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Buyers and Sellers of homes in the communities of Ladera Ranch, Talega, and San Clemente are required to pay a community enhancement fee at the time of close of any escrow or purchase.

Often described as a “lifestyle” fee, these private transfer fee obligations are a recorded covenant running with the land obligation of the sellers. Payment of this fee obligation is according to a recorded covenant and cannot be avoided.

Such recorded community enhancement fees commonly have language such as: “By its acceptance of a deed with respect to any residential Unit (as such term is defined above), the Owner of such Unit is hereby deemed to acknowledge and agree to the requirement that any Owner transferring title to such Unit shall pay to the Association a Community Enhancement Fee in an amount not to exceed one-fourth of one percent (0.25%) of the gross sale price of the Unit. By its acceptance of a deed with respect to any residential Unit (as such term is defined above), the Owner of such Unit is hereby deemed to acknowledge and agree to the requirement that any owner transferring title to such Unit shall pay to the Association such Community Enhancement Fee. Certain exemptions apply.”

So even though FHA and government-backed loans have been made by lenders in these communities for more than 10 years, HUD has recently said that such government-backed loans are no longer authorized where there are required private transfer fees.

HUD (U.S. Housing and Urban Development) representatives have recently said: “Ladera Ranch is one of many master planned communities where mandatory private transfer or other transfer fees are required upon each conveyance of the property. This includes single-family dwellings, townhouses, PUDs, MH and condos.  Per the regulation at § 203.41, private transfer or other transfer fees are not authorized. This rule was promulgated in 1994 and announced via Mortgagee Letter 04-02 and, according to HUD, the “requirements of the rule are still applicable.”

So despite HUD not enforcing its own regulation after more than 10 years in Ladera Ranch and Talega, such purchase money loans will no longer be insured or purchased by HUD. And unless it backs off on its declining to authorize loans where such private transfer fees are required, FHA mortgage insurance will no longer be available.

So how does a home buyer or home seller overcome this obstacle?  The property will either have to be sold to a buyer with conventional financing or cash to close.

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