On Tuesday afternoon, the Senate Committee on Local Government (“Committee’) held a hearing on Senate Bill 11-234 (“SB 234”) – the residential transfer fee bill. As we noted in our April 7th blog posting, SB 234 currently prohibits the future recording of residential transfer fee covenants or liens which require payment of a transfer fee. The bill has several carve outs which include the fees management companies charge in relation to the conveyance of a unit and transfer fees for community associations which are present in a recorded document.
The Colorado Bar Association, Land Title Association of Colorado, Colorado Mortgage Lenders Association and CAI’s Colorado Legislative Action Committee (“CLAC”) all testified in favor of the bill. These interest groups made the following consistent points:
- Transfer fees that are utilized to benefit the community in which the property is located, are fees which are appropriately carved out of the bill.
- Other types of transfer fees generally lead to higher closing costs, delayed closings and even uncertain title.
Not surprisingly, real estate developers testified in opposition to the bill. A representative of the Colorado Association of Homebuilders testified that in these tough economic times, it’s difficult for builders to obtain acquisition and development grants. As a result, they need to look at every opportunity to obtain funds to finance the infrastructure of developments which includes the use of transfer fees.
Interestingly, the Homebuilders also testified that it’s extremely common for community associations to set up charitable foundations funded by transfer fees to provide for the care and maintenance of common elements. Other developers testified that community associations set up these charitable foundations to fund “soft infrastructure” like fireworks and community events.
Following the close of the testimony, the Committee began consideration of a flurry of amendments to SB 234. When it became clear that sorting through the amendments was not the best approach to take, the Chair of the Committee laid the bill over for two weeks to provide stakeholders time to work out the amendments.
The good news is that it looks like the management company and community association carves outs were not an issue of controversy. Instead, the focus of the hearing seemed to be centered on cleaning up a carve out relating specifically to charitable foundations.
We’ll keep you updated on any significant developments with SB 234.