On July 31, 2017, Governor Brown signed Assembly Bill 1139 (“AB 1139”) into law. AB 1139 amends California Civil Code Section 1098.5 with regard to deed-based transfer fees (“Private Transfer Fees” or “Fees”). Prior to AB 1139 becoming law, any individual or entity who imposed a Fee on real property on or after January 1, 2008, had to record a document that provided limited notice of the Fee on or before January 1, 2009.
AB 1139 now requires any individual or entity who imposes a Fee on real property on or after February 8, 2011, to record a document that contains very specific language with regard to notice. The notice must now state that federal housing agencies are prohibited from dealing in mortgages on properties encumbered by private transfer fee covenants that do not provide a “direct benefit” to real property encumbered, and that if a person purchases such a property, that person may have difficulty obtaining financing.
Private Transfer Fees are fees paid by a purchaser when real property is resold. The Fees are typically one percent (1%) of the sale price of the real property and specified in the original purchase documents. The Fees are typically paid from the purchaser to one of four groups: 1. the HOA, 2. tax-exempt groups that provide a direct benefit to the HOA, 3. tax-exempt groups that don’t provide a direct benefit to the HOA, and 4. third-party developers or investors.