interest
except the association�s actual costs to change its records and that authorized
by subdivision (b).�
In
light of the above law why are there $250 transfer fees? Personally, I believe
many management companies are using this as a profit source. In some cases,
management contracts with Homeowner associations are based in part on the
management company retaining all or most of the transfer fees.
As
a former co-owner of a homeowner association management company, I fully
understand all of the work involved by the property manager at the time of a
sale. Of course there are documents to be completed, fees to be collected, names
to be changed, etc. One management company went so far as to write a two page
memo as to the duties involved. Having firsthand experience, I saw clearly
through the smoke screen. In an efficient, automated office all the tasks
combined are only minutes of work. Don�t be fooled by verbose arguments.
Certifications, documentation, balancing out accounts, setting up records . . .
. it�s a few simple tasks for which they collect exorbitant fees.
In
looking out for the interests of our clients, what can we do to help? With the
input of SDAR�s Working Group, perhaps we will soon see corrective legislation.
In the meantime here are a few ideas when dealing with Homeowner associations
and common interest subdivision transfers:
A.
On listings, inquire and collect all the association documents the seller may
have that are required to be provided to the buyer. Inquire directly to the
management company what the cost of the balance of the documents will be. This
way the seller will know what the document charge will be at close. Also,
consider using the condominium check list available at SDAR�s service centers.
B.
Always request the C.C.&R�s through a title company at, or prior to the listing,
where they are usually provided free-of-charge.
C.
Copy the above section of the code and send it along to the management company
with a request that they send a written itemization of what is contained in the
transfer fee and how the amount was calculated. Again, the seller will know
�up-front� what to expect. If they feel it is excessive, perhaps they could
attend a board meeting and show the board members the code section.
D.
On our contract to purchase, there is a space for who will pay the transfer fee.
Why not put down that the buyer will pay? Being a seller�s agent myself, I
almost always counter that the buyer is to pay this cost. Basically, I feel this
is a cost incurred by the buyer. More importantly if the buyer has to pay an
�excessive� fee, he/she by virtue of living in the community can much more
readily address the situation than an out-of-area seller ever could.
E.
After the close, if fees appear to be excessive, send a copy of the code with a
certified letter (on behalf of your client) requesting an adjustment. If they
refuse an adjustment, ask for a detailed written response justifying the fee, in
light of the code. If you do get your client a refund, you�ll always be looked
on as a true professional who went above and beyond to protect your client. This
will also be the case, even if your efforts do not get direct results.
Bob Schwartz CRS, GRI is a member of SDAR�s Common Interest Development Working
Group, real estate newsletter publisher and a broker with
Brokerforyou:
619-
Copyright � 2000/2001 Bob Schwartz, Broker, CRS,GRI This material is subject to copyright and any unauthorized use, copying or mirroring is prohibited.
Cell: 619-300-8819 Home office: 619-286-5604
Postal address: Bob Schwartz c/o Brokerforyou 7966 Laurelridge Road San Diego, CA 92120
