A transfer fee is a fee due upon the transfer of a unit or lot.  Utah law defines two types of transfer fees charged by an association:

• An "association transfer fee" is a fee charged by an association upon transfer of a property relating to the sale of the property that is used to pay expenses related to the transfer.
• A "reinvestment fee" is a fee imposed, directly or indirectly, by an association upon a buyer or seller upon transfer of a property and that is dedicated to benefiting the common areas (including payment for association expenses).

The statute in Section 57-1-46 does not specifically authorize an association to charge an "association transfer fee," nor does it mention whether approval of the owners is required to do so, but it is arguably implied.  In any event, a notice of the fee should be recorded but is not required.^fn1  If the "association transfer fee" is authorized in a recorded document, like the CC&Rs, then a notice must be recorded separately from the recorded document.

A "reinvestment fee" cannot be charged unless the fee is authorized in the declaration (CC&Rs) or a separately recorded covenant and must be approved by a majority of the voting interests or a higher percentage if required in the governing documents.  A notice of the fee containing specific language must also be recorded separately from the CC&Rs.  The amount of the fee must be set in accordance with the CC&Rs or covenant.  The owners may disapprove a reinvestment fee by following a procedure specified in the statute. 

In short, if the fee is just used to pay expenses related to the transfer of the property, the fee does not need to be approved by a vote of the owners or contained in the CC&Rs.  If the fee simply goes into the general coffers of the association, the fee must be authorized in the CC&Rs (or similar document approved by a vote of the owners).

Condominium Act.  The statute appears to authorize a condominium association to charge a reinvestment fee against a buyer or seller up to .5% of the value of the unit for the benefit of the common areas, although it never expressly authorizes it.  Contrastingly, the Condo Act requires an association to assess the owners the common expenses according to each unit owner's respective percentage interest in the common areas.  Assessing only a seller of a unit for common area expenses and not the other owners and not according to the percentage interests in the common area clearly violates the Condo Act.  The relationship between Section 57-1-46 and Section 57-8-24 of the Condo Act is not clear and neither is whether 57-1-46 authorizes a condominium association to charge a reinvestment fee where charging such a fee would violate the Condo Act.

Exceptions and Limits

The date the CC&Rs or amendment authorizing the fee were recorded is important because the law imposes a limit and requires exceptions if the covenant (CC&Rs or amendment) was recorded after March 15, 2010.

If the covenant authorizing the fee was recorded after March 15, 2010:

• the statute prohibits the fee from exceeding .5% of the value of the property, unless the property is within a development of at least 500 acres or units.
• the statute requires certain exceptions where the fee may not be charged, namely:  (a) an involuntary transfer; (b) a transfer that results from a court order; (c) a bona fide transfer to a family member of the seller within three degrees of consanguinity who, before the transfer, provides adequate proof of consanguinity; (d) a transfer or change of interest due to death, whether provided in a will, trust, or decree of distribution; or (e) the transfer of property by a financial institution, except to the extent that the reinvestment fee covenant requires the payment of an association's costs directly related to the transfer of the burdened property, not to exceed $250.

Transfer Fee Covenants

Contrary to what seems to be popular opinion, transfer fees are not illegal in Utah.  A transfer fee is simply a fee due on transfer of title.  Only a specific type of transfer fee obligation is illegal, and even then only if such obligation is recorded after March 15, 2010.  That type of obligation is defined in the statute as a transfer fee covenant.  A transfer fee covenant is an obligation to pay a transfer fee that is imposed on a future buyer or seller other than a person who is a party to the covenant.  A transfer fee covenant does not include: (1) a reinvestment fee covenant, (2) an obligation imposed by a governmental entity or court order, or (3) an obligation to pay a transfer fee imposed on a current or future buyer or seller who is a party to the covenant or agreement imposing the fee.  In the end, what you call it is just semantics and doesn’t matter, it’s what it is or isn’t that matters.