Private Transfer Fees Banned on Texas Real Estate

One of the most significant bills for those in the housing industry in Texas this year was passed and signed into law with little fanfare. Not many people made note of the Private Transfer Fee Ban despite it’s potential impact on future housing development throughout the state.

WHAT ARE PRIVATE TRANSFER FEES?

Private Transfer Fees add some amount to every transaction of a given parcel back to the original developer for a set amount of years.  Typically, according to a story in the San Antonio Express-News, these fees add 1% of the sales price to the final contract every time the property changes hands for as long as 99 years after the original development recorded the fee in the deed restrictions. The information is made public, but it is up the buyer to discover the information and make their purchasing decisions based on those facts.

Going forward, however, these types of fees will be banned on new developments. Existing Private Transfer Fees will be allowed to continue through their original life span, as long as they are fully reported by January 2012 and updated every three years hence. Failure to do so will nullify the fees.

AMENDING THE LAW

Texas Legislators in this year’s session took up the issue and an overwhelming majority supported the ban on future transfer fees. The Texas Senate voted unanimously to ban such fees. The House passed the bill on a vote of 142 to 1. Governor Rick Perry signed the measure into law last week.

Under the new law, no new Private Transfer Fees will be allowed. The law comes mainly in response to the efforts of one company to see developers on the merits of Private Transfer Fees. Freehold Capital Partners has been trying to recruit developers to use these fees as a means of creating a revenue stream that can help them through the rough cycles in the economy. Freehold has an interest in creating a secondary market for these transfer fees, where they would be able to earn income from the practice.

Texas became the 34th state to ban Private Transfer Fees.

Homeowners Associations and Property Owners Associations are not impacted by the new law. Also, fees for transferring memberships to country clubs are not addressed by this legislation. 

To read the full article from the San Antonio Express-News, please click here.

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About missionmortgage

A full-service professional mortgage banker providing lending in Texas for over 25 years. Our main office is located at 901 S. Mopac Expwy, Barton Oaks V- Suite 120, Austin, TX 78746 with branches in Lakeway, Houston, and Sealy. Mission Mortgage has been ranked as a Top 10 Mortgage Company in Austin for the past 7 years (Austin Business Journal).
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