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1. How much is the transfer fee?
One percent (1%) of the gross sales price.
2. Who pays the transfer fee?
The Declaration of Covenant that imposes the transfer fee provides that the Seller shall pay the fee. However, a Buyer and Seller can agree otherwise.
3. Should the transfer fee appear on the title commitment?
Yes. As an Instrument filed in the public records, a Private Transfer Fee Covenant should appear on a properly prepared title commitment or abstract of title, just like other covenants, conditions, restrictions and similar encumbrances.
4. Should the transfer fee appear on the HUD-1 closing statement?
Yes. The fee is collected from the seller at closing, and reported on the HUD-1 closing statement (typically in line 1300). See example.
5. Where should payment be sent?
IF BY MAIL
P.O. Box 6193
Round Rock, TX 78683-6193
IF BY WIRE TRANSFER
6. What title companies have closed transactions with the transfer fee ?
Agents for every major title insurer, including Fidelity Title, Independence Title, North American Title, Chicago Title, First American Title, Stewart Title, Alamo Title, Commonwealth Title, Old Republic, and many more.
7. What happens if a transfer fee is not paid?
The unpaid fee generally will be secured by a superior lien against the property (which may be a violation of a lender’s closing instructions), and will accrue default interest until paid.
8. Does every transfer of title require a transfer fee?
No. Generally speaking, a transfer of title between spouses, a sale to a government entity, a transfer of title in connection with foreclosure, and other exemptions described in the Declaration of Covenant are exempt from payment of the fee. (The foregoing is a general description. Please refer to the specific covenant that imposes the fee, generalyl in section 6 of the covenant.)
9. Does a short sale require payment of the transfer fee?
10. Does a Deed in Lieu require payment of the transfer fee?
Yes. A Deed in Lieu of foreclosure is not a foreclosure.
11. Is a transfer fee due in connection with a refinance?
No. A refinance has no Gross Sales Price. The only time a transfer fee is due in connectin with a refinance would be where a prior transfer of title resulted in an unpaid fee, which then needs to be satisfied in order to close the refinance transaction.
12. What are the most common title company mistakes in closing a transaction with a private transfer fee?
In general, closings occur smoothly. However, the most common mistake is failing to carry the encumbrance though from the original metes and bounds description (common to instruments filed by developers in the early stage of development) through subsequent plats.
Another common mistake is failing to contact us before relying on a purported release or termination, which may not satisfy all of the requirements of the encumbrance instrument.
13. Will the property always be encumbered by the fee?
No. The covenant, and requirement to pay the fee, typically expires in 99 years.
14. 99-years seems excessive. Why so long?
Statistically a given property will sell 7-10 times during a 99 year period, generating just 7%-10% in total fees over the 99-year life of the assessment. This assessment is payable only at the time of sale (not annually) and is one of the lowest expenses a homeowner will incur. The funds not only reimburse developers for expenses such as streets, utilities and other public improvements that are deeded to the cities and municipalities, but a provision mandated by the originator requires that five percent of the fee also goes to non-profits operating in the community, providing long-term sustainable funding that is expected to reach billions of dollars.
15. How do we know whether or not there are any unpaid fees?
We can help identify any unpaid fees. Simply fill out the inquiry form.
16. Where can we read more about private transfer fees?
An in-depth discussion can be found Here. However, always rely on legal professionals of your own choosing.
17. Will Covenant Clearinghouse tell me whether or not a particular property is encumbered by a private transfer fee?
Covenant Clearinghouse will respond to inquiries. However, the response is based on information maintained in Covenant Clearinghouse’s database, the accuracy and reliability of which is not guaranteed. Instead, the existence and validity of real estate encumbrances is governed by documents filed in the public records and applicable laws. Therefore, reference should be made to those sources, in consultation with legal advisors of your choosing. Simply stated, Covenant Clearinghouse does not give legal advice or render title opinions.
18. How do we ensure that there is no liability for unpaid fees due in connection with prior closings?
Request an Estoppel Certificate from Covenant Clearinghouse.
19. We are a non-profit organization that received a payment from Covenant Clearinghouse. Why did we receive this payment, and what are our obligations?
A portion of every transfer fee is remitted to a non-profit. This provision is embedded into every Declaration of Covenant we administer, and provides long-term funding for clean air, clean water, the environment, community services and other public benefits to the community from which the funds originated. If you are a non-profit and have received a check from Covenant Clearinghouse, these funds are tendered to you without restriction.