HOA Transfer Fees, What Charges Are Legal, Proper and Acceptable?

A common question, dare I say complaint, of purchasers of property in homeowner associations and realtors who sell them is: "Why are the transfer fee and document costs so high? All you have to do is send over the association documents and they can't cost that much to copy things - 6 cents a page should do it."

There have been two cases in the past two years in California (one very recent) providing binding authority, upholding the concept that although there are some restrictions on homeowner association spending and charges for assessments and other costs, the fees that are charged by a management company for transfer of title and the administrative work performed to assist an association in honoring its obligations under Civil Code Section 1368 are not limited by those statutory restrictions. What does this mean? It means that management companies may include in the costs that are charged to the association a profit margin and buyers and sellers (whomever has to pay the transfer fee) must pay when these costs when charged to them.

This ability to include a profit margin applies to all services that are provided to the association, and all vendors are so entitled.  The judges in the cases made it clear that neither the laws nor the case decisions said the vendors that serve associations are required to operate as nonprofits (even though the association is a nonprofit organization) with fees charged to associations for services that are provided including services related to transferring title records and rights from one owner to another. They also opined that the market place and competition would provide a sufficient mechanism to keep these costs effectively under control.

So what is a commonly accepted "transfer" fee?  I have asked around, and have come up with a range of numbers that seem to be fairly common: around $100 for documents and $225-$250 for the work related to transfer of title and all that entails for companies or vendors under contract to provide services for the HOA. Of course, if there are keys, key cards, vehicle registrations and a host of paperwork outside the usual, or a master-sub association, or litigation requiring extra disclosures - or the like - these fees could be higher. The standard for self-managed associations could very well be less as a profit margin would not be allowed according to the cases.  In other words, associations are more limited in charges that can be made than vendors who have a right to expect a profit.

My information on fees amounts comes from speaking with realtors, title officers, reading cases, and I myself have had personal experience involving purchase of and sale of condominiums. The recent Berryman case confirmed that this range seems to be in the ballpark. Merit is a very large management company and was charging $100 for documents and $225 each for the transfer of title work in two associations, a master and sub-association, because in the case of the Berrymans' property, it was located in two different associations.  The court did not condemn these amounts nor question the reasonableness of them and I think that has some significance. However, the $100 for documents may be high in a self managed association where an officer is in charge of sending out the docs. If the association uses condocerts.com or a service to provide the certification and documents, that may be different. The $225-$250 figures may be high for a self-managed association, as they incorporate the managing agents' administrative costs and a profit margin.

The two cases on this fee issue are:

2007 - Berryman v. Merit Property Management Inc.
2005 - Brown v. Professional Community Management, Inc.

Although these cases proved successful for the management companies required to defend claims of unreasonable behavior, don't think this is the end of the inquiry. For each of the past several years and currently, the California legislature is again reviewing legislation dealing with proposed limitations on transfer fees of various types.

copyright 2007, Beth Grimm, all rights reserved.

By Beth A. Grimm, Attorney. A "service oriented" attorney and member of ECHO and CAI and various other industry organizations in California and nationally, host of the website www.californiacondoguru.com; two Blogs: California Condominium & HOA Law Blog, and Condolawguru.com Blog, and author of many helpful community association publications which can be found in the webstore on her site.