PA Senate passes bill to prohibit future private transfer fees

The PA Senate passed Senate Bill 1481 today, moving it to the House of Representatives for consideration. The bill, introduced by Sen. Wayne Fontana (D-Allegheny), a REALTOR®, would prohibit all future private transfer fees (PTFs) and create reporting and disclosure requirements on the administrators of the private transfer fees that already exist. If the requirements are not met, the PTF is null and void.

“This is a true consumer protection bill,” Fontana said. “In some states, this obligation isn’t even included in the closing papers and doesn’t require a signature, letting a person with no ownership interest in the property continue to collect revenue from it for up to 99 years.”

Pennsylvania REALTORS® responded to two Calls-to-Action, sending the message to their senators that private transfer fees would provide an additional burden on homeowners. Private transfer fee covenants are attached to the property deed forcing sellers to pay 1 percent of the purchase price to a private third-party entity every time the property sells over the next 99 years.

The legislation passed the Senate unanimously by a vote of 49-0.

PAR President Don Roth has said private transfer fees could cost homeowners thousands of dollars at closing. In addition, private transfer fee covenants could make the properties unattractive to future buyers and homeowners could lose further equity in their homes, according to Roth.

In a $200,000 home sale with a private transfer fee covenant, the seller will be responsible for paying an additional $2,000 transfer fee which he may be unaware of. This will further burden the homebuyer in an already challenging economy.

The private transfer fees are often used as a guise to help local communities, while in reality the majority of the funds go to line the pockets of unscrupulous developers and third-party investors, Roth said. Eighteen states have already passed legislation opposing private transfer fees.

On a federal level, the U.S. Department of Housing & Urban Development (HUD) has ruled that it will not insure mortgages on properties that include the transfer fees and the Federal Housing Finance Agency (FHFA) is also considering a similar proposal.

These fees are being fought by a national coalition of 20 organizations called the Coalition to Stop Wall Street Home Resale Fees. The organization includes the National Association of REALTORS® (NAR) and the American Land Title Association and recently the Consumers Union and the Consumer Federation of America have announced they have joined the coalition.