HOA Transfer Fees: What are they & Who pays them

What should I expect when I sell my home, which is located in an HOA? Understanding transfer fees is a crucial part of this process.

Each association is different, and its governing documents drive the transfer fees collected at the close of escrow. 

Examples of fees that could be charged at the closing are: 

Working Capital/Initial Capital Contribution/Community Enhancement Fee

• This part of the transfer fee is paid to the association and will be deposited into the association’s operating account for use at the board of directors’s discretion.  Oftentimes, if a reserve fund fee is not called for in the governing documents, the board will have the working capital fee designated to fund the reserves. The amount collected would be called out in the CC&Rs or in a resolution adopted by the board. This fee is typically paid for by the buyer at closing.

Reserve Fund Fee

• This is a fee paid to the association for the purpose of funding the reserve account to allow the association to properly maintain and replace capital improvements as dictated by the CC&Rs for the association. The fee will be deposited in the reserve account for future use. The Board of Directors typically contracts with a third-party vendor to identify the assets of the association and provide funding strategies so that the association can maintain the assets. This fee is typically paid by the buyer.

Transfer Fees

• This is a fee that is paid to the association as well, and the board of directors oftentimes has the authority, as provided in the governing documents, to determine how the fee will be used. It may be dedicated as a reserve contribution to fund the operating account or, in some states, to offset the cost of setting up the new owner in the association records. This fee is typically paid by the buyer.

Resale Disclosure Fee/Statement of Account Fee/Certificate of Assessment

• This fee is typically paid to the managing agent. The amount is dictated by the management contract that the board has negotiated with the managing agent. State statutes often dictate these amounts. The seller typically pays the fee.

An important item to note is that the fees listed above are not considered an advance payment of assessments nor are they refundable upon any future sales of the property.

As noted above with reference to who pays the transfer fees, this is not always the case as the fees can often times be negotiated between the buyer and seller in the purchase contract. It does not matter to the association who pays the fees as long as they are collected at closing and paid to the association.