Bulletin: OR2010001

Dear Associates:

This Bulletin describes current Company policy regarding covenants purporting to require the payment of a fee upon the transfer of real property (hereafter "Transfer Fee Covenants"). The common characteristic of such covenants is generally a requirement to pay a fee each time the property is transferred (on the current sale and all future sales), for an extended period of time, sometimes as long as 99 years. The fee varies, but is generally one percent (1 %) of the selling price or the gross sales price. The provisions purport to create a lien on the property in the event the transfer fee is not paid. Oregon Revised Statutes 93.269 defines Transfer Fee Covenant as an instrument conveying, or contracting to convey, a fee simple interest in real property which causes, or purports to cause, a declaration or covenant to be filed, or a declaration or covenant that requires, or purports to require the payment of a fee, commission or other payment to the declarant or to another person specific in the declaration or covenant, or to the declarant's or other person's successors or assigns, upon a transfer of a fee simple interest in the property.

Oregon Revised Statutes 93.269 provides as follows: "(1) An instrument conveying, or contracting to convey, a fee simple interest in real property may not cause, or purport to cause, a declaration or covenant to be filed or recorded against the title to the real property if the declaration or covenant requires, or purports to require, the payment of a fee, commission or other payment to the declarant or to another person specified in the declaration or covenant, or to declarant's or other person's successors or assigns, upon a transfer of a fee simple interest in the property. (2) A declaration or covenant that requires, or purports to require, the payment of a fee, commission or other payment upon the transfer of a fee simple interest in real property to the declarant or other person specified in the declaration or covenant, or to the declarant's or other person's successors or assigns, upon a transfer of a fee simple interest in the property or that otherwise violates subsection (1) of this section is void."

These covenants may be created in separate documents and may be referred to as "Transfer Fee Covenants," "Freehold Licensing Transfer Fee Covenants," "GenEstate Legacy Covenants" or "Private Transfer Taxes." In some cases, the transfer fee provision is included within other documentation, such as a general declaration of covenants and restrictions, or in a deed.

Company Policy Where The Covenants Were Recorded Before June 17, 2009:

1. Exceptions Required. Upon discovery of a Transfer Fee Covenant in the chain of title, all commitments, preliminary reports and policies must contain the following exceptions (hereafter "Exception"):
   
   Owner's Policy: Covenants, Conditions and Restrictions, set forth in instrument recorded ___________, together with transfer fees set forth therein. This instrument includes provisions purporting to create a lien on the Land payable upon each transfer of the Land. Notwithstanding any Covered Risk, policy provision, or endorsement to the contrary, this policy does not insure against and excepts all loss or damage due to the failure to pay any fees, amounts, or assessments: (a) on any prior transfers of Title, (b) on the current conveyance of Title, and (c) on any future transfers of Title.
   
   Loan Policy: Covenants, Conditions and Restrictions, set forth in instrument recorded _____________, together with transfer fees set forth therein. This instrument includes provisions purporting to create a lien on the Land payable upon each transfer of the Land. Notwithstanding any Covered Risk, policy provision, or endorsement to the contrary, this policy does not insure against and excepts all loss or damage due to the failure to pay any fees, amounts, or assessments: (a) on any prior transfers of Title, (b) on the current conveyance of Title, and (c) on any future transfers of Title, and (d) a lack or loss of priority of the Lien of the Insured Mortgage to any lien securing the payment of such fees, amounts, or assessments.
   
   
2. Modification of the Exception for the Loan Policy only:
   
   (a) You may delete section (a) of the Exception (relating to prior transfers) from the Loan Policy only if the Public Records disclose or if you receive acceptable documentation (often from the "Trustee") (which may be titled, for example, an Estoppel Certificate, Receipt, Acknowledgment or Release), in recordable form, confirming that the applicable fees have been paid for all prior transfers of the property. If not already of record, you should record such documentation with all other closing documents.
   
   (b) You may delete section (b) of the Exception (relating to the current conveyance) from the Loan Policy only if you receive acceptable documentation (often from the "Trustee"), in recordable form, confirming that the applicable fees have been paid for the current transaction. You should record such documentation with all other closing documents.
   
   You should examine the instrument creating the Transfer Fee Covenant to make these determinations.
   
   (c) You may not delete section (c) of the Exceptions (relating to future transfers) from any policy.
   
   (d) You may delete section (d) of the Loan Policy Exception (relating to lack or loss of priority of the Line of the Insured Mortgage), if you furnish the Transfer Fee Covenant to our underwriting personnel and they approve such deletion.
   
   (e) You may not make any other modifications to the exceptions or provide any affirmative coverage relating to Transfer Fee Covenants without underwriter approval.

Company Policy Where The Covenants Were Recorded On Or After June 17, 2009:

Guideline: If your search and examination shows a Transfer Fee Covenant recorded on or after June 17, 2009, contact your local Stewart underwriting personnel for guidance.

Oregon Revised Statute 93.269 governing Transfer Fee Covenants expressly excludes the following matters from the operation of the statute and therefore the following matters require compliance with Company policy as outlined above:

(a) An instrument conveying or contracting to convey a fee simple interest, in real property that provides for any consideration payable by a grantee to a grantor for the interest in real property being transferred, including but not limited to any subsequent additional consideration for the property payable by the grantee based upon any subsequent appreciation, development or sale of the property.

(b) A requirement in a mortgage loan agreement for the payment of mortgage principal, interest and fees upon sale of the property by the mortgagee.

(c) A limited liability company, limited liability partnership, corporation, joint venture or partnershi0p agreement in which a member, shareholder, joint venturer or partner contributes real property to the limited liability company, limited liability partnership, corporation, joint venture or partnership.

(d) An agreement providing for a series of related transfers of the fee simple interest in a real property, if the agreement identifies with specificity the price of the transferred interest, all consideration given, party names and other essential terms for each transfer of interest that is part of the series.

(e) An affordable housing covenant, servitude, easement, condition or restriction in a deed, declaration, land sale contract, loan agreement, promissory note, trust deed, mortgage, security agreement, or other instrument, including but not limited to instruments created as provided under ORS 456.270 to 456.295, that are executed by:

(A) A public body as defined in ORS 174.109;

(B) An agency of the United States;

(C) A public benefit corporation, religious corporation or foreign corporation, all as defined in ORS 65.001, if the purposes of the corporation include providing affordable housing for low income households and moderate income households as those terms are defined in ORS 456.270;

(D) A limited liability company, as defined in ORS 63.001, having a membership composed of one or more corporations described in subparagraph (C) of this paragraph;

(E) A consumer housing cooperative as defined in ORS 456.548;

(F) A manufactured dwelling park non-profit cooperative as defined in ORS 62.803; or

(G) A federally recognized Indian Tribe.

(f) A requirement for the payment of a fee to:

(A) A homeowners association as defined in ORS 94.550;

(B) An association of unit owners as defined in ORS 100.005;

(C) A managing entity of a timeshare plan, as those terms are defined in ORS 94.803;

(D) Any other owners' association that is governed by recorded covenants, conditions and restrictions; or

(E) An agent for an association or managing entity described in subparagraphs (A) to (D) of this paragraph.

(g) An agreement between a real estate licensee and a grantor or grantee providing for any commission payable to the real estate licensee for the transfer of the real property.

If you have questions relating to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.

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