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Transfer Fee Covenants

Tuesday, May 16, 2017  
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Marina Pacifica Homeowners Association v. Southern California Financial Corp.

Cal.App. 2nd Dist. (B270580)  4/24/17

An "Assignment Fee" set forth in unrecorded condominium leases and certain other recorded documents, requiring payment of a monthly fee to the original developers, fell within the general definition of a "Transfer Fee" within the meaning of Civil Code Section 1098. However, Subsection 1098(i) excepts from that definition any fee recorded against the property on or before December 31, 2007, that is separate from any covenants, conditions, and restrictions, and that substantially complies with subdivision (a) of Section 1098.5. In a previous appeal this court held that provisions in the leases that notify lessees of the existence of the fee satisfied the notice requirements of Subsection 1098(i). Therefore, the court held that the persons entitled to collect the fee did not have to record the notice of transfer fee required by CC Section 1098.5. Subsequent to the decision, and in direct response to the decision, the legislature amended CC Sections 1098 and 1098.5, effective January 1, 2016 to provide that a transfer fee covenant cannot be contained in an unrecorded document that is incorporated by reference. The legislation also provided that such a transfer fee would remain in place, so long as a document reflecting the assignment fee was recorded, "in a single document that complies with subdivision (b) [of Section 1098] and with Section 1098.5," before December 31, 2016. Accordingly, the court affirmed the trial court's judgment determining that the transfer fee was valid.


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