January 25th, 2010

When Arizona homebuyers buy into a homeowner’s association, the HOA sometimes charges them a one-time transfer fee.  The fee can range anywhere from $1 to $25,000 or more, and like most fees of this type, transfer fees sometimes generate quite a controversy.  Depending on an individual’s perspective, transfer fees can be seen as a positive or a negative.

Supporters of transfer fees generally argue that they are important for developing a reserve fund for the community.  These funds are frequently drawn from to pay for unexpected repairs.  Revenues generated from transfer fees can be used to repair and maintain common areas and association property, and even make additions approved by the HOA.

Opponents to transfer fees view them quite differently.  Regardless of the benefits that transfer fees may provide, opponents argue that transfer fees make it difficult for members of the community to sell their homes.  This problem, they argue, outweighs any advantages that transfer fees provide for the community.

These competing perspectives have made transfer fees the topic of many legal discussions in Arizona.  In court battles where transfer fees have been disputed, courts tend to allow them as long as they are authorized in the CC&Rs and they are reasonable

Checking the CC&Rs for authority to charge transfer fees is simple enough, but sometimes what is “reasonable” is not so easy to determine.   What is reasonable in one community may be entirely unreasonable in another.  The reasonableness test is subject to factors such as the value of the home and the number of amenities that the association offers.   Communities that are more expensive to buy in and that offer upscale amenities may charge a higher transfer fee than communities that require little maintenance.

If the transfer fee is indeed reasonable and the CC&Rs permit transfer fees, then the HOA is permitted to charge it even if it restricts homeowners’ ability to sell their home.