National Disclosure Standard for Private Transfer Fee Covenants Proposed in U.S. Congress

NEW YORK, Oct. 1 /PRNewswire-USNewswire/ -- On September 29, the U.S. House of Representatives introduced a bill to standardize disclosure of private transfer fees (PTFs) (also called capital recovery fees). The proposed legislation provides important consumer protections nationwide by ensuring uniform transparency and disclosure of private transfer fees in all relevant real estate transactions.  

"Disclosure is the key to making private transfer fees work for all stakeholders – home buyers and sellers, developers, banks, non-profit organizations and communities – and we applaud Congress for proposing this legislation," said Bryan J. Cohen, Esq., General Counsel and Executive Vice President of Freehold Capital Partners. "The concerns people have raised about the instrument are fully addressed by the prominent disclosure form that we have made standard practice for our company, and this legislation ensures that all entities that use PTFs will be equally rigorous in their disclosure."  

This legislation addresses the concerns raised by the National Association of Realtors, the title industry, the Federal Housing Finance Authority (FHFA) and state legislatures, and, most importantly, it allows consumers to make informed purchase decisions.

For decades private transfer fees have been used by community associations, co-ops, and non-profits to fund important community benefits, to reduce dues and association fees, and to fund maintenance and infrastructure improvements. Developers use private transfer fees to equitably spread infrastructure costs of community amenities such as sewer lines, roads, water pipes, open spaces and utilities among all individuals who will benefit from the improvements.

Developers can use private transfer fees to create a development bond, and the proceeds are then used to pay for infrastructure and to reduce development loans. This frees up lending capacity for regional and community banks, which has a positive ripple effect throughout Main Street. It also provides a lower entry price for homeowners, who no longer have to absorb 100% of development costs in the initial purchase price.

This bill will also help to resolve negative equity by providing an alternate means for infrastructure funding, which in turn will help restart stalled projects, providing significant employment in the construction sector.  

In this new post-economic crisis era, Congress and the federal government has placed an emphasis on disclosure and consumer empowerment to strengthen our economy and prevent future problems.  The disclosure protections in this legislation are consistent with that trend.  

SOURCE Freehold Capital Partners

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