New Jersey has become the 19th state to restrict the use of private transfer fees, which require a percentage of a home's sales price be paid to a private third party each time the property is sold, often for up to 99 years.
The controversial fees occur when the builder adds a covenant to the deed of each new home. Sometimes the recipient of the fee is a charity or government agency that provides housing for low-income families.
But sometimes builders pocket the money as pure profit.
Freehold Capital Partners of New York, a leading proponent of the fees, is attempting to bundle the rights to the fees and sell them to investors on Wall Street.
Community associations also are advocates for the fees, which they use to maintain common facilities like roads, walkways and recreational amenities, and fund needed improvements.
But a full-scale war to ban private transfer fees is being led by the National Association of Realtors and the American Land Title Association, which have complained to federal authorities that not only does the hidden charge increase the cost of ownership, there is little or no oversight on how the proceeds are disclosed, how they are spent or how long the tax may be imposed.
New Jersey joins Arizona, California, Delaware, Florida, Hawaii, Illinois, Iowa, Kansas, Louisiana, Maryland, Minnesota, Mississippi, Missouri, North Carolina, Ohio, Oregon, Texas and Utah in restricting the fees.
On the federal level, the Federal Housing Finance Agency has issued guidance that would prevent government-sponsored entities from investing in mortgages with these fees.
