A new and alarming trend has reached Tooele County.  Transfer fees, which can be recorded on a property, have arrived.  Transfer fees are fees that are found on the title of a piece of property that require the selling party to pay a certain percentage of the purchase price to a third party, often a developer, upon sale of the property.  For instance, let’s say that a buyer bought a 1 acre parcel of land for $100,000.  They then built a house, landscaped the property, and made other improvements.  The homeowner then decides to sell the property.  They find a buyer and sell the property for $400,000.  On title it is found that a 1% transfer fee was recorded by the developer for 99 years.   At closing $4,000 will be taken from the sellers proceeds and paid to the developer due to the 1% transfer fee.  This scenario will occur every time the property is sold.

I see many problems with this.  A couple of those are reduced proceeds to the homeowner when they sell and fewer people who will be able to purchase properties that have a transfer fee. 

The homeowner is the person who has spent the time and money to make improvements to their own property.  Why should a 3rd party benefit from their efforts?  Developers may argue that it was their time and money invested that made it possible for the homeowner to build in the development.  Developers should charge enough for their land that they make up the costs they incurred during development.  They should not seek to make additional money later based on the improvements made at someone else’ expense.

There has been talk among title insurance companies that they will not insure properties that have these fees on their title.  If a buyer cannot secure title insurance, they may not be able to secure a loan to purchase the property as lenders require a title insurance policy be issued to protect their interests.  This would limit the number of potential buyers who could purchase a property to cash buyers.  There are not many people who can pay cash!

There is talk at the State level of passing laws that will ban this practice in Utah.  I hope the legislator see the wisdom in this and pass laws to protect property owners during their next session.  Until then, make sure you use a knowledgeable Realtor to help guide you through any real estate transaction so that any pitfalls may be avoided!