HOA Transfer Fee: Who Pays, the Buyer or the Seller?
Demystify HOA transfer fees in property sales. Understand their purpose and how payment responsibilities are established.
When engaging in property transactions within planned communities, individuals often encounter various fees associated with homeowners associations (HOAs). These associations are organizations established to manage and maintain common areas and enforce rules for properties in a specific development. A common charge that arises during the transfer of property ownership in such communities is the HOA transfer fee.
Understanding HOA Transfer Fees
An HOA transfer fee is a one-time charge levied by a homeowners association when ownership of a property within its jurisdiction changes hands. This fee covers administrative expenses incurred by the association during the ownership transition. These costs often include updating official records, providing new owners with governing documents, and processing necessary disclosures.
It helps cover the costs of preparing and distributing essential documents, such as the Covenants, Conditions, and Restrictions (CC&Rs), bylaws, financial statements, and resale certificates. Unlike recurring regular assessments that cover ongoing maintenance or special assessments for specific projects, the transfer fee is a distinct charge applied only at the point of sale. These fees typically range from $100 to $500, though in some instances, they can reach several thousand dollars, depending on the community and its location.
Identifying the Responsible Party
Determining who pays the HOA transfer fee—the buyer or the seller—does not follow a universal rule and can vary significantly. While sellers traditionally bear this cost as an expense of transferring ownership, it is also common for buyers to cover it as a cost of joining the community. In many transactions, the responsibility for payment becomes a point of negotiation between the parties, with the outcome ultimately stipulated in the real estate purchase agreement.
Several factors influence this determination, including local real estate customs, which can vary by region. Although HOAs authorize these fees in their governing documents, these documents typically do not specify whether the buyer or seller is responsible for payment. Some jurisdictions may have statutes governing how these fees are disclosed or even capping the amounts.
Handling Fees in Real Estate Transactions
The practical management of HOA transfer fees occurs throughout the real estate transaction process, with clear disclosure being a primary component. Both buyers and sellers are informed about these fees through various channels, including listing information, seller disclosures, and comprehensive HOA disclosure packets. These packets often include crucial details about the association’s financial health and operational procedures.
The actual payment of the HOA transfer fee almost always occurs at the closing of the transaction. This ensures that all administrative tasks related to the transfer are completed before the new owner assumes responsibility. On official closing documents, such as the Closing Disclosure or Settlement Statement, the fee is itemized, clearly indicating which party is debited for the amount as agreed upon in the purchase contract. It is important for both buyers and sellers to carefully review their purchase agreement and all closing documents to confirm the agreed-upon allocation and ensure accuracy.