The CotoBuzz Journal
Community Journalism, Newsletters and Blogs Covering South Orange County, CA
June 2007 Issue
We do not make jokes, we simply watch the LA Times, the Orange County Register and the Coto de Caza Board of directors and report the facts!
Private Transfer Tax - Good for the Common Interest Development (HOA/CID) Industry or Good for the Politicians?
When we received our copy of the report
that the California Association of Realtors (CAR) used
"There's nothing to think about, the document speaks for
itself. It's useless. It
plays on, and manipulates the vulnerabilities of both
unsuspecting real estate salespersons who
trust their organization, and all consumers who are trying to make a
living, feed their
families, and pay their mortgages" said
Vanitizian. She added "Senate and Assembly Bills like these that CAR sponsors and supports, are bad for the
and give industry a bad name."
So, now judge for yourself – following is the Final Report:
Private Transfer Tax Task Force
Final Report: Private Transfer Tax Task Force
October 5, 2006
The Task Force was appointed in July, 2006, with the following
familiar with how various forms of private transfer
PTTs are fees imposed on sellers and/or
buyers by way of a deed restriction requiring
the payment of a fee
some percentage of the purchase price each time the
what, if any, problems PTTs present for REALTORS® in
their role as agents for sellers and buyers.
recommendations as to what, if any, actions
(legislative or otherwise)
C.A.R. should take with regard to PTTs and report to
Board of Directors at their October Board meeting.
transfer “taxes” (PTTs) are
being used to settle disputes between
environmentalists and builders
the alternative, by builders to proactively avoid a
lawsuit by environmentalists
or to smooth development negotiations with the local government. Typically,
in return for an agreement by the environmental
group to not pursue a lawsuit based on one of
the state’s environmental
protection acts, the builder agrees to the imposition of one
or more PTTs
through a covenant included in the CC&Rs.
These PTTs have totaled
as much as 1.75 percent of the purchase price
of a home and is paid by
every buyer of a home in the development for 20
to 25 years or, even,
in perpetuity. The
monies generated by a PTT
can be used for everything
from environmental mitigation to the
development of affordable housing.
Some believe that PTTs usurp functions that properly belong to
and, as a result, that the imposition of PTTs should
prohibited or, at a minimum, that the existence of a PTT
explicitly disclosed to potential home buyers.
Problems. The task force concluded that PTTs present the following
1. A PTT
can be imposed by a developer for an excessive number
Generally, the minimum length of time that PTTs
are currently being
imposed ranges from 20 to 25 years; however, many are
imposed in perpetuity.
cost of a PTT
can be prohibitively expensive for home owners
PTTs of up to 1.75 percent of a home’s sales
price have been
seen; however, there is no upper limit on the
percentage of a home’s
sales price at which a PTT
can be set.
can be levied on individuals who already have to
to buy a home. PTTs
imposed on affordable housing only
serves to make that housing less affordable.
requirements for disclosing the existence of a PTT
are limited at best. In
addition, the PTT
requirement can be masked by the
developer by not having it apply to the first
buyer but having it,
instead, apply only to subsequent buyers.
is no guarantee that PTTs will be imposed only on what
considered legal transfers of title; determining which
transfers are exempt from a PTT
is the exclusive province of the
For example, placing a home into a trust or a
a parent and his or her child could theoretically
trigger the requirement
to pay a PTT.
is no limit to the number of PTTs a developer can
impose. Multiple PTTs have been imposed by developers on each home in
with each PTT
funding a different purported benefit.
funds generated by a PTT
can be used to pay for projects that
do not directly benefit the development or the
Individuals living in a development in which a PTT
has been imposed
may be shouldering a disproportionate burden in that
nonprofit organizations that receive PTT
funds are not required
to account to any independent oversight entity and, as
there are no assurances that these organizations will
work to achieve
the goals with which they have been entrusted.
nonprofit organizations that receive PTT
funds are not required
to limit their administrative costs to those that are
reasonable and necessary.
As a result, funds intended to pay for
specific projects may, instead, end up as
salary increases for
developers that impose PTTs are not required to
project benefits for which PTT
funds are generated with the general
plan of the local city and, as a result, those
supposed benefits may be
at odds with those in a city’s general plan.
For example, land which
Possible Solutions. The
task force considered the following possible
action challenging the legality of PTTs.
imposing restrictions or disclosure requirements on
PTTs that would, to an extent, address each of
the problems posed by
PTTs identified by the Task Force.
prohibiting the imposition of a PTT.
Evaluating Solutions. The task force used the following principal
A proposed course of action should be taken only if it will advance
REALTOR® and consumer interests, and is the
alternative that most
completely addresses the problems that have
task force made the following recommendations:
should sponsor legislation to prohibit the imposition
Legislative Committee should determine in January 2007
whether legislation is needed in connection
with the disclosure of
existing PTTs to avoid real estate licensee
liability associated with
C.A.R.’s Standard Forms Committee should determine whether a
is needed that would be provided by sellers to buyers
at the time a
home is listed (or, if not listed, at the same
time at which the
Transfer Disclosure Statement is required to be
provided) disclosing to
the buyer the existence, cost and duration of
any PTTs. In
Standard Forms Committee should determine if
should be included in the statewide advisory and/or in
the buyer advisory.
The CotoBuzz Journal P.O. Box 154 Trabuco Canyon, CA 92678 (509) 355-8895
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