A transfer fee is a fee due upon the transfer of a unit or lot.  A transfer fee may be charged by an association if (1) the fee is authorized in the CC&Rs or the fee is to cover actual costs incurred by the association as a result of the transfer of title, and (2) a notice of the fee is recorded separately from the CC&Rs.^fn1  A covenant (such as a CC&R provision) authorizing a transfer fee charged by an HOA is referred to in Utah law as a "reinvestment fee covenant."  In other words, if an association's CC&Rs say the association may charge a fee due on transfer of title to a unit or lot, that provision is called a reinvestment fee covenant in the law.  Some people carry it further and call the transfer fee a reinvestment fee, but the statute does not refer to a reinvestment fee.  But, that's just semantics and what it's called doesn't matter.

The statute requires that, in order for an HOA to collect a fee due on transfer of title, a notice containing specific language must be recorded on its own—separate from the CC&Rs and any amendment to the CC&Rs. 

Exceptions and Limits

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

If the covenant (CC&Rs or amendment) 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.

FN 1.  However, it is arguable that the Condo Act prohibits condominium associations from charging a transfer fee if the purpose of the fee is to pay common expenses.  The Condo Act requires an association to assess the unit owners the common expenses according to each unit owner's respective percentage of undivided interest in the common areas.  See Utah Code § 57-8-24(2).  Utah appellate courts have not addressed this issue, although the Court of Appeals did confirm the proportionate share of common expenses attributable to each owner is directly tied to the undivided ownership interest that an owner has in the common areas, and an association cannot change the assessment amount as to one owner only without following procedure to change the respective undivided interests of all owners.  See Johannessen v. Canyon Rd. Towers Owners Ass'n, 2002 UT App 332, 57 P.3d 1119.