Monday, April 10, 2017

Highlands Ranch resident Stan Hrincevich is determined to push back on HOA transfer fees.

Highlands Ranch resident Stan Hrincevich is determined to push back on HOA transfer fees.: "You are about to sell your house in a local planned community. All the paperwork is ready. You notice a single line item charging you $350, labeled as a transfer fee for “unreimbursed expenses” incurred — usually by your homeowners association’s property management company — during the transfer of the home to a new owner. You don’t get a receipt and you cannot finalize sale of your home if you don’t pay it.

A few hundred dollars in a transaction typically dealing with hundreds of thousands of dollars might not seem like a big deal. But for Highlands Ranch resident Stan Hrincevich the scenario is an injustice that bilks Colorado homeowners out of millions of dollars."


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Thanks to Robert in Colorado for this link. I've posted on this issue before and a number of people have identified transfer fees as a suspect practice that shovels money to property managers who (it is argued) don't do much to earn the fee. Let the comments begin!

5 comments:

IC_deLight said...

There are a number of fees management companies try to extract from sellers or buyers at closing. "Disclosure document fees" and "transfer fees" are but two examples.
Fundamentally the homeowners are not in privity of contract with the management company - so since when can an agreement between the HOA and management company be binding on the homeowners? Answer: it is not.

When ALTA lobbied state legislatures a few years ago to declare these fees unlawful, ALTA and CAI worked a "carve out" for HOAs (and the managing agents). Instead of a law outlawing transfer fees, the "model legislation" is an enabling act for charging a "transfer fee". This is how the management company industry got around the lack of privity problem above.

These transfer fees are nothing but a windfall for HOA management companies who by the way spend the rest of their time finding more ways of extracting money from the involuntary members of HOAs. There is no legitimate basis whatsoever for either a transfer fee by covenant or by management company contract. Such a feudal fee has long been prohibited by common law. FHFA (conservator for Fannie Mae and Freddie Mac) looked at these fees and proposed new rules regarding allowable investments by the GSEs. The rule prohibited investment in any loans secured by properties with transfer fees. You should read the nonsense that CAI members put out. Associa opposed the proposed rule and provided absolute false claims about the purpose, approval, etc. of these fees. FHFA tossed Associa's argument pretty quickly. The end rule prohibits investments unless the transfer fee specifically benefits the collateral property - and a general fee paid to the HOA or the management company does neither - FHFA made that clear. The rule does not currently appear to be enforced BUT wait until those management company contracts and statutes that no homeowner agreed to eliminate about 90% of the lenders for the prospective buyer. Why you ask? Well it's because no one holds onto these loans - they sell them like hotcakes to the GSEs. But if the loans do not meet GSE standards then the loans cannot be sold on the secondary market. If they cannot be sold on the secondary market lenders stop making loans on HOA property - a huge concern for CAI. After all the organization's members needs the help of the GSEs to fund a purchase so that the management companies and HOA attorneys can extract all the equity in the home. EM could write a great article looking at the 2010 FHFA proposed and final rules, the Associa (and management company) letters, FHFA's response, and CAI's public policies.

Deborah Goonan said...

Yes, transfer fees of all types are probably subject to price gouging. That is because the management business is one with a low profit margin. So the industry has invented dozens of other ways to extort money from homeowners and buyers.

I am more concerned about excessive fees piled on during the collection process - especially when the so-called delinquencies are not even validated and the owners (including banks) are not even given proper notice of late payments.

The Tampa Bay Times wrote an Editorial on this subject a few days ago.

http://web.tampabay.com/opinion/columns/editorial-laws-that-get-homeowners-booted-over-fees-need-changing/2318729

I am also very concerned about document fees charged to member-owners for general access to official records, and to buyers for discolsure documents as basic as a copy of the governing documents or most recent budget. The big management firms have created a lucrative side business for themselves, archiving records and putting them behind password-protected web portals, accessible only to those members the board or manager chooses to accommodate, and then, only for a service fee. It amounts to a staggering lack of transparency to members, consumers, and the general public. No wonder there is so little accountability.

robert @ colorado hoa . com said...

Stan was on Shu's radio program three years ago, talking about his efforts back then (Colorado HB14-1254). You can listen to that program here, or read my partial transcript here.

Long story short: the bill morphed from Stan's attempt to limit or eliminate transfer fees to a "disclosure" of management company fees. But the bill does not require that the fees be disclosed to the home owners, but "to the executive board of each HOA for which it provides or offers to provide services". Think about that: H.O.A. corporations were unaware of the fees being charged by the management companies to the home owners. Boards ignorant of H.O.A. fees charged by their managers and lawyers is something I have a lot of personal experience with.

"Several Community Associations Institute (CAI) members attended today's committee hearing to testify in favor of the transfer fee disclosure bill. Those CAI members primarily represented management companies and offered legislators a full picture of the services that management companies provide in exchange for the transfer fees they charge" (Colorado H.O.A. Law, 02/20/2014).

Fast forward to two years later...

According to Stan, "HB 16-1133 was defeated in Committee, February 22, 2016. This Bill was simple, no burden on businesses or taxpayers, and only required HOA property managers (PM), also known as Community Association Managers, to provide a detailed receipt to home owners when fees are paid. The Bill did not preclude any fees from being charged or limit amounts: just provide a detailed receipt of work completed" (emphasis in original). Trying to obtain a detailed accounting of H.O.A. fees charged to me -- including thousands of dollars in illegal fees that were in violation of a judge's Court Order -- is something else I have experienced far more than I ever wanted.

In the Denver Post story, a C.A.I. spokes-bot is quoted as saying the usual things designed to appeal to libertarians and Republicans: “Our position has always been free commerce, free markets. Boards can hire managers based on the fees that they charge”. Meanwhile, a Democrat state senator offers no hope, saying that "protecting [sic] HOA homeowners has been one of the primary issues in her years at the Capitol and agrees transparency around transfer fees is a legitimate concern. The problem she sees — and one that Hrincevich is well aware of — is that even if the state made a law regarding transfer fees, the need would remain for an enforcement mechanism short of homeowners filing a civil lawsuit against and offending company. 'Here is the deal: People can report it but if there needs to be a follow-up with that to the point of enforcement. It’s going to cost more money to increase the staffing (to ensure enforcement) and I’d say there is zero to negative number interested in increasing state government right now'.

IC_deLight said...

As one example of the ALTA/CAI collaboration, look at the transfer fee statute in Illinois. Illinois Realtors® - a trade group for real estate agents - claimed that transfer fees were "banned" in Illinois. See,

http://www.illinoisrealtor.org/transferfeecovenant

This is EXTREMELY misleading and no doubt deliberately so given the manner in which Illinois Realtor® members earn their livelihood (i.e., selling HOA and condo burdened real estate). If you read the statute (Public Act 96-1345) it does purport to ban transfer fees - but then specifically excludes fees paid to HOA, condo corporations, or their "authorized agents" (i.e., management companies) from the definition of transfer fees.

robert @ colorado hoa . com said...

related blog post : "Homeowners Want Changes to HOA Transfer Fees" (04/02/2016, one year ago). Evan McKenzie wrote "Ka-ching, ka-ching, goes the cash register at the property management firm."