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Florida Condo & HOA Legal Blog News & Updates on Condo & HOA Laws & Legislation in the State of Florida

Does Your Condo/HOA Charge a Fee in Connection With a Sale or Transfer?

Posted in Mortgages

If so you need to become aware of the Federal Housing Finance Agency’s plan to prohibit Fannie Mae, Freddie Mac and other Federal Home Loan Banks from purchasing mortgages for properties in communities where the covenants contain transfer fees. If you read the newspapers (or watch news on the internet) you already know that mortgage rates are lower than ever before.  Wouldn’t it be great to refinance at 4.5% (3.8% for 15 year conventional loans)?  Think about how monthly savings would help your cash flow needs. For owners trying to sell properties, lower mortgage rates usually mean higher sales prices.  For those looking to buy a home, lower rates mean more buying power and/or more cash flow to meet other needs, such as community assessments. In order to qualify for those low rates, the mortgage must be backed by a government or quasi-government entity.  FHA/VA loans have great rates and very low down payment requirements (usually 3%).  The government guarantees those loans so the lender is protected in the event of default.  Fannie Mae, Freddie Mac and other GSEs (government sponsored enterprises) buy loans from lenders – the lender is able to offer the low rate since it sells the loan (and the risk) to one of these entities. The Federal Housing Financing Agency (FHFA) is a government agency created to regulate and oversee GSEs.  One of its primary purposes is to make sure the GSEs operate in a “safe and sound manner” – so it reviews business practices on the part of the GSEs.  It recently proposed a new regulation that, if adopted, would prohibit buying loans for properties in communities where the covenants contain a private transfer fee. What is a private transfer fee?  Well, it could be many things.  Community Associations Institute (CAI) defined this term as “any fee or payment required at time of sale of a property by a deed or covenant restriction.”   Typical community association fees include:

  • Screening/Background investigation fees;
  • Estoppel fees;
  • Capital Improvement assessments;
  • Mandatory Country Club initiation fees and the like.

While the regulation is not intended to limit mortgages as a result of these types of fees, it could have that impact if adopted.  In fact, Florida law specifically excludes certain typical community association fees from the definition of transfer fees in Section 689.28, Florida Statutes. CAI has created a survey for community leaders and managers.  It will compile the results and use them in an attempt to convince FHFA not to limit mortgage options for properties in community associations.  If distressed owners cannot sell their units/lots/homes because buyers cannot obtain mortgages, community associations will continue to suffer. Please take a look at this survey.  Click HERE for the Survey.

  • Frank

    Lisa, I can’t believe that mortgages are so difficult to obtain. I had two different buyers for my condo in downtown Fort Lauderdale – each had excellent credit and the loan to value was within limits. Both contracts fell apart because lenders said there were too many unoccupied apartments in the building – that’s crazy – its a beachfront vacation condo!
    Please – do whatever you can to get lenders to lend money so the rest of us can go on with life!

  • Gunther Karger

    On what basis can a condo board deny the purchase if the buyer:
    1. Pays for the condo entirely in cash
    2. Can demonstrate far more than sufficient income and cash reserves than the maintenance fees
    3. Can demonstrate being responsible persons with significant personal references
    Can the board reject, given the above, based on impaired credit score reflecting the impact of the recent economic crisis, if the credit report shows no skips, no criminal records, no judgments, no bankruptcies and that the buyer has lived ion the same house for 42 years and is stably married for 56 years.
    RESPONSE: Each set of governing documents is different. There is an appellate case in Florida that stands for the proposition a purchaser must facially qualify for membership. Arbitration decisions clarify the association’s powers to a certain extent. It is always possible the proposed purchaser (or seller for that matter) failed to follow specific procedures & you must seek legal advice for an analysis of the described situation.