Private Transfer Fee Covenants

The Federal Home Financing Agency (FHFA) plans to issue  a proposed rule  regarding private transfer fees.   FHFA incorporated the following CRE core recommendations into the proposed rule:

1.      If FHFA is to regulate private transfer fees, then it should do so by issuing a rule rather than guidance.

2.      Any regulation issued by FHFA should include a carve out exception for private transfer fees that directly benefit the encumbered property.

CRE also commends FHFA for listening to the many voices expressing their concern on CRE’s interactive public docket (IPD) for private transfer fees.  CRE invites FHFA to continue to review the CRE’s IPD on transfer fees available at http://www.thecre.com/tForum/.

CRE has completed its review of  the transfer fee issue and has submitted its findings to FHFA.  The CRE report is attached hereto.

CRE’s recommendations are based upon an extensive review of the many comments it received on the Interactive Public Docket dedicated to this subject matter. CRE expresses its appreciation to the many stakeholders who participated in this review.

Transfer Fees final Jan 19

Attached please find an analysis regarding the impact of transfer fees on the cost of homeowership. Private transfer fees offer consumers the opportunity to pay less for their home today in exchange for the obligation to pay a transfer fee upon sale. A PTF changes the economics of the real estate transaction by lowering the cost of ownership; a buyer who pays less for a home today will save on various costs associated with homeownership, including closing, carrying, and opportunity costs.

Attached please find an analysis regarding the impact of transfer fees on the cost of homeowership. Private transfer fees offer consumers the opportunity to pay less for their home today in exchange for the obligation to pay a transfer fee upon sale. A PTF changes the economics of the real estate transaction by lowering the cost of ownership; a buyer who pays less for a home today will save on various costs associated with homeownership, including closing, carrying, and opportunity costs.

December 21, 2010 marks the tenth anniversary of the Data Quality Act (DQA), also known as the Information Quality Act, 44 U.S.C § 3516, note.

The DQA has deep roots developed over nearly a half-century as the result of a seed planted during the Johnson Administration which germinated in the Nixon Administration, was watered by the Carter Administration and whose product was harvested by the Reagan Administration, made available to the public in the Bush I Administration and subsequently enhanced by the Clinton Administration and promoted by the Bush II and Obama Administrations. See: http://thecre.com/ombpapers/SystemsAnalysisGroup.htm and http://thecre.com/quality/20010924_fedinfotriangle.html

On December 13, New Jersey became the 19th state to ban private transfer fees. New Jersey’s ban on private transfer fees contains a carve out exception for transfer fees paid to homeowner associations, cooperatives, and charitable organizations. In addition, New Jersey’s ban on private transfer fees does not apply to existing covenants established prior to the law. New Jersey’s law banning private transfer fees comes ahead of FHFA’s anticipation regulation on transfer fees.

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1. Yes, a rule should be issued. A rule is definitive whereas guidance opens the door to various and vague interpretations.

2. Yes, an environmental impact statement on the transfer fee proposal will show the impact that will be felt by hundreds of thousands of Community and Property Associations around the country. It will also show the trickle-down effect that impacts employees of those associations as well as the residents that live in those associations.

This proposed rule would effectively bar the use of the Flip Tax. In New York State, where I serve on the board of a pre-war, middle-class co-op building, the Flip Tax is used to build up reserve funds in order to make essential repairs to aging housing stock; repairs that would otherwise necessitate possibly unaffordable assessments to shareholders. The Flip Tax is not used as a way to make a quick buck in New York: rather, it is one of the few ways to maintain older buildings without placing undue financial burdens on middle-class shareholders.

Jenny Dubnau
Jackson Heights, NY

The flip tax deterred me from buying a coop. I understand most coop in NYC has flip tax and keep their maintenance fee low. However, many coop has insane flip tax, 10% of total sale price, 25% of profit are not uncommon. I understand long term coop residents who support flip tax. They never planning on leaving the coop, and never have to worry about resale or flip tax. For young people looking to buy their starter home and sell when they have kids, coop suppose to be the only affordable option in NYC, With flip tax, this option is gone.

CRE Proposed Recommendations TF 3