Legislative Update 2010
LEGISLATIVE UPDATE
MAY 2010
TRANSFER FEES
House Bill 2768: Adds a new section to Title 33, Chapter 4, Article 3, related to Conveyances of Real Property and Deeds.
House Bill 2768, signed into law by the Governor on April 9, 2010 and taking effect July 29, 2010, attempts to restrict the ability of certain associations to assess and collect transfer fees. It does not appear to relate to disclosure fees. It appears the general objective of the law is to nullify certain transfer fee provisions in CC&Rs and other documents. Specifically, if the fee in question is both identified in a document that binds buyers and obligates buyers or sellers to pay a fee to the Declarant or third party on transfer of the property, the provision requiring the fee is unenforceable. However, there are various situations and complicated scenarios in the law that are expressly exempted from this prohibition.
Simplistically speaking, a transfer fee provision can generally survive the new law: (1) if the document establishing the fee explains the purpose for which the fee will be used; (2) if the fee being charged touches and concerns the land; and (3) if the fee is not required to be passed through to a third party, “unless the third party is authorized in the document to manage real property within the association or was part of an approved development plan.” (See A.R.S. § 33-442©(3)(b).) Additionally, it should be noted that the new law does not apply to any fee or charge relating to transfer of a club membership or for fees payable for the purpose of supporting recreational activities within the Association. (See A.R.S. § 33-442©(6-7).)
The new law is convoluted and inartfully drafted. As such, the answer of whether a specific association’s transfer fee remains valid under the statute will require a case by case analysis of the language establishing the transfer fee in question. Each such answer will be document specific. Accordingly, it is recommend that associations seek advice from legal counsel regarding the validity of specific transfer fee provisions.
The full text of the new law is as follows:
A. A PROVISION IN A DECLARATION, COVENANT OR ANY OTHER DOCUMENT RELATING TO REAL PROPERTY IN THIS STATE IS NOT BINDING OR ENFORCEABLE AGAINST THE REAL PROPERTY OR AGAINST ANY SUBSEQUENT OWNER, PURCHASER, LIENHOLDER OR OTHER CLAIMANT ON THE PROPERTY IF IT PURPORTS TO DO BOTH OF THE FOLLOWING:
1. BIND SUCCESSORS IN TITLE TO THE SPECIFIED REAL PROPERTY.
2. OBLIGATE THE TRANSFEREE OR TRANSFEROR OF ALL OR PART OF THE PROPERTY TO PAY A FEE OR OTHER CHARGE TO A DECLARANT OR A THIRD PERSON ON TRANSFER OF AN INTEREST IN THE PROPERTY OR IN CONSIDERATION FOR PERMITTING SUCH A TRANSFER. REGULARLY SCHEDULED FEES OR CHARGES SHALL NOT BE CONSIDERED PAYABLE ON TRANSFER OF AN INTEREST IF THE FEES OR CHARGES WILL BE PAYABLE BY THE OWNER OF THE PROPERTY REGARDLESS OF WHETHER OR NOT THE PROPERTY IS TRANSFERRED, EVEN IF THE OBLIGATION TO PAY DOES NOT COMMENCE UNTIL THE TRUSTEE, DECLARANT, BUILDER OR DEVELOPER FIRST CONVEYS THE PROPERTY TO A RETAIL PURCHASER.
B. A TRANSFER FEE PROVISION PRESCRIBED BY SUBSECTION A IS UNENFORCEABLE WHETHER OR NOT RECORDED AND DOES NOT CREATE A LIEN RIGHT AND ANY LIEN PURPORTEDLY ARISING OUT OF AN UNENFORCEABLE PROVISION PRESCRIBED BY SUBSECTION A IS INVALID AND UNENFORCEABLE.
C. THIS SECTION DOES NOT APPLY TO ANY OF THE FOLLOWING:
1. ANY PROVISION OF A PURCHASE CONTRACT, OPTION, MORTGAGE, SECURITY AGREEMENT, REAL PROPERTY LISTING AGREEMENT OR OTHER AGREEMENT THAT OBLIGATES ONE PARTY TO THE AGREEMENT TO PAY THE OTHER PARTY AS FULL OR PARTIAL CONSIDERATION FOR THE AGREEMENT OR FOR A WAIVER OF RIGHTS UNDER THE AGREEMENT IF THE AMOUNT TO BE PAID IS:
(a) A LOAN ASSUMPTION FEE OR SIMILAR FEE CHARGED BY A LENDER THAT HOLDS A LIEN ON THE PROPERTY.
(b) A FEE OR COMMISSION PAID TO A LICENSED REAL ESTATE BROKER FOR BROKERAGE SERVICES RENDERED IN CONNECTION WITH THE TRANSFER OF THE PROPERTY FOR WHICH THE FEE OR COMMISSION IS PAID.
2. ANY PROVISION IN A DEED, MEMORANDUM OR OTHER DOCUMENT RECORDED FOR THE PURPOSE OF PROVIDING RECORD NOTICE OF AN AGREEMENT PRESCRIBED IN PARAGRAPH 1, SUBDIVISION (a) OF THIS SUBSECTION.
3. ANY PROVISION OF A DOCUMENT THAT REQUIRES PAYMENT OF A FEE OR CHARGE TO AN ASSOCIATION TO BE USED EXCLUSIVELY FOR THE PURPOSE AUTHORIZED IN THE DOCUMENT IF BOTH OF THE FOLLOWING APPLY:
(a) THE FEE BEING CHARGED TOUCHES AND CONCERNS THE LAND.
(b) NO PORTION OF THE CHARGE OR FEE IS REQUIRED TO BE PASSED THROUGH TO A THIRD PARTY OR DECLARANT DESIGNATED OR IDENTIFIABLE BY DESCRIPTION IN THE DOCUMENT OR IN ANOTHER DOCUMENT THAT IS REFERENCED IN THE DOCUMENT UNLESS THE THIRD PARTY IS AUTHORIZED IN THE DOCUMENT TO MANAGE REAL PROPERTY WITHIN THE ASSOCIATION OR WAS PART OF AN APPROVED DEVELOPMENT PLAN.
4. ANY RENT, REIMBURSEMENT, CHARGE, FEE OR OTHER AMOUNT PAYABLE BY A LESSEE TO A LESSOR UNDER A LEASE, INCLUDING ANY FEE PAYABLE TO THE LESSOR FOR CONSENTING TO AN ASSIGNMENT, SUBLEASE, ENCUMBRANCE OR TRANSFER OF THE LEASE.
5. ANY CONSIDERATION PAYABLE TO THE HOLDER OF AN OPTION TO PURCHASE AN INTEREST IN THE REAL PROPERTY OR TO THE HOLDER OF A RIGHT OF FIRST REFUSAL OR FIRST OFFER TO PURCHASE AN INTEREST IN REAL PROPERTY AND PAID FOR WAIVING, RELEASING OR NOT EXERCISING THE OPTION OR RIGHT ON TRANSFER OF THE PROPERTY TO ANOTHER PERSON.
6. ANY FEE, CHARGE, ASSESSMENT, DUES, CONTRIBUTION OR OTHER AMOUNT RELATING TO THE PURCHASE OR TRANSFER OF A CLUB MEMBERSHIP RELATED TO THE REAL PROPERTY OWNER BY THE TRANSFEROR.
7. ANY FEE OR CHARGE THAT IS IMPOSED BY A DOCUMENT AND THAT IS PAYABLE TO A NONPROFIT CORPORATION FOR THE SOLE PURPOSE OF SUPPORTING RECREATIONAL ACTIVITIES WITHIN THE ASSOCIATION.
8. ANY FEE, TAX, ASSESSMENT OR OTHER CHARGE IMPOSED BY A GOVERNMENTAL AUTHORITY PURSUANT TO APPLICABLE LAWS, ORDINANCES OR REGULATIONS.
9. ANY CONSIDERATION PAYABLE BY THE TRANSFEREE TO THE TRANSFEROR FOR THE INTEREST IN REAL PROPERTY BEING TRANSFERRED INCLUDING ANY SUBSEQUENT ADDITIONAL CONSIDERATION FOR THE PROPERTY PAYABLE BY THE TRANSFEREE BASED ON ANY SUBSEQUENT APPRECIATION, DEVELOPMENT OR SALE OF THE PROPERTY.
D. NOTWITHSTANDING ANY PROVISION IN THE DOCUMENT OR PURPORTED LIEN, A TRANSFER FEE COVENANT OR OTHER DOCUMENT PRESCRIBED BY SUBSECTION A OR A LIEN PURPORTING TO SECURE PAYMENT UNDER A TRANSFER FEE COVENANT OR DOCUMENT PRESCRIBED BY SUBSECTION A THAT IS EXECUTED AFTER THE EFFECTIVE DATE OF THIS SECTION IS NOT BINDING OR ENFORCEABLE. THIS SECTION SHALL NOT BE CONSTRUED TO IMPLY THAT A TRANSFER FEE COVENANT OR OTHER DOCUMENT PRESCRIBED BY SUBSECTION A THAT IS EXECUTED BEFORE THE EFFECTIVE DATE OF THIS SECTION IS ENFORCEABLE OR VALID.
E. FOR THE PURPOSES OF THIS SECTION:
1. “ASSOCIATION” MEANS A NONPROFIT MANDATORY MEMBERSHIP ORGANIZATION THAT IS CREATED PURSUANT TO A DECLARATION, COVENANT OR OTHER APPLICABLE LAW AND THAT IS COMPRISED OF THE OWNERS OF HOMES, CONDOMINIUMS, COOPERATIVES OR MANUFACTURED HOMES OR ANY OTHER INTEREST IN REAL PROPERTY.
2. “TRANSFER” MEANS THE SALE, GIFT, CONVEYANCE, ASSIGNMENT, INHERITANCE OR OTHER TRANSFER OF AN INTEREST IN REAL PROPERTY LOCATED IN THIS STATE.
FOR SALE AND FOR LEASE SIGNS & OPEN HOUSES
House Bill 2345: Amendment to A.R.S. §§ 33-1261 and 33-1808 regarding Real Estate Signs (for sale, for lease and open house signs) and Open House hours.
House Bill 2345, signed into law by the Governor on April 14, 2010 and taking effect July 29, 2010, restricts associations’ ability to regulate certain real estate signs. This new law applies equally to planned communities and condominiums. The new law adds the following requirements to A.R.S. § 33-1261(c) and to A.R.S. § 33-1808(F):
Temporary Open House Signs and For Sale Signs: This amendment restricts associations’ ability to require that members use particular for sale or open house signs. Pursuant to this amendment, associations can no longer regulate the use of for sale or open house signs provided the signs are owned by the member or the member’s agent, except to require that such signs be industry standard with respect to size (i.e., eighteen by twenty-four inches).
Open House Hours: This amendment restricts associations’ ability to regulate open house hours. Pursuant to this amendment, provided open houses are held between the hours of 8:00 a.m. and 6:00 p.m., associations cannot regulate them. However, this amendment expressly provides that an association can prohibit such open houses from being held prior to 8:00 a.m. and after 6:00 p.m. Additionally, this amendment confirms that associations may still prohibit open house and for sale signs from being placed on the association’s common areas or common elements.
For Lease Signs and Open Houses for Rental Properties: For communities where leasing is not prohibited by the recorded covenants, this amendment protects for lease signs from regulation by associations. Specifically, the amendment provides that Associations cannot require the use of a specific for lease sign or regulate such for lease signs other than to require they be industry standard with respect to size (i.e., eighteen by twenty-four inches). Likewise, the amendment protects open houses for rental properties held between the hours of 8:00 a.m. and 6:00 p.m.
The full text of the new language of the law is as follows:
WITH RESPECT TO REAL ESTATE FOR SALE OR LEASE IN THE CONDOMINIUM PLANNED COMMUNITY in the Planned Communities Act, AN ASSOCIATION SHALL NOT PROHIBIT OR OTHERWISE REGULATE ANY OF THE FOLLOWING:
1. TEMPORARY OPEN HOUSE SIGNS OR A UNIT OWNER’S FOR SALE SIGN. THE ASSOCIATION SHALL NOT REQUIRE THE USE OF PARTICULAR SIGNS INDICATING AN OPEN HOUSE OR REAL PROPERTY FOR SALE AND MAY NOT FURTHER REGULATE THE USE OF TEMPORARY OPEN HOUSE OR FOR SALE SIGNS THAT ARE INDUSTRY STANDARD SIZE AND THAT ARE OWNED OR USED BY THE SELLER OR THE SELLER’S AGENT.
2. OPEN HOUSE HOURS. THE ASSOCIATION MAY NOT LIMIT THE HOURS FOR AN OPEN HOUSE FOR REAL ESTATE THAT IS FOR SALE IN THE CONDOMINIUM PLANNED COMMUNITY in the Planned Communities Act, EXCEPT THAT THE ASSOCIATION MAY PROHIBIT AN OPEN HOUSE BEING HELD BEFORE 8:00 A.M. OR AFTER 6:00 P.M AND MAY PROHIBIT OPEN HOUSE SIGNS ON THE COMMON ELEMENTS OF THE CONDOMINIUM COMMON AREAS OF THE PLANNED COMMUNITY in the Planned Communities Act.
3. AN OWNER’S OR AN OWNER’S AGENT’S FOR LEASE SIGN UNLESS AN ASSOCIATION’S DOCUMENTS PROHIBIT OR RESTRICT LEASING OF A MEMBER’S PROPERTY. AN ASSOCIATION SHALL NOT FURTHER REGULATE A FOR LEASE SIGN OR REQUIRE THE USE OF A PARTICULAR FOR LEASE SIGN OTHER THAN THE FOR LEASE SIGN SHALL NOT BE ANY LARGER THAN THE INDUSTRY STANDARD SIZE SIGN OF EIGHTEEN BY TWENTY FOUR INCHES ON OR IN THE MEMBER’S PROPERTY. IF LEASING OF A MEMBER’S PROPERTY IS NOT PROHIBITED OR RESTRICTED, THE ASSOCIATION MAY PROHIBIT OPEN HOUSE LEASING BEING HELD BEFORE 8:00 A.M. OR AFTER 6:00 P.M.
