Ripped Off by HOA Transfer Fees?

When you purchase a home in a Homeowner’s Association in California, the law requires that the buyer be provided with all of the governing documents for the HOA.  Additionally, when ownership transfers, the new owner receives all the membership cards or keys, and all the HOA accounting records will be updated with the new owner’s information. Someone has to pay to make this happen, and the fees to complete the process are referred to as the Document fee and the Transfer fee and may be paid by either the seller or the buyer.

Homeowner’s associations in California are governed by state law (California Civil Code), and the section that specifically addresses HOAs (also called CIDs for “Common Interest Developments”) is called the Davis Sterling Act.  This is the collection of rules that cover operating the association, collecting member assessments, privacy, elections, notification of meetings, penalties for late payments, access to information, homeowner’s rights, and other consumer protection provisions.

1366.1. An association shall not impose or collect an assessment or
fee that exceeds the amount necessary to defray the costs for which
it is levied.

So what would be reasonable fees to defray the costs?

For the Document fee, I estimate a maximum of 500 pages of documents @ 25¢ per page to copy (although a pdf on disk would be more efficient) + maybe $25 for courier or mail delivery?  That total would be $150.  Add another $25 for the time it takes a person to make the copies and put them in an envelope?  Ok, maybe $175 could be justified, but only by being generous with rounding factors.

The Transfer fee may require spending a total of 30 minutes to look up the balance due on that property and sending that bill to escrow, then changing the name in the records at close, along with providing new membership cards and keys.  Some associations also require that someone physically view the property to make sure that it conforms to the association standards and that nobody painted it purple or extended a balcony without permission.  A reasonable Transfer fee could be as high as $150, by my calculation.

Unfortunately, the Davis Sterling Act does not limit private HOA management companies who manage associations as a business.  They have a right to make a profit, and when challenged in court, the court ruled that  “Competitive forces, not the statute, will constrain the vendors’ fees and charges.” In reality, there are no competitive forces available in this situation.  The management company that has the authority to provide the documents and complete the transfer is essentially a monopoly and there is no alternative but to give in to their extortion!  (Some of the private HOA management companies in Orange County are charging as much as $700, and when a condo is part of several associations & sub-associations, it can add up to a substantial part of the closing costs!)

What can be done about this? By the time you are either a buyer or a seller, it’s too late!  The management company is going to gouge someone.   If you currently live in a HOA that is managed by a private management company, you need to bring this to the attention of your Board of Directors.  The Board selects the management company and has the authority to control them. They have a contract that states what monthly fees will be charged to the homeowners for managing the association, and can put a limit on these fees if it is brought to their attention.  If enough homeowners demand that this be controlled, it can be!