Two county developments among first in state to kick back money to developer each time a property sells

Real estate industry professionals are rallying against a controversial new fee being implemented at two developments in Tooele County.

The Maples in Tooele and South Rim, just outside of Stockton, are the first developments in the county to have covenants, codes and restrictions that require that any time a property is sold, the seller must pay a “private transfer fee” of 1 percent of the gross sales price to the developer and stipulated associates. The fee is paid each time a property changes hands over a set time period, usually 99 years.

Private transfer fees are a fairly new mechanism being used in other states to generate additional income for developers. In Utah, however, the practice is not widespread and has been criticized by those in the real estate industry as an unfair way to price-gouge sellers.

“It is perfectly legal,” said Calleen Peshell, Tooele County recorder. “But I don’t like it.”

Peshell is concerned the transfer fee can sneak up on sellers.

“It should be on the title report and noticed by both the buyer and the seller,” said Peshell. “The problem is too often we don’t look at things too closely when we are buying a home. This is buyer beware. Buyers will need to read their CCRs before agreeing to a purchase.”

The Utah Land and Title Association has taken a stand against transfer fees.

“We are completely against the transfer fees,” said Susan Houghton, examiner/escrow officer of Tooele Title and vice-president for the central region of the Utah Land and Title Association. “The money benefits the developer. It does not go back into the subdivision or project.”

The transfer fee recently recorded at South Rim does not affect the current Benches subdivision project, but does apply to a large adjacent parcel of land owned by the developer of South Rim, the Hogan family. The transfer fee would apply to any future subdivisions built on the property, according to Mark Nelsen, president of B&D Title in Tooele.

Joyce Hogan, speaking on behalf of the family, said the transfer fee isn’t an attempt to hit future homebuyers with an additional cost.

“The transfer fee we recorded is a part of a private business transaction,” said Joyce Hogan. “It does not at this time affect anybody except us as the current property owners, and it does not in any way affect the Benches at South Rim. I may go and withdraw the document from the recorder’s office this afternoon.”

The controversy surrounding transfer fees has already impacted one local real estate broker, Dan Egelund of Re/Max Platinum in Tooele, this year.

“We were representing two buyers on new-built homes in a development in Tooele and the title company made us aware that documents requiring a transfer fee had been recently recorded,” Egelund said. “Under the pressure of loosing two sales, the developer withdrew the requirement.”

Utah Realtors as a whole are cautious in their opposition to transfer fees, according to Chris Sloan, broker of Group 1 Real Estate in Tooele and president of the Utah Association of Realtors.

“It is not necessarily a bad thing. The money should recoup costs of improvements the builder or developer makes to the project,” Sloan said. “But there needs to be proper disclosure of the fee. If everybody knows about it up front, there should be few problems and surprises down the road. We expect there to be legislation this year that will require prominent notification.”

Vicki Griffith, broker for Prudential Utah in Tooele and president of the Tooele County Board of Realtors, said she is opposed to private transfer fees.

“Realtors certainly don’t benefit from transfer fees,” Griffith said. “They just make the transaction more costly to the buyer, which certainly doesn’t help attract buyers when you are trying to sell property.”

Peshell doesn’t think the fee will be in existence long in Utah.

“It has been outlawed in Texas and I hope our legislature follows suit,” Peshell said. “People who are familiar with real estate will either negotiate the fee away or go somewhere else to purchase their home. Think about it, you are agreeing to pay 1 percent of the sales price of your home when you sell it in the future, and whoever buys it has to agree to the same thing when they sell. These things [transfer fees] have a life of 99 years.”

Tim Gillie: tgillie@tooeletranscript.com