On the House: Private transfer fee imbroglio

I wrote a few weeks back about private-transfer fees and efforts to block them in Pennsylvania and other states.

Although that column included someone opposing efforts to prohibit such fees, the folks at the Community Associations Institute - whose members include homeowner, condo, and cooperative associations - seemed to think I didn't go far enough to tell their side. So, to be fair, an explanation, their side, and the opposing view follow.

Many a new-home sales contract contains a private-transfer fee, also called a capital-recovery fee, requiring that the developer be paid a sum - typically 1 percent of the sale price - each time the house is resold, up to 99 years from the original sale date.

The Pennsylvania Association of Realtors is urging the state to join 12 others in prohibiting such fees. The ban is supported by the American Land Title Association and other groups.

On the other side of the argument is the new Coalition to Preserve Community Funding, created to fight efforts by the Federal Housing Finance Agency to restrict Fannie Mae and Freddie Mac from purchasing mortgages encumbered by private-transfer fees.

"For months, I have heard the Realtors and title companies peddle myths about private-transfer fees," said Jaime Arechiga, a Texas developer and coalition member. "I know firsthand how PTFs can offer a path to overcoming difficult economic times, keeping my workers employed, and making homes more affordable."

A bill introduced in the U.S. House would require "clear and prominent disclosure" of private-transfer fees, the coalition said.

From the coalition's viewpoint, the fee is simply a real estate financing tool that allows developers to spread the high up-front infrastructure costs of new developments - things such as sewer lines, roads, and water pipes.

The group says private-transfer fees have been in use for many decades and are "legal covenants that attach to property and are filed in the office of the public records, easily found by ordinary diligence."

Nationally, about 10 million to 12 million single-family homes are subject to private-transfer fees, the coalition says.

The Community Associations Institute says it recently surveyed its members across the country in September for information it could use to persuade the Housing Finance Agency to change its mind about the need for the fees. Among its findings: