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AB 1139 Transfer Fee Disclosure

ยป Posted August 15, 2017News

Existing law allows various required fees to be included in the price of a residential real estate transfer. These include public fees, such as transfer taxes and document recording fees as well as private fees, such as those charged by a homeowner association. Private transfer fees (PTFs) are fees required by the developer and are paid by each homebuyer as part of each sale. The money generated from each sale is usually earmarked for some specific cause, like environmental mitigation or the development of affordable housing in the locality. In some cases, the homeowners association is the recipient of the money.

In recent years Freddie Mac and Fannie Mae-backed mortgages require that the funds from a PTF have a direct benefit on the home being sold. As a result, some owners that have PTFs attached to the property, which do not directly benefit the property, may have a difficult time finding financing. This is because Fannie Mae and Freddie Mac own or insure more than half of the mortgages in the country.

The law will now require a specific advisory notice to be recorded by the entity seeking payment of PTFs created after February 8, 2011, with some exceptions. The notice will essentially inform a prospective purchaser that the PTF may cause problems with financing.

AB 1139 was drafted out of concern that there is not enough transparency and, as a result, prospective buyers may not recognize possible financing limitation. Not surprisingly, the California Association of Realtors promoted this piece of legislation.