Bulletin: FL2010001

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 sale price.  The provisions purport to create a lien on the property in the event the transfer fee is not paid.  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. 

Florida Statute 689.28 defines a transfer fee covenant as "a declaration or covenant recorded against the title to real property which requires or purports to require the payment of a transfer fee to the declarant or other person specified in the declaration or covenant or to their successors or assigns upon a subsequent transfer of an interest in the real property." 

Florida Statute 689.28 (3) provides that "A transfer fee covenant recorded in this state on or after July 1, 2008, does not run with the title to real property and is not binding on or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee of any interest in real property as an equitable servitude or otherwise. Any liens purporting to secure the payment of a transfer fee under a transfer fee covenant that is recorded in this state on or after July 1, 2008, are void and unenforceable."

Company Policy Where The Covenants Were Recorded Before July 1, 2008: 

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 July 1, 2008:  

Guideline:  If your search and examination shows a Transfer Fee Covenant recorded on or after July 1, 2008, contact your local Stewart underwriting personnel for guidance. 

Florida Statute 689.28 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:       

1. Any consideration payable by the grantee to the grantor for the interest in real property being transferred, including any subsequent additional consideration for the property payable by the grantee based upon any subsequent appreciation, development, or sale of the property. For the purposes of this subparagraph, an interest in real property may include a separate mineral estate and its appurtenant surface access rights.

2. Any commission payable to a licensed real estate broker for the transfer of real property pursuant to an agreement between the broker and the grantor or the grantee, including any subsequent additional commission for that transfer payable by the grantor or the grantee based upon any subsequent appreciation, development, or sale of the property.

3. Any interest, charges, fees, or other amounts payable by a borrower to a lender pursuant to a loan secured by a mortgage against real property, including, but not limited to, any fee payable to the lender for consenting to an assumption of the loan or a transfer of the real property subject to the mortgage, any fees or charges payable to the lender for estoppel letters or certificates, and any shared appreciation interest or profit participation or other consideration described in s. 687.03(4) and payable to the lender in connection with the loan.

4. Any rent, reimbursement, charge, fee, or other amount payable by a lessee to a lessor under a lease, including, but not limited to, any fee payable to the lessor for consenting to an assignment, subletting, encumbrance, or transfer of the lease.

5. Any consideration payable to the holder of an option to purchase an interest in real property or the holder of a right of first refusal or first offer to purchase an interest in real property for waiving, releasing, or not exercising the option or right upon the transfer of the property to another person.

6. Any tax, fee, charge, assessment, fine, or other amount payable to or imposed by a governmental authority.

7. Any fee, charge, assessment, fine, or other amount payable to a homeowners', condominium, cooperative, mobile home, or property owners' association pursuant to a declaration or covenant or law applicable to such association, including, but not limited to, fees or charges payable for estoppel letters or certificates issued by the association or its authorized agent.

8. Any fee, charge, assessment, dues, contribution, or other amount imposed by a declaration or covenant encumbering four or more parcels in a community, as defined in s. 720.301, and payable to a nonprofit or charitable organization for the purpose of supporting cultural, educational, charitable, recreational, environmental, conservation, or other similar activities benefiting the community that is subject to the declaration or covenant.

9. Any fee, charge, assessment, dues, contribution, or other amount pertaining to the purchase or transfer of a club membership relating to real property owned by the member, including, but not limited to, any amount determined by reference to the value, purchase price, or other consideration given for the transfer of the real property.

10. Any payment required pursuant to an environmental covenant.

For an Example of a Transfer Fee Covenant, click here. This is only a sample; do not assume that the Transfer Fee Covenant in your chain of title contains the same terms.  

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

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