Chapter 14 - § 14.5 • TRANSFER FEE COVENANTS

JurisdictionColorado
§ 14.5 • TRANSFER FEE COVENANTS

§ 14.5.1—Transfer Fee

A transfer fee is a fee or charge required to be paid by a transfer fee covenant, any portion of which is payable upon conveyance219 or payable for the right to make or accept such conveyance,220 regardless of whether the fee or charge is a fixed amount or is determined as a percentage of the value of the residential real property, the purchase price, or any other form of consideration given for the conveyance.221

§ 14.5.2—Transfer Fee Covenants

A transfer fee covenant is a provision in a document, whether recorded or not and however denominated, that requires or purports to require the payment of a transfer fee, or part of a transfer fee, to a payee.222 A transfer fee covenant does not include, and the Transfer Fee Covenant Act223 (the "Act") does not apply to, an excluded provision.224

The Colorado General Assembly found, determined, and declared that:


(a) The public policy of this state favors the transferability and marketability of interests in residential real property free from unreasonable restraints on alienation and covenants or servitudes that do not touch and concern the residential real property; and

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(b) A transfer fee covenant as applied to residential real property violates this public policy by impairing the transferability and marketability of title to affected residential real property and constitutes an unreasonable restraint on alienation, regardless of the duration of the transfer fee covenant or the amount of the transfer fee set forth in the transfer fee covenant.225

§ 14.5.3—Binding Effect of Transfer Fee Covenant

A transfer fee covenant recorded on or after the effective date of the Act, or a lien recorded on or after the effective date of the Act, to the extent that it purports to secure the payment of a transfer fee, is not, upon conveyance, binding on or enforceable against the affected real property or payable for the right to make or accept the conveyance, nor is the covenant or lien binding upon or enforceable against any subsequent owner, purchaser, or holder of a mortgage, deed of trust, or other security interest encumbering the affected real property.226

§ 14.5.4—Liability for Recording and Failing to Release Transfer Fee Covenant

A person who records, or causes to or suffers to be recorded, a transfer fee covenant on or after the effective date of the Act and fails to release the covenant and any lien purporting to secure the payment of a transfer fee within 30 days after written request for the release is sent to the last-known address of the payee as specified in the transfer fee covenant, personally or by certified mail, first-class postage prepaid, return receipt requested, is liable for all of the following:


• Any actual damages resulting from the imposition of the transfer fee covenant on a conveyance, including the amount of any transfer fee paid by a party to the conveyance.
• All reasonable actual attorney fees, expenses, and costs incurred by a party to the conveyance or by a holder of a mortgage, deed of trust, or other security interest encumbering the residential real property subject to the transfer fee covenant in connection with an action to:
• Recover a transfer fee paid;
• Quiet title to the residential real property burdened by the transfer fee covenant; or
• Show cause why the transfer fee covenant, or any lien purporting to secure the payment of a transfer fee, should not be declared invalid.227

§ 14.5.5—Recording Notice of Pre-existing Transfer Fee228

In the case of a transfer fee covenant, or an amendment to a transfer fee covenant, recorded prior to the effective date of the Act, the payee, as a condition of payment of the transfer fee, must record against the residential real property burdened by the transfer fee covenant, in the office of the county clerk and recorder for the county in which the residential real property is situated, not later than October 1, 2011, a notice of transfer fee.229

The notice must:


• Be entitled "notice of transfer fee" in at least 14-point boldface type.
• Specify the amount of the transfer fee if the transfer fee is a flat amount or the percentage of the sales price constituting the transfer fee if the transfer fee is determined as a percentage of the value of the residential real property, or such other basis by which the transfer fee is to be calculated.
• Provide actual cost examples of the transfer fee for a home priced at $250,000, a home priced at $500,000, and a home priced at $750,000.
• Specify the date or circumstances under which the transfer fee requirement expires, if any.
• Describe the general purpose for which the moneys from the transfer fee will be used.
• Identify the name of the payee and specific contact information for the payee, including mailing address, regarding where the moneys are to be sent.
• Contain the acknowledged signature of the payee.
• Identify the name of the owner and the legal description of the residential real property burdened by the transfer fee covenant, as disclosed by the records of the county clerk and recorder.
• Specify the method of releasing any lien recorded against the residential real property pursuant to the transfer fee covenant.230

The payee may file an amendment to the notice of transfer fee containing new contact information. The amendment must contain the recording information of the notice of transfer fee that it amends, the name of the owner, and the legal description of the residential real property burdened by the transfer fee covenant as contained in the records of the county clerk and recorder at the time of the recording of the amendment.231

The office of the county clerk and recorder must index the notice of transfer fee under the names of the persons, entities, or organizations identified in the notice or as such names may be identified in a notice that has been amended. The office of the county clerk and recorder is not required to examine any other information contained in the notice of transfer fee or any amendment of the notice.232

§ 14.5.6—Failure to Record Notice of...

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