What an HOA “Transfer Fee” Is—And What It Is Not

Jim Slaughter

The term “transfer fee” is used in North Carolina incorrectly all the time. Misuse is common even among professionals. Recently I’ve heard both real estate brokers and real estate attorneys refer to items as “transfer fees” that were not. Since there is a statute that regulates and can even prohibit improper transfer fees, it’s important to use the correct term.

Let’s start with a bit of background. Since 2010 North Carolina state statute has defined a transfer fee as a “fee or charge payable upon the transfer of an interest in real property . . . regardless of whether the figure charges a fixed amount or is determined as a percentage of the value of the property.” There’s more to it, but basically to be a transfer fee, the amount has to be:

  • An amount charged each time a property is deeded from one owner to another
  • The amount is owed due to language in the filed covenants or restrictions (often called the “Declaration” or the “Declaration of Covenants, Conditions & Restrictions” or the “CCRs”)

Such charges required by a declaration upon sale are sometimes referred to as a “capital contribution,” “capital reserve fee,” “initiation fee,” or something similar.

In 2010 the NC General Assembly adopted state statute 39A-3, which greatly limited the ability to charge transfer fees to successive owners going forward. For a community association created after July 1, 2010, it is generally inappropriate to have a transfer fee that is charged each time the property is resold. However, a one-time payment to the homeowners association on the first transfer of the property from the developer to the initial owner is acceptable. NCGS 39A was not made retroactive and does not generally apply to transfer fees in HOA declarations filed on or earlier than July 1, 2010.

The term “transfer fee” is used in North Carolina incorrectly all the time. Misuse is common even among professionals. Recently I’ve heard both real estate brokers and real estate attorneys refer to items as “transfer fees” that were not. Since there is a statute that regulates and can even prohibit improper transfer fees, it’s important to use the correct term.

So what is NOT a transfer fee? Any charges that might be permitted for setting up a new homeowner or are related to obtaining pay-off statements for assessments, etc. NCGS 39A specifically notes that the definition of “transfer fees” does not include “any reasonable fee charged for the preparation of statements of unpaid assessments pursuant to G.S. 47F-3-102(13) or resale certificates or statements of unpaid assessments pursuant to G.S. 47C-3-102(12).” Calling such items “transfer fees” can lead to confusion and even claims that state law is being violated when it is not. That’s why we encourage those in the industry to use the right terms!

For assistance with transfer fees or other HOA / condo issues, contact one of our community association attorneys in our Greensboro, Charlotte, Triangle or Coastal offices.