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Pennsylvania Moves Closer to Banning Private Transfer Fees

October 26, 2010

Legislation supported by the Pennsylvania Land Title Association (PLTA) to prohibit the future use of private transfer fees (PTFs) in Pennsylvania recently passed the Senate and is now under consideration in the House of Representatives.

“The PLTA was instrumental in getting Senate Bill 1481 passed in the Senate and we are currently continuing those efforts in the House,” said Pam Croke, executive director of PLTA. “The association worked closely with other industry partners including the Pennsylvania Association of Realtors to get support for this important legislation.”

The bill was introduced by state Sen. Wayne D. Fontana (D-Allegheny).

PLTA’s Executive Committee formed a special committee earlier this year to investigate the impact of private transfer fee covenants on the transfer of real estate in Pennsylvania. In an effort to raise awareness of the dangers of PTFs, a letter from PLTA President Diana Sabol urging support for the bill was hand delivered to all senators. PLTA is doing the same for members of the House, Croke said.

A private transfer fee is also known as a resale fee or a capital recovery fee and allows the developer or builder of a home to collect 1 percent (or more) of the sales price from the seller every time the property changes hands for the next 99 years. To date, private transfer fees have been seen in 43 states, with 17 states acting to ban the practice, one acting to require additional disclosure requirements while four other states are considering similar bills. In August, Freehold Licensing announced that it had partnered with a developer in Pennsylvania on a $250 million project. On a federal level, the U.S. Department of Housing & Urban Development has ruled that it will not insure mortgages on properties that include the transfer fees and the Federal Housing Finance Agency is also considering a similar proposal.

SB 1481 would ban all new private transfer fees, allow for remedies if private transfer fees are imposed, require the full disclosure of existing private transfer fees, establish a process to free the property of an obligation and require persons entitled to such a fee to register with the county Recorder of Deeds.

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

“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.”

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