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Disclosure of Private Transfer Fees Would Be Required Under Helm’s Legislation

Rep. Sue Helm (R-Susquehanna Township) has introduced legislation that would prohibit the charging of private transfer fees and require disclosure of these fees in real estate purchase contracts, as well as impose liability for violations. 

“This legislation is designed to prevent hidden fees from cropping up on homebuyers and sellers during the closing transaction,” said Helm, who is a real estate broker in the central Pennsylvania area, and noted that these fees impact buyers and sellers.  “With all the costs included in a real estate transaction, private transfer fees can possibly make or break a deal.  Private transfer fees serve no other purpose but to provide supplemental income to a third party.” 

House Bill 442 would amend Title 68 (Real and Personal Property) by creating a chapter that focuses on private transfer fee obligations.  Also referred to as a resale fee or a capital recovery fee, private transfer fees are written into purchase contracts and are levied based on a percentage of the final sales price each time the property changes hands.  A typical private transfer fee is 1 percent and remains in place for 99 years. 

The following charges would not be included in the definition of private transfer fees: 

  • Fees payable to private communities by members of homeowner associations.
  • Fees that do not bind successors in title, including mineral estates and surface access rights.
  • Commissions to real estate brokers.
  • Interest, charges and fees payable to a lender pursuant to a mortgage, deed or trust.
  • Rent, reimbursement and charges payable by a lessee to a lessor.
  • Assessments, fees and fines imposed by and payable to a governmental authority.
  • Payments for extraction of timber, crops or minerals, including gas, oil and water. 

Helm noted that her legislation also would require disclosure of private transfer fees during the contract process.  A contract that does not conform to this requirement would not be enforceable by the seller against the buyer.  Additionally, the buyer would be entitled to a return of all deposits involving the sale of the property.  If disclosure is not made and the buyer discovers the private transfer fee after title to the property has been transferred, the buyer would have the right to recover damages, such as the amount of the private transfer fee and legal expenses. 

In addition, House Bill 442 would also apply to existing private transfer fee obligations.  Payees of private transfer fees in effect before this bill becomes law must record, within six months, a separate document in the office of the recorder of deeds for each county in which the property is located indicating the amount of the fee, if the fee expires, description of the property and the purpose of the fee being charged. 

If a payee fails to file the required notice, the grantor would not be subject to payment under the private transfer fee obligation.  In this circumstance, the private transfer fee becomes invalid and the property is conveyed free and clear. 

According to Helm, 19 states restrict private transfer fees, including Delaware, Maryland, New Jersey and Ohio. 

At the national level last year, the Federal Housing Finance Agency issued a rule to prohibit Fannie Mae, Freddie Mac and Federal Home Loan banks from investing in private transfer fees.  Additionally, legislation proposed in Congress would outlaw the misuse of private transfer fees. 

“I’m grateful that federal lawmakers are also addressing this issue,” Helm said.  “Oftentimes, private transfer fees are buried in a contract and the homeowner does not recognize they exist until they attempt to sell their house.  Everything should be laid out on the table before this type of transaction is completed.” 

State Representative Sue Helm
104th District, Pennsylvania House of Representatives

Contact:  Tim Eller

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