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Transfer Fee Covenants - Freehold Licensing PDF Print E-mail


To:  All Agents and Approved Attorneys
Transfer Fee Covenants - Freehold Licensing

 Supersedes Prior Bulletin dated November 4th 2009

This bulletin sets forth guidelines for transactions involving property which is encumbered by a transfer fee covenant.  These covenants are designed to run with the land and require subsequent sellers or buyers to pay a "transfer fee" of a specified percentage (usually one percent (1%)) of the consideration to be paid on the sale of the property to the covenantor or a trustee representing the covenantor and/or others.   When you encounter property in which such a covenant is involved (either previously recorded or to be recorded as part of the insured transaction) the following guidelines must be followed:


  1. All title policies and commitments must contain the following exception:

Covenants, conditions and restrictions and other instruments recorded in the public records and purporting to impose a transfer fee or conveyance fee payable upon the conveyance of a interest in real property or payable for the right to make or accept such a transfer, and any and all fees, liens or charges, whether recorded or unrecorded, if any, currently due payable or that will become due or payable, and any other rights deriving therefrom, that are assessed pursuant thereto.


Note:  If you have the specific recording information for a recorded covenant, it should be substituted in the exception for the general reference to "public records."

  1. The Covenant must be disclosed to the proposed insureds on the PRIVATE TRANSFER FEE DISCLOSURE  FORM. (Click HERE to download).

Several states have already passed statutes that deem such covenants void and California has passed a statute requiring specific disclosure of its existence.  If you are in one of these states you must comply with your local law.  If you have questions contact your State Underwriting Counsel.

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