Senate Bill 11-234 (“SB 234”), which was granted late bill status, has just been introduced in the Colorado Senate. After months of negotiations between stakeholders, SB 234 was introduced to address concerns relating to residential transfer fees, to protect equity in homes and to promote the sale of residential real estate. 

SB 234, as currently written, provides as follows: 


● Transfer fee covenants on residential real estate recorded on or after July 1, 2011, are not binding or enforceable against the affected property, or any subsequent owner, purchaser, or holder of a mortgage, deed of trust or other security interest encumbering the affected the property. This provision also applies to liens recorded on or after July 1, 2011, that require payment of a transfer fee on residential real estate.


● Any person who records a residential transfer fee covenant on or after July 1, 2011, will be liable for: (1) actual damages resulting from imposition of the transfer fee – including the amount of the fee paid by a party when the property is conveyed; and (2) reasonable costs, expenses and attorney fees incurred to recover payment of a prohibited transfer fee, to quiet title to the residential property burdened by the transfer fee covenant or to pursue an action to show cause why a transfer fee covenant or lien should be declared invalid.


●A “Notice of Transfer Fee” must be recorded for transfer fee covenants perfected prior to July 1, 2011. If this Notice of Transfer Fee is not recorded, the transfer fee is not enforceable at the time the property is conveyed or for any future conveyances. 


Community Association Related Fees in SB 234



A “Transfer Fee Covenant” is defined in the bill as “. . .a provision in a document, whether recorded or not and however denominated, that requires or purports to require the payment of a transfer fee, or part of a transfer fee, to a payee.” 


As a result of outstanding work by CAI’s Colorado Legislative Action Committee (“CLAC”), the following fees charged by associations and management companies are excluded from the definition of “Transfer Fee Covenant” and are permitted to be charged:


● “. . . a one-time fee paid to a . . . management company for an association of unit owners . . . for services rendered in connection with the conveyance for which the fee is earned . . .” In other words, management companies are permitted to charge a fee related to work performed by the management company in relation to the conveyance of a unit.


● “Any provision in a recorded document, regardless of whether the document is recorded before, on or after July 1, 2011, requiring payment of a fee, charge, assessment, fine, or other amount only to the extent payable to or collected by an association of unit owners, homeowners, property owners, condominium owners, or similar mandatory membership organization, including a cooperative, mobile home, time share unit, or common interest community association.” Simply put, community associations may charge a transfer fee as long as it is included in a document that is recorded. In addition, associations are not required to record Notices of Transfer Fees as described above.


SB 234 has been assigned to the Senate Committee on Local Government.  However, since the Senate is heavily engaged in working on the budget, we don’t expect any Senate action on the bill for the next few days.   


It will be interesting to see how SB 234 proceeds through the legislative process at this late date and whether any interest groups will come out in strong opposition to the bill.  As always, you can count on us to keep you updated on all the latest developments on SB 234!