Who Pays the HOA Transfer Fee: Buyer or Seller?
Discover whether the buyer or seller pays the HOA transfer fee. Understand the factors, documents, and negotiations that determine responsibility in real estate transactions.
When a property within a homeowners’ association (HOA) changes hands, an HOA transfer fee often arises. This fee is a common element in real estate transactions involving managed communities, designed to address administrative requirements for ownership changes. Understanding the nature and allocation of this charge is important for both buyers and sellers as they navigate property transfers.
Nature of the HOA Transfer Fee
An HOA transfer fee is imposed by a homeowners’ association when a property is sold to a new owner. Its primary purpose is to cover administrative costs incurred by the association during ownership transition. These costs often include updating internal records, processing new member data, and providing the buyer with disclosure documents, such as the association’s covenants, conditions, and restrictions (CC&Rs) and bylaws. The fee also helps with tasks like issuing new access cards or updating security codes for common areas.
The amount of an HOA transfer fee can vary significantly between communities and regions. While many fees range from $100 to $500, they can sometimes extend into several thousand dollars. The specific amount is determined by the individual HOA and outlined in its governing documents. This charge is a one-time assessment paid at the time of the property sale, distinct from recurring HOA dues.
Determining Responsibility for Payment
Who pays the HOA transfer fee, buyer or seller, is a frequent question in real estate transactions. Traditionally, the seller often bears this cost as part of the closing expenses. However, this practice is not universally fixed and can vary based on local customs and the specific rules of the homeowners’ association.
The HOA’s governing documents, such as its CC&Rs and bylaws, determine who pays the transfer fee. These documents often specify the responsible party, and HOAs are required to disclose these fees prior to closing. Beyond HOA regulations, some jurisdictions may have state or local laws that provide guidelines or caps on the amount HOAs can charge for these fees.
Despite default practices or HOA stipulations, the buyer and seller can negotiate the payment responsibility for the HOA transfer fee. This agreement is formalized within the real estate purchase contract. Such negotiation can override the association’s default rules or local customs, allowing the parties to allocate the cost as they see fit. For instance, a seller might agree to pay the fee as an incentive to attract buyers, or a buyer might offer to cover it in a competitive market. The agreed-upon payment is settled at closing.
Related Fees and Information Access
Beyond the administrative HOA transfer fee, other charges can arise during the sale or purchase of a property in an HOA. One such fee is the capital contribution fee, sometimes called a capitalization, initiation, or working capital fee. This is a one-time payment made by a new homeowner, intended to bolster the HOA’s reserve funds or contribute to community capital improvements. Unlike the administrative transfer fee, which covers record updates, the capital contribution directly supports the association’s long-term financial health and maintenance projects. These contributions can range from a few hundred dollars to several thousand.
Another distinct charge is the estoppel certificate fee, also known as a resale or disclosure fee. This fee is levied by the HOA to provide an official statement detailing the current owner’s account status, including any outstanding balances, pending violations, and governing documents. This document is part of the due diligence process during closing, providing transparency to the buyer regarding the property’s financial standing within the association. Fees for estoppel certificates range from $200 to $600. These one-time fees differ from regular HOA dues, which are ongoing payments for community operations and amenities.
To obtain information about all applicable fees for a property, buyers and sellers should consult the HOA’s governing documents, such as the CC&Rs and bylaws. The estoppel certificate process is also a direct method for acquiring an overview of all financial obligations tied to the property. Real estate professionals can assist in navigating these disclosures and ensuring all parties are aware of the costs.