Ownership Transfer Fee Covers Time-Consuming Chores

Question: I recently bought a second unit in a condominium association where I have been an owner for several years. After the closing, the association manager informed me that I owed $175 for an ownership transfer fee.

There is nothing in the association’s governing documents or the management agreement that states that a fee is charged when ownership changes. The manager’s contract simply states that it is the manager’s duty to record changes in ownership and maintain ownership records.

Is a transfer fee normally imposed for this purpose and, if so, what amount would be normal?

Answer: There is almost always a transfer fee that is charged to the buyer or the seller. Transfer fees range from nothing to more than $400. In general, self-managed associations tend to change less than those with professional management. If an unpaid board member is providing the service, a transfer fee might consist of only photocopying costs.

Civil Code Section 1368 includes a long list of documents and disclosure information that must be provided from the seller to the prospective buyer. It states that when the association receives a written request for these documents and disclosure information, the association must respond within 10 days. The association may charge a reasonable fee.

Because it is the manager who usually performs this service, the fee is normally established in the manager’s contract, even though the amount is collected from an individual seller or buyer.

In my opinion, the manager certainly has a right to collect a fee and $175 is reasonable for the complete ownership transfer packet and related services.

Kathleen Windsor, a real estate agent with Tarbell Realtors in Tustin, says, “I have seen transfer fees as high as $400 or more, especially in Orange County, where the property might be in a sub-association under a larger master association. In such a situation, the documents and disclosures may be provided by two different management companies, one for the sub-association and one for the master association.”

On the first page of the standard residential purchase agreement used by the California Assn. of Realtors, there is a place to check whether buyer or seller will be responsible for payment of the homeowner association transfer fees. The escrow company then charges the appropriate party at the time of closing.

You may want to review your purchase agreement and escrow documents to see if an ownership transfer fee was included in the escrow fees that were paid at the time of the closing.

If you acquired the property without the assistance of a Realtor or escrow company, that would explain why the manager is now billing you for the fee.

In my opinion, the services provided in conjunction with transfer of ownership are worthy of reasonable charges.

In general, buyers and sellers are unaware of the large amount of time that a manager spends on an ownership transfer. An itemization of charges would include a long list of services. It is not simply changing an owner’s name on the computer.

Buyers must be provided with complete and current copies of the governing documents, financial statements and disclosures, reserve study, insurance coverage, litigation disclosure and board meeting minutes. An accurate statement of the status of the seller’s assessment account must be prepared.

Usually, lengthy lender documents and disclosures must be filled out. Sometimes there is more than one loan application. The manager may have many phone calls from real estate agents, escrow company representatives, lenders and others. If the property has some form of controlled access, the directory at the entrance must be changed and common area keys must be provided.

Because you already owned a unit in the association, you may feel that some of the disclosure information was superfluous, but each transfer is a separate transaction, and the seller is obligated by law to meet the legal disclosure requirements and lender requirements.

Selective Enforcement Violates Most Rules

Q: Our association has board-established rules, many of which are arbitrary and selectively enforced. Are there any court decisions that give authority to the association or its board of directors when that authority does not appear in the governing documents? Can the board levy fines or monetary penalties to enforce the documents if that authority is not granted in the declaration or bylaws?

A: The board should be fair and consistent with its enforcement policies, and those policies must be distributed to all owners. Most associations have bylaws that give the directors the authority to adopt reasonable rules and enforcement procedures.

Civil Code Section 1363 (g) states: “If an association adopts or has adopted a policy imposing any monetary penalty, including any fee, on any association member for violation of the governing documents or rules of the association, including any monetary penalties relating to the activities of a guest or invitee of a member, the board of directors shall adopt and distribute to each member, by personal delivery or first-class mail, schedule of the monetary penalties that may be assessed for those violations, which shall be in accordance with authorization for member discipline contained in the governing documents.”

Redistribution of the schedule of penalties must occur only when the board’s policies of enforcement are changed.

The Nahrstedt vs. Lakeside Village case upheld the board’s authority to levy reasonable fines for the purpose of enforcing the governing documents. If you feel that your association’s board is not abiding by the law or is enforcing rules inconsistently, seek the advice of an attorney.

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Jan Hickenbottom is a community association management consultant and a founding director of the California Assn. of Community Managers. She selects questions of general interest for the column and regrets that she cannot respond to all questions. Send questions to: Condo Q&A;, Private Mailbox 263, 4790 Irvine Blvd., No. 105, Irvine, CA 92620-1998.