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Helm’s Private Transfer Fee Legislation Heads to State Senate

Legislation that would prohibit the assessment of private transfer fees and require disclosure of such fees in real estate purchase contracts, as well as impose liability for violations, passed the state House today, said Rep. Sue Helm (R-Susquehanna Township), sponsor of the measure. 

“My legislation seeks to protect homebuyers and sellers from being tied to a fee from which they will draw no benefit,” Helm said.  “Private transfer fees are nothing more than a new way for a third party with no real ties to a property to make money.” 

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 items 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 sales agreement that does not conform to this requirement would be unenforceable by the seller.  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 the property’s title 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, this legislation 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 or when the fee expires, description of the property and the purpose of the fee being charged. 

Last year, the Federal Housing Finance Agency issued a rule prohibiting Fannie Mae, Freddie Mac and Federal Home Loan banks from investing in private transfer fees.  In addition, legislation has been introduced in Congress that would outlaw the misuse of private transfer fees nationwide. 

“Inaction to restrict private transfer fees will further drag down a housing market that is trying to rebound and it will tie unsuspecting buyers and sellers to an agreement they had no opportunity to negotiate,” Helm said. 

This bill now goes to the Senate for consideration. 

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

Contact:  Tim Eller

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