The Federal Housing Finance Agency (“FHFA”) recently published a Notice of Proposed Rulemaking directing Fannie Mae, Freddie Mac and the Federal Home Loan Bank System to regulate transfer fees paid to common interest community associations. While the revised FHFA draft will allow community associations to continue to use deed-based transfer fees (i.e., capital contributions, condo fees, flip taxes, etc.) to fund association operations, the rule would still allow FHFA to limit how associations use the income generated by such fees. FHFA’s rule would ban transfer fees paid to investors, but will allow transfer fees payable to a community association. This would apply to investors only prospectively, which should mean that any existing transfer fee paid to an investor or used by an association for any purpose is still valid and enforceable.
Per the rule, community associations could use revenue raised by new HOA transfer fees for very narrow purposes, and would be regulated in how those with new transfer fees manage non-resident use of common elements or property. The rule has not yet been finalized or put in place, such that the public can still comment on it. This proposed rule, to the extent that it restricts how funds from new transfer fees can be used, does not likely adhere to established property law. Generally speaking, community associations have the right to raise revenue and use this revenue the way their owners and leadership determine. Until April 11, 2011, citizens are permitted to submit comments to the Federal Housing Finance Agency as follows:
– E-mail: Use the address, regcomments@fhfa.gov, and include the following in the subject line of the e-mail: FHFA Proposed Rule on Certain Private Transfer Fee Covenants, (RIN) 2590-AA41
– U.S. Mail: Use the following address to send comments by U.S. Mail:
Mr. Alfred Pollard
General Counsel
Federal Housing Finance Agency
1700 G Street, NW
Washington DC 20552
ATTN: Public Comments: FHFA Proposed Rule on Certain Private Transfer Fee Covenants, (RIN) 2590-AA41
– Federal E-Rulemaking Portal: Go to www.regulations.gov and follow the instructions provided to submit your comments electronically.