The CotoBuzz Journal

Community Journalism, Newsletters and  Blogs Covering South Orange County, CA

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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?

May 7, 2007  

When we received our copy of the report that the California Association of Realtors (CAR) used to Sponsor and help draft transfer fees, we were confused.   Given that Vanitzian has become an icon in Sacrament (some say a thorn  in the legislature's side), we asked her what she thought of the CAR's  Final document.

"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 support  and 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 California  economy  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 charge:

Mission Statement:

1.    Become familiar with how various forms of private transfer taxes  (PTTs) operate.  Generally, PTTs are fees imposed on sellers and/or  buyers by way of a deed restriction requiring the payment of a fee  based  on some percentage of the purchase price each time the home transfers.

2.    Determine what, if any, problems PTTs present for REALTORS® in  their role as agents for sellers and buyers.

3.    Make recommendations as to what, if any, actions (legislative or  otherwise) C.A.R. should take with regard to PTTs and report to the  C.A.R. Board of Directors at their October Board meeting.


  • Lawrence Fargher, Chair

  • Ilse Cordoni

  • Greg Galli

  • Stephen Hanleigh

  • Brian Holloway

  • James Irving

  • Peter Morris

  • Leslie Munger

  • Frank Nelson

  • Dianne Rath



  • August 2, Burbank

  • September 6, Oakland

  • October 4, Sacramento

Status/Summary.  “Private” transfer “taxes” (PTTs) are  increasingly  being used to settle disputes between environmentalists and builders  or,  in 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 local  government and, as a result, that the imposition of PTTs should be  limited, prohibited or, at a minimum, that the existence of a PTT  should  be explicitly disclosed to potential home buyers.

Problems. The task force concluded that PTTs present the following  problems:

1.    A PTT can be imposed by a developer for an excessive number of  years.  Generally, the minimum length of time that PTTs are currently  being imposed ranges from 20 to 25 years; however, many are imposed in  perpetuity.

2.    The cost of a PTT can be prohibitively expensive for home owners  and buyers.  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.

3.    PTTs can be levied on individuals who already have to stretch  financially to buy a home.  PTTs imposed on affordable housing only  serves to make that housing less affordable.

4.    The 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.

5.    There is no guarantee that PTTs will be imposed only on what are  generally considered legal transfers of title; determining which  transfers are exempt from a PTT is the exclusive province of the  developer.  For example, placing a home into a trust or a transfer  between a parent and his or her child could theoretically trigger the  requirement to pay a PTT.

6.    There is no limit to the number of PTTs a developer can impose.  Multiple PTTs have been imposed by developers on each home in a  development with each PTT funding a different purported benefit.

7.    The funds generated by a PTT can be used to pay for projects that  do not directly benefit the development or the immediately surrounding  community.  Individuals living in a development in which a PTT has been  imposed may be shouldering a disproportionate burden in that they are paying for things that, in many instances, benefit the general public.

8.    The nonprofit organizations that receive PTT funds are not  required to account to any independent oversight entity and, as a  result, there are no assurances that these organizations will work to  achieve the goals with which they have been entrusted.

9.    The 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  nonprofit administrators.

10.    The developers that impose PTTs are not required to coordinate  the 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 a  city is planning to develop for housing might instead be preserved as  open space by the nonprofit receiving PTT funds.

Possible Solutions.  The task force considered the following possible  solutions:

1.    Legal action challenging the legality of PTTs.

2.    Legislation 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.

3.    Legislation prohibiting the imposition of a PTT.

Evaluating Solutions. The task force used the following principal to  evaluate possible solutions:

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 been identified.

Recommendations.  The task force made the following recommendations:

1.    C.A.R. should sponsor legislation to prohibit the imposition of  any PTTs.

2.    C.A.R.’s 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  that disclosure.

C.A.R.’s Standard Forms Committee should determine whether a separate  form 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 addition,  the Standard Forms Committee should determine if information relating  to  PTTs should be included in the statewide advisory and/or in the buyer advisory.








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