by Beth Mulcahy, Esq.

Our Association wants to charge a “transfer fee” or a capital improvements fee to buyers when they purchase a home in our community? Is that allowable? How can we implement this type of fee?

A “transfer fee,” is paid to the association for a specified purpose, such as funding the association’s reserves or contributing to the association’s working capital fund. Transfer fees are sometimes also referred to as capital contribution fees, working capital fees, and/or reserve contribution fees. Pursuant to A.R.S. Section 33-442, an association can charge a transfer fee, capital contribution fee or reserve assessment fee that becomes due at a close of escrow when the following requirements are met:

1) The governing documents (CC&Rs) grant authority for the fee and provides for a specific purpose for the fee;

2) The fee being charged touches and concerns the land; and

3) The fee does not go to a third party (such as a management company) or a developer unless the third party or developer is authorized in the governing documents (CC&Rs) to manage the real property within the association or was part of an approved development plan.

Many associatons try to charge this fee at the close of escrow without meeting the criteria of A.R.S. Section 33-442 above. Our firm advises strict compliance with A.R.S. Section 33-442 or else the Association’s actions in collecting the transfer fee could be subject to a legal challenge by a homeowner who paid it.