Protecting RI Associations From Transfer Fees

By Frank A. Lombardi, Esq.

In many states and also on the federal level, there is movement to prohibit unwarranted transfer fees related to real estate transactions. While these proposed bills have the good intention of preventing real estate developers from milking real estate deals, we believe that the unintended consequences of this pending legislation would be to possibly prohibit condominium associations from charging fees for Resale Certificates, “move in and move out” fees, and the typical two-month working capital deposit fees. 

Nationally, CAI (Community Associations Institute) was successful in efforts to have the federal legislation carve out exceptions for condominiums so long as the association received a direct benefit from the fees.  Locally, CAI’s Rhode Island Legislative Action Committee (LAC), on which I serve with my associate, Mary-Joy Howes, Esq. was on the lookout for similar legislation. Sure enough, Rhode Island Senator Walter Felag recently proposed Senate Bill 2012-S2215,  which would prohibit transfer fees upon the resale or subsequent transfer of real estate.

The RI LAC, a committee of CAI, met and developed a strategy to oppose the bill in its current form.  Then, on behalf of LAC, I brought the issues to the attention of the RI Senate Judiciary Committee during a public hearing on the bill on April 12, 2012.  I pointed out how the fees for Resale Certificates were critical to give proposed condominium unit purchasers a clear idea of both the physical and fiscal health of the condominium project, which would be consistent with the underlying consumer protection objectives of RI’s Condominium Act.

Moreover, the “move in, move out” fees charged whenever unit owners move onto or off of the premises are in place to cover the supervision costs and to prevent structural damage.  And, of course, the working capital deposits historically are used to shore up association reserves.  Each of these fees directly benefits the association, which is the essential test for passing these carve-out revisions to this type of legislation.

Setting Our Sights on the Senate
Judging by the questions asked, the Senate Judiciary Committee was receptive to our suggestions.  In fact, at the conclusion of the hearing, the Committee Chairman suggested that we meet with the bill’s sponsor to assist in revising the bill.  Upon motion, the bill was tabled for further study.

With this in mind, we wrote to Senator Felag, and I hope to meet with him shortly to incorporate our suggested changes with the goal of ensuring that the interests of Rhode Islandcondominium associations are protected.

In the future, we will keep you posted on the outcome of this bill and other public policy matters that we regularly address in RI’s LAC.  Like our counterpoint in the Bay State (the Massachusetts Legislative Action Committee), we are pleased to serve as ongoing advocates for condo associations in the Ocean State.

At GSL, we will continue to be your watchdog regarding policy matters and other legal issues. Please let us know what issues concern you by contacting us here!