Hidden Fee Allows Housing Developers to Collect Money for 99 Years
Tuesday, September 14, 2010

Homeowners looking to sell their property would be wise to make sure they’re not on the hook for paying the original developer of the home thousands of dollars once the sale goes through. Developers are increasingly adding “resale fee” covenants into sales agreements of newly built homes as a way of making money again and again for up to 99 years.
Under a resale fee, the home seller must pay the developer 1% of the sales price no matter how many times the property changes hands within the 99-year period. For example, the resale of a $500,000 house allows a developer to collect $5,000 from the fee, which developers prefer to call a capital recovery fee or private transfer fee. The fee applies no matter how many times a house is sold.
The fee may not even be contained in the sales contract, but rather in an addendum called the declaration of covenants, conditions and restrictions. Real estate brokers don’t always know about the fee, putting the onus on the seller to determine if they’ll be responsible for paying the resale fee.
As if this development wasn’t bad enough, one company, Freehold Capital Partners, which claims to have signed up more than 5,000 developers, wants to package the resale fees and market them to investors…just like bundling of subprime loans that led to the current recession.
-Noel Brinkerhoff
Resale Fees That Only Developers Could Love (by Janet Morrissey, New York Times)
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