You've played a big part in bringing this issue to people's attention and therefore I think deserve more than a little bit of credit for getting this ban passed.

Also, kudos to our representatives here in Ohio who 1.) took on the issue in the first place, and 2.) made the right vote on the right bill in the end. 

As for the developers who would have benefitted from the type of transfer fees that are now (soon to be) banned, this really takes away nothing from them.  Developers have made money since forever without financing projects on the backs of future purchasers of the property, have they not? 

Especially at this time when we have an overhang of vacant residential and commercial property, there is simply no need to juice development thru this kind of financing.  Developers may be experiencing slow economic times like most of the rest of us are in real-estate related industries, but to abandon the idea of sound, common sense rules and regulations in order to pump up the industry in the short term would have been foolish.  Banning these transfer fees was the only solid long term play.

Thanks for the update.  Great remarks by Senator Seitz.  I think a 32-0 vote makes it clear that all our Senators realize that this is "too clever by half"

The consumer would know about this way before the closing table and this is NOT the same as putting someone in home that cannot afford it.

I disagree.  I believe that there would be many instances where a consumer was unaware of the transfer fee until they are ready to sell and someone from the title company points it out to them.  Filing something in the county records might constitute constructive notice, but that is a far cry from actual notice. 

The two groups making all the noise are the NAR and ALTA who are tied at the hip (do you really believe it is because they care about a 1% fee and the customer?).

There is certainly some self-interest in the lobbying of the NAR and ALTA, but that doesn't necessarily mean that their views are in conflict with the consumers'.  For example, if ALTA is concerned that their members will become liable for more title insurance claims, there wouldn't be any claims if the consumer doesn't suffer a loss.  Thus, the two points of view are compatible. 

The realtors refer(without the consumers knowledge) business to the the title groups so they are going to follow along like a lost puppy. By the way, technically, that is a RESPA violation.

Seriously?  I don't see it.

The only people in favor of these covenants are those that profit from it direcly.  I haven't seen any consumer groups offering their support.  And, so far California is the ONLY state that has addressed this issue and decided NOT to pass a complete ban.  I believe that dozen or so states that are currenly working on legislation will also pass bans and join the majority.

Paul,

Perhaps you could clarify something for me.  I've read the position paper issued by the Real Property section of the Ohio State Bar Association.  It was clearly and briefly against the concept of private transfer fees.  They made the argument that this arrangement benefits the original developer only and in no way at all is to the benefit of the consumer.  Would you suggest that they are also in the pockets of the NAR and ALTA?

Please re-read the position of the Ohio Builders Association as well.  It was not really an endorsement of the concept, more a let us give it a bit more thought position.

I spoke recently with a friend of mine who is on the Real Property committee of the OSB about their final determination.  It was not based on dumb consumers, just like the subprime mess, etc.  It was based on Real Property law.

Under the false pretense of protecting Ohio consumers, the NAR and it's joined at the hip lobbying partner, ATLA, have passed this ban.  It is insulting that the sponsors and supporters of this bill claim that Ohio consumers are too naive or ill informed to protect themselves and make their own contracts.

The scare tactics and misinformation as described in this article and in Senator Seitz's comments are truly unfortunate.  They do highlight, however,  that the true reason for the ban is to support NAR and ALTA's self-interest at the cost of the consumer's freedom to contract.. They want to protect their six percent commissions and the limited funds available at closing.  Their motivation is greed and nothing more.

If they were worried about notice to the consumer, they would support:

• A disclosure bill much like that which was done in California
• More specific disclosures on title reports where this covenant would appear.
• Specific language on standard seller's disclosure forms that would mention transfer fee covenants by name and require disclosure at the time of a listing (just like homeowners have to disclose other conditions on the property)

Instead, all they support is an outright ban, and that is not to protect the consumer, it is to protect only themselves. If they were only interested in protecting the consumer, do you think they would support legislation banning a 6% real estate commission as hard as they are supporting the ban of a 1% transfer fee?

If they were worried about the consumer, they would allow the consumer the freedom to contract. They would allow the comsumer to bargain for  a lower price for his home knowing that a 1% transfer fee covenant was on it, instead of saying to him, "You are too dumb to read your documents, so we will take that choice away from you."

It is remarkable that the securitization market is made the villian by Senator Seitz to support this ban.  This is the same market that bundles up the bonds that Ohio and other states and cities sell promising to pay people over the course of thirty to fifty or more years for the projects they support. Without this market those bonds would not be possible.  Do you really think that multiple years into  bond payments that the payor would not know who to pay?  If that is the standard by which financing tools are judged in Ohio, then you should ban all municipal bond programs, all thrity year mortgages, all insurance annuity programs, etc. 

The notion that these capital recovery coveneants which have no real risk of default, are fully disclosed in a title report and are paid through a centralized trustee system are the same as the abuses in the subprime mortgage market shows a remarkable lack of education about how they work or is a dishonest argument meant only to frighten.

The sad truth is that for their own short-sighted self-interests to protect their commissions, the NAR and the Title associations have prevented this fair and equitable, private industry financing tool to be used in Ohio. It prevents developers from developing projects which ultimately these same realtors could sell.  This ban forces the first buyer of a home to carry the burden of the entire development cost instead of spreading it out in an equitable manner. It also prevents  these covenants from generating millions of dollars to local charities. It furthers the real threat of Ohio bank failures through the defaults on commercial real estate loans, and it does nothing to provide growth and job creation without government stimulus funds in a state that has an 11% unemployment rate.

Finally, I must correct your statement that these bans are passed in every state where the NAR lobbys for them.  The truth is that many state legislatures, once they are educated on the benefits and where misinformation is corrected, are refusing to ban them.

...at least about one thing... "if you want to get a conversation going, talk about transfer fees, because all the weirdos come out of the woodwork."  You Freehold advocates are all the same.  Everybody who doesn't like your covenant has a vested interest, some personal agenda.  But you and the developers who PROFIT from the covenant have nothing but the purest intentions and are doing God's work.  Even if you discount the NAR and ALTA's positions as "interested," it doesn't account for the bar associations and the bankers associations that also oppose this ridiculous "stream of revenue" for you and the developers.

Regarding my "zero batting average"... I have substantiated my interpretation with legal citations in many previous blogs and, at least in Ohio, very experienced attorneys with the Ohio Bar Association, the Ohio Land Title Association, the Ohio Bankers League, and the Ohio Association of Independent Title Agents, and, yes, even the Realtors, agree with my interpretation.  All you have cited is the anonymous opinions of "major law firms."  I have repeatedly asked for their reports so I can evalute them, but so far nobody has provided anything.

Regarding the states you mentioned above that have "rejected a ban," I have been unable to verify that information.  In fact, the Hawaii Legislature's Web site lists the current status of their bill as "carried over to the 2010 regular session."  The Hawaii bill, with some appropriate exceptions, is a complete ban and it goes even further.  It specifically states that "this section shall not be construed in such a way as to presume that transfer fee covenants or liens recorded in this state prior to July 1, 2009 are valid and enforceable."  They seem to recognize that they are subject to challenge in a court of law and may be invalid under common law and they didn't want to take away any such legal arguments.

Alabama's bill, has been indefinitely postponed, but hopefully it will be resurrected. 

Oregon's legislation seems to be poorly drafted but in my opinion it is a ban and I do not read it to permit a Freehold type covenant.  I think you are bending over backward, looking for exceptions that aren't there. 

The other states you mentioned, I can't find any information about their proposed legislation.  If you want to provide me with Bill numbers, I'd be happy to look into them.

I understand your backward interpretation of the Texas statute and I have already explained that the language "a transferee of residential real property or the transferee's heirs, successors, or assigns" rightfully includes subsequent owners.  You and your cronies have been successful in confusing the issue based on the interpretation that your covenant only applies to "transferees."  I guess that will be for a court to decide and I'm sticking by my interpretation until you can show me legal precedent to the contrary.  Good luck with that.

Attorney Fambrough provided a short over-view of the Texas law and he pointed out that transfer fees are legal with some exceptions, such as those for homeowners' associations and governmental entities.  Unfortunately he did not address the "heirs, successors, and assigns" language in his presentation.  Wish I had been there to ask a follow up question.  Also, if you listen to his entire review of transfer fees, he doesn't seem to care for them all that much.  He pointed out several problems with the statute.  I'm sure the Texas legislature will get around to addressing those soon.

You can continue to rant and insult me if you like.  But, what you can't seem to do is support your position with any law.  Maybe you should get back to the practice of law, rather than trying to make a quick buck off of other people's equity in their real estate.

You and your friends seem to love to pick on Realtor's 6% commission and make comparisons to your 1% transfer fee.  I'm not a big supporter of the Realtors' commissions either. (see The Six Percent).  But you are too short cited to see the obvious difference - willing sellers agree that THEY will pay the commission to the Realtors!  That is truly the "freedom to contract" that you are so fond of.  It would be equally ridiculous if the Realtor's commission attempted to collect their fee from EVERY subsequent owner for the next 99 years, but that isn't what the commission is all about. 

In short... who they hell are you to think you have the right to require people whose grandparents haven't even been born yet to pay you anything?  Ohio got it right... along with Florida, Iowa, Maryland, Minnesota, Missouri, Kansas, and Utah.  I expect many more states to follow suit... including North and South Carolina, as well as several of the states you claim have rejected a ban.  We'll see.

You say:

It is remarkable that the securitization market is made the villian by Senator Seitz to support this ban.  This is the same market that bundles up the bonds that Ohio and other states and cities sell promising to pay people over the course of thirty to fifty or more years for the projects they support. Without this market those bonds would not be possible.  Do you really think that multiple years into  bond payments that the payor would not know who to pay?  If that is the standard by which financing tools are judged in Ohio, then you should ban all municipal bond programs, all thrity year mortgages, all insurance annuity programs, etc.

The state of Ohio has been around since 1803, and has been easy to find the entirety of that time.  Name one developer who has a record of stability even remotely close to that.

You say:

This ban forces the first buyer of a home to carry the burden of the entire development cost instead of spreading it out in an equitable manner.

Doesn't the first buyer of a car "carry the burden" of the entire cost of the development of a car via the price they pay?  What exactly is not equitable about the purchaser of a new product paying a price that reflects the costs that went into producing the product?

Calm down Robert. By your train of thought, everyone who has an "interest" in something does not have a valid opinion on the subject. If that were the case, there would never be a need for conversation or disagreement.  We think we are on the right side and you and the NAR/ALTA think you are on the right side. Is that a problem for you? This is how things get done in th U.S.

But if you sincerely believe that the NAR lobbyists are not trying to keep there job by finding an "issue" to lobby against (in this case PTF's), you are seriously naive. They have gone to the government "well" to many times lately (tax payer subsidized home buyer credits, tax payer subsidized guarantees of construction loans, tax payer subzidized etc, etc and on and on). They have to lobby against the free market now. It is sad really.

And you are right, "we will see".

By your train of thought, everyone who has an "interest" in something does not have a valid opinion on the subject.

Not at all... But I do find it very ironic that you guys keep pointing out that the NAR and ALTA are merely lobbying for their own interests, yet nobody has as much an interest in this issue as you Freehold advocates. 

We think we are on the right side and you and the NAR/ALTA think you are on the right side.

Yes.  I agree.  But you have to consider that rationality of your position when you are the only one advocating on that side.  YOU think you are on the right side and ME, THE BAR ASSOCIATIONS, THE REALTORS, THE LAND TITLE ASSOCIATIONS, and THE BANKERS ASSOCIATIONS think we are on the right side.  Hmmm... I guess it is possible that ALL of those groups have some sort of hidden agenda and they really don't give a darn about the consumer.  But seeing as how the most simple solution is usually the correct solution... I'm leaning more toward "you are just wrong."

So, no... it's not a problem for me. But it would seem to be a problem for you.

They have to lobby against the free market now. It is sad really.

What is sad is that you think that obligating people whom you have never met, and aren't even alive yet, to pay you thousands of dollars is somehow fair and within your "freedom to contract."  I think you are free to contract with whomever is willing to deal with you... but when you start obligating people whose grandparents haven't been born yet, I think that is a little over the line of "freedom to contract" and, really, human decency.  Yep... that is what is sad.

And, don't worry, I'm calm.  Just checked... my BP is 115/71.  I actually enjoy the debate... even when I have to put up with being insulted on my own forum (luckily, I have a thick skin). 

I must say that argument that these fees are binding folks who haven't even been born yet is really illogical.  The freedom to contract applies to everyone who buys these properties over the years.  Even the unborn folks who will make the decision years from now. They will have the same freedom to contract as the first buyers today-  They can choose to buy the property or not, they can choose to nogotiate a lower price if they want, or they can buy another peice of property without the fee.  There is nothing in these covenants which take that freedom away.  Yet the bans do take that freedom to contract away. The bans prevent all folks, born or not yet born, from making the choice to purchase property with the fee or not or to buy it with a negoiated price that reflects the fee. By supporting the ban you are suporting the government taking this freedom to contract away from the consumer.  Period.

Thanks Robert Wilson. Could not have said it better myself. But I guess this "simple solution" is not exactly the "simple solution" Mr. Franco had in mind.

Oh yeah, the consumer is too stupid to make an intellectual decision regarding a real esate transaction. They need to the realtor and the title agent to walk them through it properly. To protect them from unscrupulous business practices.

I have been in many real estate closings in my day, and all I have ever seen is a realtor that can't get out of there fast enough and a title agent that says "if you don't sign you don't get the house".

75 years from now when Joe Smith owns a home burdened with a covenant and he wants to sell it to Jim Johnson, they don't have any "freedom to contract" with regard to the 1% transfer fee.  Because some idiot today thought he found a cute way to make a buck, the owners who are involved in negotiations for a sales contract many years from now are stuck with something neither of them most likely wants, nor bargained for.  Shouldn't they have freedom to contract, too?  Shouldn't they be able to negotiate the terms of the sale without interference from someone long dead who is still trying to collect a fee?

You have a very shortsighted view of "freedom to contract"... and while I agree that you have the freedom to contract, you don't have the right to bind people who are not a party to the negotiations.  A willing buyer and seller can agree to bind themselves to any contract they want, but they can't force others to pay for it.  Which is exactly why covenants to pay a sum of money are personal in nature and do not run with the land.

The choice to buy or not to buy is really no choice at all.  If these covenants are permitted, who wouldn't use them??  Every new subdivision would include them and in fifty years or so, you won't be able find a decent home in a nice neighborhood that doesn't have a private transfer fee covenant.  Even sellers of older homes would start to use them.  There really wouldn't be much a choice when nearly every home is burdened by a transfer fee covenant of one variety or another. 

But clearly nothing would make you happier.  Stick all of those consumers with a 1% transfer fee for 99-years and you can laugh all the way to the bank, right?  You are clearly not interested in the consumers - you just want to make some easy money by stealing future equity and appreciation and selling out to the latest sucker on Wall St. 

Just be honest about it.  Don't pretend to care about "freedom to contract."  Just admit that you want to make a lot of money and you don't care who writes the check. 

It was the realtors and the title associations who have attempted to mask their self interest in protecting their commissions under the banner of protecting the consumer, not the other way around.  The supporters of this fee are consistent in their message.  It is a sincere belief that this finance tool is good for the consumer, the developers and the communities.  And with full disclosure, gives everyone the freedom to contract without the ban for their alleged own good.

Your definition of who is a party to the transaction is simply not correct.  Everytime one of these pieces of property is bought or sold in the future each party to that contract will have the freedom the deal with this fee in their own way- buy the property, not buy the property, or negotiate the effect of the fee in the deal. That will be the same over the 99 years.

To use your logic,  any restrictive covenant that would  bind all parties in the future should be banned.  For example, let's say there is a restrictive covenant on my property that I can't build a fence higher then 6 feet.  Ninety years from now that covenant would still be there and would bind my great grandchildren.  Why should it?  They didn't negotiate that covenant.  It should therefore, under your logic be banned.  However there is no need to ban that covenant because they will have purchased the property knowing it was there and can make their own decision.       

Mr. Wilson and Mr. Phillips.  I don't know who you guys are, but I'm impressed by your vigor.  Not a single legislator in Ohio agrees with your position and yet you make it seem like this was a close call.  Points for style.  Unfortunately, the substance is a problem.

I had even given up on this thread thinking you guys were off to the next state to spin more yarn about job creation and the purported safety of securitized debt instruments.

I was wrong. 

You both are still here. Still chirping.  Still complaining to the heavens to make the rains stop.

I think the insults and veiled threats against Mr. Franco & friends weakens your position, though.  Don't you?

Give Robert and the rest of us a break.  

Everytime one of these pieces of property is bought or sold in the future each party to that contract will have the freedom the deal with this fee in their own way- buy the property, not buy the property, or negotiate the effect of the fee in the deal.

So what you are saying is that all of the future owners are free to negotiate any terms they want... as long as they want to pay you one-percent.  Reminds me of Henry Ford... "you can get the model-T in any color you want - so long as you want black."

Henry Ford also said that "a businsess that makes nothing but money is a poor business."

To be honest, my real estate/title background is not that extensive, but I consider myself to be a fairly intelligent individual.  Based soley on reading Roberts posts and more importantly reading the back and forth between the Freehold advocates and Robert, I think it's pretty clear that you guys have found a slimy legal loophole that as gives you a "cute way to make a buck" (to quote Robert).  Thats not the issue I have.  My problem is that you insult everyones intelligence.  Paul Daniels' comment to Robert Wilson seems to imply that those two just happened to have found each other as the sole supporters of these covenants on this website.  More than likely, these two clowns are sitting at the same desk at Freehold Headquarters playing grabass as they type this stuff.  All I'm saying is, this is clearly a slimy loophole that allows you to make a quick buck, and I would have a heck of a lot more respect for you guys if you stopped insulting our intelligence and were up front about it.

-Ryan Scioli, Abstractopia Inc

  "Caveat Emptor", which is Latin for "buyer beware" is the rule of any industry, regardliess of how regulated it becomes.  This is a classic example of a "loophole" in the law (one of many), which is the duty of we abstractors to locate in the public record and report on such findings.

  Some people like to think that codes and statutes are sufficient to overcome such issues, but in reality, they are poor quality substitutes for due diligence on the part of the responsible property owner (or potential buyer).   Our legislators simply do not have the brain power to write good, comprehensive bills to address each of the circumstances that arise in society.  They are a product of the same dumbed-down public education system (private education systems too, but to a somewhat lesser degree), which fails to provide good fundaments;  and of a society that no  longer provides critical thinking basics to We the People in the form of common sense. 

  BTW, in response to Ryan Scioli at Abstractopia Inc, I support these covenants and have replied to Robert's posts in the past too.  I have no affilliation or connection to the other two posters, to whom you refer, adn am not part of any "Freehold Headquarters" of any sort.  I am a professional businessman who engages in transparent, honest, clear, upfront business and I advocate based on individual rights and individual responsibility over and above the powers of a police/nanny state to hold my hand at every turn.  In saying this, I would ask that you too have a little respect for the other side of this arguement and not classify every supporter of covenants under the same blanket that implies a patriot-style "crazy" view, and I will avoid painting the other side as a bunch of left-wing, tax-and-spend authoritarians who support big industry and big government special interests over the rights of the man on the street.  Fair?

  The Old West is alive and well in America on a daily basis.  Buyer Beware!

You have a right to your opinion, William.  And at least you are honest about not giving a damn about the consumers.  "Screw 'em, they can watch out for themselves and if they don't, they get what they deserve."

But, I'm glad that I don't live in your 19th century version of the world where people can take advantage of others with no consquenses just because they happen to know about things others don't.  I'm glad we have legislatures that care about consumers. 

Yesterday afternoon, the governor signed HB 292... private transfer fees are officially banned in Ohio.

Thank you Robert, the more elegant version of what I was going for.  Congratulations on this, it seems that your hard work on this topic has paid off.

-Ryan