Transfer Fees

Greetings All,

Bottom Line up front: In our HOA CR it says developer will receive 1% of sale for the next 25 years; however, Florida Statue prohibits transfer fees. Pretty clear cut, but the issue I'm finding is the CR was created in 2005 and the Florida Statue went into affect in 2008. Here is where I need smart people like you to help, the very last line of the Fl Statue states just because the CR was three years before this prohibited clause doesn't mean it is "presumed valid and enforceable." Can 51% of the HOA vote to remove this from the CR? Is it 'now' illegal? Is the developer "grandfathered in"?

Transfer Fees: This is taking from our CR
Section 11. Transfer Fees. Upon the sale of each Lot subsequent to the original purchase of the Lot in the Subdivision, each subsequent purchaser shall pay to the developer or its successors and/or assigns a sum of money equal to one percent (1%) of the purchase price at the following address (address removed)

Florida Statue 689.28 Prohibition against transfer fee covenants.—
(1) INTENT.—The Legislature finds and declares that the public policy of this state favors the marketability of real property and the transferability of interests in real property free of title defects or unreasonable restraints on alienation. The Legislature further finds and declares that transfer fee covenants violate this public policy by
impairing the marketability and transferability of real property and by constituting an unreasonable restraint on alienation regardless of the duration of such covenants or the amount of such transfer fees, and do not run with the title to the property or bind subsequent owners of the property under common law or equitable principles.
Skip a few para.
(3) PROHIBITION.—A transfer fee covenant recorded in this state on or after July 1,2008, does not run with the title to real property and is not binding on or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee of any interest in real property as an equitable servitude or otherwise. Any liens purporting to secure
the payment of a transfer fee under a transfer fee covenant that is recorded in this state on or after July 1, 2008, are void and unenforceable. This subsection does not mean that transfer fee covenants or liens recorded in this state before July 1, 2008, are presumed valid and enforceable.

Sherri,

The best way to avoid said fee would be to amend the covenants (following the provisions to amend).

Otherwise, you will need to consult with a local attorney to see if the covenant for the fee is enforceable or not.

Sherry,

You need to have an experienced HOA attorney research the issue after securing ALL of the facts and provide you with an opinion.

However, having said that, who pays the 1%?

I have to presume that the 1% is not paid by the HOA, but by the new owner/buyer of the property. If that is correct, the HOA doesn't have a "dog in the hunt" here and the issue is one for those adversely affected to research on their own dime, with their own legal counsel. IMO, those adversely affected should pool their resources together and find an experienced attorney for that opinion (which should end up costing each of them relatively little).

Those adversely affected folks might also consider engaging an attorney to file suit on their behalves to seek declaratory relief, i.e., a determination that the 1% fee is unconscionable, an unreasonable restraint upon alienation or otherwise unenforceable as a matter of public policy.

If and only if you are interested in continuing the conversation (at no charge or obligation), you are welcome to contact me privately. My email is: [email protected]. I am in central Florida (Orlando area), but can refer you to other experienced HOA practitioners in your area of the state if you are outside of mine.

James is correct. If the HOA does not pay nor receive the 1%, it is none of their business. Granted the HOA could change the Covenants but expect some sort of challenge from he who gets the 1%.