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Transfer Fees

12/01/2019 9:06 AM | CAI Rocky Mountain Chapter (Administrator)

Community Associations Institute (CAI), the leading international authority on community association governance, management, and education, would like to present a few facts with respect to fees charged during the sale of real estate.

The term “transfer fee” is loosely used to describe three different fees, or a combination thereof, some or all of which would be applicable to any community association.  Because these fees are collected at the closing where property is bought and sold, they are generally referred to as “transfer fees” and are as follows: 

  1. Resale Disclosure:  State law and good business practices suggests or requires that a community association disclose important documents and financial information about the community association prior to closing so that buyers understand the respective rights and responsibilities of owners and of the community association. This will also involve a questionnaire being responded to in writing by the community association or its agent, which varies by lender and involves risk to the responding party. It is critical this information is accurate, complete, and up-to-date; therefore, CAI members support the preparer's right to charge a reasonable fee to compile and produce such documents.
  2. Owner Transfer: When there is a transfer of ownership in a community, an administrative process is undertaken to ensure a smooth transition of records and ownership in the community association.  Each community may differ in what is required during the transition process and therefore the related fees will vary.  This takes time and effort by those providing this service.  CAI members believe that the market should determine the related fees. 
  3. Long-Term Reserve Fund:  The term transfer fee may also be used to describe a fee paid to fund a long-term capital reserve fund.  This fee is charged by some communities as a mechanism to fund reserve accounts used to increase the possibility that monies are  available in the future to fund capital improvements like roof replacement, private street maintenance, common areas, drainage systems, and the like.

Many community associations engage professional managers and / or management companies to fulfill and comply with their obligation to provide financial reports and documents for a successful resale of a home within their community.   These services cost money. If they are not charged to the parties who are buying and selling the property at issue, then they will be borne by all of the other owners within the community association who are not selling their property.

With nearly 2 million people in Colorado living in community associations, there are bound to be some complaints.  However, the legislative framework in Colorado is comprehensive and balanced.   We urge you to consider the facts.  According to the Foundation for Community Association Research, 90 percent of people living in community associations say their community association’s rules protect and enhance property values (62%) or have a neutral effect (28%); only 4% say the rules harm property values.

80% percent of residents surveyed nationally oppose additional regulation of community associations.  Importantly, 86% percent of residents rate their community association experience as positive (63%) or neutral (22%).  

It is indeed important that homeowners fully understand the community association housing model and their respective rights and responsibilities.  Homeowners can do so by visiting CAI’s Rocky Mountain chapter for additional resources. 



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