Kevin Sherrill says he moved to the Springs at Westport Community in Denver in 2023.
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But, when he went to sell the house this year, he found out he had to pay a 1% transfer fee.
“First time I’d ran across an exit fee or a conveyance fee to leave the neighborhood,” he told Action 9 attorney Jason Stoogenke.
Even more of a shock, he says he’s the third owner, and one of the developers -- Southern Home Management -- hadn’t collected the 1% fee from the first or second owners when they moved. So, Sherrill had to pay all three fees when he closed: more than $4,600 for his and more than $9,300 for the other two.
“It’s unfair,” he said. “I think it’s unfair. A bit immoral.”
Sherrill says he didn’t feel he had a choice. So, he paid and told the person who bought his house about the fee that will apply when that person sells one day. But he’s not giving up on the roughly $14,000 he paid out. He says he’s talking to lawyers.
Southern Home Management emailed Stoogenke that, in this case, the transfer fee is “to repay the personal capital used for the purchase and renovation of the Westport Golf Course in 2005-2006.” The company says they did an audit over the past year and identified properties that hadn’t paid the transfer fee. So, they mailed letters and then got liens.
Southern Home Management pointed out that a title search at closing would pick up on that sort of thing. Closing attorneys are supposed to find any covenants or similar burdens that run with the land.
The company’s full statement:
The Transfer Fee Covenants pertaining to parcels in the Westport Club Development was recorded on 6/11/2010, prior to NC ban on transfer fees. This Covenant is separate from the Covenants Conditions and Restrictions Covenant that pertains to Homeowner’s Association.
The purpose of the transfer fee is to repay the personal capital used for the purchase and renovation of the Westport Golf Course in 2005-2006, and the property that was donated for the Westport Swim, Tennis and Fitness club in 2009. At that time the Westport Golf Course was abandoned and shut down, and the Westport Community Club was nonfunctioning. Both of these facilities are now valuable amenities to the property owners of the Westport Club development. A portion of the fee is returned to the Master HOA, Westport Lakeside HOA, Inc., which provides supplemental income to the HOA.
The Covenant was recorded on the parent track prior to the development and subdivision of the lots for the referenced property. The deed restriction runs with the land, and thus transfers to the subdivided lot and to the sequent homeowner.
The Covenant was disclosed to all of the builders in the Westport Club Development where it was applicable. Typically, the builder discloses this information to the initial home buyer. A complete title search performed for a Buyer at purchase, would reveal the recorded covenant and the obligation of the current property owner, Seller, to pay a 1% fee at the closing.
Unfortunately, some closing attorneys are not performing a complete title search for their clients, where this would be clear to the Purchaser, and the fee paid at closing by the Seller. In most cases the closing attorney picks up this information, and request an Estopple Letter from the Trustee as directed by the Covenant, and the fee is paid.
Upon an audit completed by the Trustee, Southern Home Management, Inc. over the past year, properties that had not paid the transfer fee were identified. The owners were notified by certified mail of the outstanding transfer fees. After a second notice, and several months of inaction by certain property owners, notice of lien was sent, and the lien placed on those properties with an outstanding balance.
Unfortunately, in the case of the homeowner referenced by your email, the two prior transfer fees were not paid. This should have been revealed at that homeowner’s purchase by their closing attorney. Thus, there would not have been such a cost at closing, had it been paid by the previous owner as prescribed by the Covenant, or Deed Restriction on the land.
In this case, Sherrill says the transfer fee lasts about 100 years. So anyone who buys then sells the same house would owe that 1% fee until around the year 2109.
Transfer fees used to be common.
North Carolina basically banned them in 2010, with some exceptions. So -- transfer fees before then -- are still OK. They’re grandfathered in. But -- for the most part -- transfer fees after then -- are not OK.
South Carolina passed a similar law in 2012.
Bottom line: Ensure you know the covenants when you buy a home. Again, all the more reason to hire a solid closing attorney.