Hidden Fee Allows Housing Developers to Collect Money for 99 Years

[The Straight Story]

Hidden Fee Allows Housing Developers to Collect Money for 99 Years

Homeowners looking to sell their property would be wise to make sure they’re not on the hook for paying the original developer of the home thousands of dollars once the sale goes through. Developers are increasingly adding “resale fee” covenants into sales agreements of newly built homes as a way of making money again and again for up to 99 years.

Under a resale fee, the home seller must pay the developer 1% of the sales price no matter how many times the property changes hands within the 99-year period. For example, the resale of a $500,000 house allows a developer to collect $5,000 from the fee, which developers prefer to call a capital recovery fee or private transfer fee. The fee applies no matter how many times a house is sold.

The fee may not even be contained in the sales contract, but rather in an addendum called the declaration of covenants, conditions and restrictions. Real estate brokers don’t always know about the fee, putting the onus on the seller to determine if they’ll be responsible for paying the resale fee.

As if this development wasn’t bad enough, one company, Freehold Capital Partners, which claims to have signed up more than 5,000 developers, wants to package the resale fees and market them to investors…just like bundling of subprime loans that led to the current recession.

http://www.allgov.com/Controversies/ViewNews/Hidden_Fee_Allows_Housing_Developers_to_Collect_Money_for_99_Years_100914

[FiveGoodMen]

1. Don't know how this kind of thing flies.

[flvegan]

2. This has been going on in some places for some time.

BTW, anyone buying a home that doesn't know EXACTLY what they're buying, signing and/or agreeing to would be wise to hire a title-savvy real estate attorney who will not only explain everything to you at the closing, but will obtain a copy of the Commitment long before the closing and will examine/explain any covenants and restrictions to you.

[RKP5637]

3. Amazing. Absolutely F'en amazing. n/t

[Turbineguy]

4. No problem

just demand a 99 year warranty.

[Rex]

5. People will continue to do this as long as the Big Crooks get away with

stealing, so too will the smaller crooks...er entrepenuers.

[gratuitous]

6. Oh, but the developer will have to pay taxes on this

For doing absolutely nothing, having been adequately compensated in the original sale, the developer will have his or her greedy mitt out for the next 99 years, picking up a cool five large every time the property changes hands. For what? Nothing, really. Just because they can. Oh, but the taxes! Think of the taxes the developer will have to pay! Please, please, please, Congress, lower the rate on this little windfall, otherwise all these developers will go under, bankrupt! starving children, lonely widows, orphans, needy and starving in the gutter.

And, with the Freehold Capital Partners little scheme, it's obvious that there's no mean little piece of greed that someone else isn't going to want to pick up a little taste for himself. But we can be sure that unscrupulous brokers won't just churn a bunch of properties to see the value of the Developers' Enduring Cut balloon so they can sell them to a bunch of suckers by inflating their perceived value, will they?

Naaaahh. That'd just be too greedy for words!

[customerserviceguy]

8. It won't be five large every time

How much money do you think this will generate 99 years from now? I hope that some court declares this thing 'unconscionable' but I have no doubt the present SCOTUS would love it, at least five of them, anyway.

[customerserviceguy]

7. That's why it pays to read the stuff that comes with your title examination

Most people just say, "Where do I sign?" And if you don't know how to read or understand it, then pay someone to help you figure it out. If there are any attorneys out there who don't disclose this to their clients, then they are guilty of malpractice.