Real Property Transfer Fee Interest Definition
A real property transfer fee interest is a future right in all lot sales in a subdivision retained by a developer. This right is retained by placing restrictions, called transfer fee covenants, on the sales. A number of states have banned these restrictions, and the August 16, 2010, publication of the Federal Register indicates that federal agencies may follow.
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Transfer Fee Covenants
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Transfer fee covenants are recorded in the deed records of the county where the property is located. When not prohibited by state law, these covenants generally grant the developer a lien on lots that sell without the transfer fee being paid. The developer may assign the fees or a portion of the fees generated by these covenants to other persons or groups.
Proponents
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According to "RealtorMag," developers and environmentalists have joined forces in some states to support the transfer fee. Some developers provide for payment of a portion of the fees into a trust to benefit an environmental agency. Environmentalists feel this is a way for developers to financially compensate for their use of undeveloped land. The developers are pleased to have the future lot owners bear the cost to the environment.
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Opponents
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Many real estate agents fear transfer fees may open the door to other types of fees that benefit varied parties and will eventually make housing less affordable. Title companies worry that lenders will be unwilling to lend on properties that are subject to these covenants, causing marketability problems with the title.
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References
- Illinois Association of Realtors: Transfer Fee Covenants Banned in Illinois
- Federal Register: Private Transfer Fee Covenants
- Weltman, Weinberg and Reis Co., L.P.A.: Transfer Fee Covenants
- "RealtorMag": Front Lines: Private Transfer Taxes
- "Title News": Transfer Fees May Create Road to Unmarketable Title
Resources
- Photo Credit military housing #1 image by Aaron Kohr from Fotolia.com
