DRAFT HOA Transfer Fees: Status Letter and Updating Records Frequently Asked Questions

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1 What part can DORA play in eliminating or limiting the TF on HOA home sales? Would restricting CAM income in/by their relationship with the HOA through licensing and that which is in their contract with the HOA effect abusive TF/SL fees? Does the TF on sales of homes in HOA s involves extraordinary work effort and labor thus warranting a special assessment on the home seller. None or nothing effective. DORA doesn t make the law nor can it modify the law. It can t limit the fee to a dollar amount or the means to collect the fee. No, as long as there is no dollar limit or elimination of CAM charges in the conveyance of property (home ownership change) the current problem of excessive fees imposed on home sellers would continue. Most likely those CAM s that depend on this income to increase their profit margin would find a way to rename or repackage this fee to ensure they can continue to low bid a contract knowing that along with contract award comes the added revenue of TF NO: the TF involves the primary tasks 1) issuance of a SL indicating the financial status of the seller with the HOA : are dues current, outstanding infractions with covenants, special assessments. This information is produced each month via computer applications for all residents and HOA reports. The process doesn t require additional labor or cost to produce and such work is already compensated for via the CAM contract with the HOA. Many HOA s/hoa CAM s provide requests for SL s free of charge and multiple requests don t result in a fee. Thus the contention that this is extraordinary work justifying hundreds of dollars of assessments to the home seller is false. 2) updating HOA records to reflect the home sale. This is routine work similar to what occurs in divorces, marriages, deaths, or any other change in occupants in a home. Routine work that does not impact cost of operations and already compensated for in the CAM contract. 3) issuing a welcome package to the new resident. Some communities issue a welcome packet with baseline community information and mostly accompanied by coupons from local vendors who pay for the distribution of their advertising. Preparation and distribution in many cases is completed via volunteers and this is actually a profit making task. Any special TF/SL assessment can t be warranted

2 Is TF is an assessment on the seller of a home in and HOA to compensate a CAM (or HOA that is self -managed) for extraordinary expenses in the conveyance of property? Is the TF assessment reasonable and related to the costs incurred and is it consistent among HOA s, is the work completed the same among CAM s, and are such charges to home sellers well documented on an invoice.? Do any CAM s or HOA s provide SL without an assessment? Do HOA s assess homeowners to update their records in response to divorce, deaths in family, marriage or to add, change, or delete their security profile or entrance cards? Is this work similar to a home sale? Many HOA s don t charge for the SL. Does this result in other homeowners paying for that task via their HOA dues? Does the TF/SL assessment benefit the HOA or CAM or penalize the home seller or by extraordinary or even minimal costs associated with the task. The mandatory fee appears to be unrelated to work performed and mostly assessed because it can. A minimal assessment of $50 or less to complete such tasks with documented evidence of such extraordinary costs is acceptable. NO, in fact the issuance of a SL is a no-fee task with many CAM s. Updating HOA records to reflect name changes is routine and already compensated for in the CAM contract. Mostly NO. Those CAM s charging $50 or less TF are considered reasonable if such expenses can be documented as extraordinary. The fee in most instances for the same services performed is not consistent and somewhat arbitrary. The fee ranges from zero to $50 to over $450+. Some CAM s charge for work already completed by a title company or realtor (liens on property, providing HOA documents, etc.) Homeowners are rarely if ever provided a detailed invoice on the TF. The charge for a SL in many HOA s is zero but is the justification for charging hundreds of dollars in another CAM. Yes, in fact some HOA s charge zero and even issue multiple SL s as needed with no assessment. NO assessment to update records or change security profiles. YES the work is very similar to that required in a home sale. NO. This is ordinary, routine, and expected work of residents via their dues. Charging for this letter appears to be charging twice for the same task. It does not benefit the HOA as the HOA doesn t receive the money it goes to the CAM. It benefits the CAM by allowing them to low ball bids knowing this is supplemental income. The home seller is paying twice for the same expected services and being penalized through this mandatory, non-negotiable, and unknown fee

3 What is the intended purpose of the SL/TF? Is this valid and used as intended? Does the TF inhibit competition among CAMS for HOA business Are there CAM s and HOA s that limit their TF to $50 or less and have successful businesses? Is the TF assessment imposed so other HOA residents don t get stuck with the cost of the TF/SL? Do HOA governing documents require a TF and are home buyers aware of what the TF/SL is? Is the TF assessed to compensate for researching liens on the property and filing documents with a government. Can an HOA home owner sell their home without paying a TF? Does the responsibility to complete the SL cause the CAM to purchase special liability insurance? To pay the CAM for uncompensated expenses not included in the contract with the HOA. No extraordinary expenses have been identified. The fee appears to be used as supplemental income to allow for low balling contract bids. YES. Large CAM s that charge the higher TF fee are using their relationship with the HOA to impose this non-negotiable and mandatory fee on the home seller. This practice supplements their income beyond that paid to them by the HOA contract and allows for low balling a bid. Smaller and less capital backed CAM s can t rely on the erratic income from a TF and base their bids for HOA contracts on cost plus a profit margin. Any expected income from a TF plays a minor part in their business model as fluctuations in this income come be more detrimental than with large CAM s. Yes and quite successfully. Their bid on CAM services to HOA s doesn t depend on the erratic TF income from home sales but the cost of operations. No, the home owner is already paying for all services related to the SL and administrative tasks through their dues. If the cost to complete the tasks are extraordinary why do major HOA s not charge for the SL and on $50 for the TF NO, HOA governing documents don t mandate a TF, don t mandate the amount, and don t retain the fee. HOA home buyers not required by law to pay the fee but can t sell their home unless they do. They are not aware of this fee even up to the day of closing and receive no detailed invoice on the charges. NO The title company researches liens and all filing of official documents with the county government are completed by other than the CAM Probable not. The Title Company most likely will stall the closing if not completed. NO. CAM s and HOA s already carry liability insurance and the completion of SL s have no impact on their premiums. The work involved and integrity of data of those charging $50 vs $450 is

4 the same. Is the information provided with a CAM charging $450 have more integrity than one charging $50? Does the TF generally includes a status letter and tasks to update HOA records and other administrative and financial tasks? Why do some separate these tasks.? Is the amount of TF negotiable? Will HOA contract costs to CAM s increase if the TF/SL fees are eliminated or limited? Is the cost to produce the SL letter the main reason the TF is charged? The transfer fee involves extraordinary costs incurred by the CAM NO and the same information is presented by both. CAM s releasing incorrect information are accountable for their actions under either case. Yes, it generally includes both but some separate the tasks. Some CAM s provide the SL as a base line service to the HOA and thus no cost to the homeowner and then when the home is sold assess the seller a transfer fee. NO. The CAM/HOA possess the information and it is impractical, time consuming, and costly to send the information to a third party to produce the SL. Probably not and most likely NO. Those companies that bid on HOA contracts based on services performed will not be effected. HOA subcommunities with their own CAM will be uneffected since they don t charge this fee (it goes to the parent HOA). Those CAM s charging $50 or less and are successful will only gain more business as they are more competitive and efficient. Note, when this fee was made illegal for all non-hoa home sales no known businesses were financailly harmed or bankrupted. This contention appears to be empty. Some CAM s claim this to be true but then why do many HOA s issue one or more SL without charge to the homeowner? False. The transfer fee that is justified to reimburse the CAM for extraordinary costs of SL s and admin records update due to the sale of the property is not supported by fact. Many CAM s provide the SL or multiple SL s free (no charge) to requesting resident. If the seller backs out of the sale, the buyer fails to commit, or other reason the home sale is not successful and one or more SL s have been issued, the CAM doesn t charge for this service. Thus SL s are not material in labor or material but ordinary tasks realted to the CAM s contract with the HOA. The other component to the TL, admin records update and issuing welcome

5 Is the TF is a known expense and understood to be a fee to all home owners when they sell their house? The TF is like other fees in a real estate sales transaction HOA home owners can sell their home by themselves and avoid a TF The transfer fee is used by CAM s to enhance their revenue and net profit more than to recover the cost of the task? The transfer may be illegal as the home owner is not apprised of this fee when buying their home. Do homes sold in an HOA s that has subcommunities get assessed twice for the same TF? packets to new residents, are not labor or material intensive but routine task similar to requiring changes in records for divorce, marriage, death, etc. Neither of these tasks require additional labor for the CAM or additional liability insurance to warrant the work of staff (all CAM s already have liability insurance and such cost is not influenced by these tasks). NO: the fee is first learned about during closing procedures on the home purchase. Home buyers believe that the HOA requires the fee, it is a legal requirement, the HOA pockets the fee, and the amount is a standard fee. No invoice or detailed description of services provided for the fee is provided to the buyer. NO: see previous answer. Also, a homeowner can shop the market for a real estate commission and also shop the market to select a Title insurance company. The home owners can t shop the market as the CAM that services the HOA possesses the data to complete TL tasks and by default the home owner must use and pay the CAM the amount requested. The fee is imposed and must be accepted or there is no home sale. NO. The TL is a mandatory (not legally required) fee regardless of who sells your home. Mostly true for those who charge more than $50 If SL s are completed with no cost the seller in many cases and the work for changing administrative records to reflect the conveyance of property being routine and already paid for via the HOA contract, then why would the fee exceed $50? CAM s use the TF assessment to increase revenue when they win low ball contract bids. Possibly. All fees and financial obligations of an HOA home buyer must be presented prior to the home closing. This fee is never mentioned and/or quantified. True. If a home is in a sub-community of an HOA, the seller pays a fee to both the parent and sub association. There is no measurable difference in work for completing the TF for a home in the main HOA or in the sub-community.

6 If TF/SL fees are made illegal or limited to $50, companies will not be able to turn a profit and HOA dues will have to rise due to higher contract costs with CAM s. Allowable high amounts charged for TF impact competition among CAM s and value to the HOA Is there a difference between the TF and an HOA buy-in fee or prepayment of HOA dues False. CAM s will simply have to stop anticipating the opportunity to charge an inflated TF to make up for low balling their bids to the HOA. Those CAM s that don t count on TF to be successful and and operate their businesses and contract bids based on expenses plus a profit margin and in part minimal income from TF will prosper. An HOA with 400 homes and 40 home sales a year would produce $10,000 to the CAM. If the contract to the HOA would go up this amount this would result in $25 per year per home increase or $2 a month. More than likely the CAM would figure out how to be more efficient or accept that the fact that their profit margin that was subsidized by home sellers will be less. There are profitable companies that charge $50 or less for the TF/SL. True: CAM s that have a business model that acquires contracts with HOA s for a set price and such price is known to be low and not profitable but are dependent on events and income not stated in the contract such as high TF, are not fostering competition among CAM s as they low ball bids to win the contract but subsequently financially burden home sellers with high TF fees to make up for the low bid. YES: The TF is income to a self-managed HOA or CAM. When charged by an HOA it is income to the HOA. When charged to by the CAM it is retained by the CAM. The fee in either case is used to subsidize the entity s income. The fee is not authorized in the HOA s governing documents but is a mandatory upon sale of the home. The fee is not negotiable nor can a home owner shop the market place for a competitive rate: they must use the HOA or the CAM and accept their rate. The TF is not collected to support community capital improvement nor is it a fee for membership in any organization nor is it a prepayment of HOA dues.

7 Will CAM s that charge high TF figure out some other way to rename or repackage the TF so they can continue this practice? The licensing of CAM s and eliminating or limiting the TF to $50 will raise contract costs to HOA and HOA dues? What does the transfer fee cost Colorado HOA home owners? What needs to be done to eliminate or limit TF on HOA home sales? Maybe and that is why any changes to the law allowing this fee must be specific. There is NO evidence this has or will happen. The same was said by some about an the State s HOA registration fee and that never happened. For every 100,000 homes sold HOA home buyers are assessed over $20+ million in TF fees. Remove the verbiage in SB that allowed only HOA home sales to be assessed a TF. Should HOA s/cam s use an assessment against home owners when selling their home to artificially keep HOA dues from rising a few dollars a month? Who opposes ending or limiting the TF? NO, the transfer fee is an arbitrary and unwarranted fee/tax on those selling their home in an HOA to raise operating capital. The result is that home owners in good status with the HOA for years are penalized and ask to subsidize current operations simply because they are selling their home. Furthermore, no home owner is apprised of the fee when they move in and then not made aware of the fee until the time of closing on their home. Organizations like the CAI (Community Association Institute) who represent CAM s oppose any changes to the existing law. They support the exception clause that was inserted in SB to allow only HOA s to assess home sellers a transfer fee.