By Beth Mulcahy, Esq.
Last week, I discussed “Disclosure Fees” under Arizona law. This week we will be discussing “Transfer Fees” which are distinctly different that disclosure fees.
A “transfer fee,” on the other hand, 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 as-sessment fee that becomes due at a close of escrow when the following requirements are met:
- The governing documents (CC&Rs) grant authority for the fee and provides for a specific purpose for the fee;
- The fee being charged touches and concerns the land; and
- 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.
Further, an association can charge any fee or charge that is imposed by the document (CC&Rs) and that is payable to a non-profit corporation for the sole purpose of supporting recreational activities within the association.
Finally, pursuant to the Arizona Non-Profit Corporation Act [A.R.S. Section 10-3302(16)], an association can charge a transfer fee. A transfer fee under this section, in our firm’s opinion, may only be used to compensate an association for the cost to transfer the membership paperwork from one owner to another owner. This statute may conflict with A.R.S. Section 33-442 and this conflict has not yet been tested in court. If a non-profit association wishes to charge a transfer fee pursuant to this section, our firm suggests that the transfer fee be set at a minimal amount.