Coalition Threatens Transfer Fee Funding for Non-Profits

FRESNO, Calif., Sept. 4 /PRNewswire/ -- Large declines in giving are forcing some non-profits to the brink of insolvency.  Government cutbacks, large investment losses, and the "tapped out" average charitable donor have all taken their toll.  One of the few reliable sources of long-term revenue for non-profits comes from private transfer fee covenants.  However, this too has come under attack.

The National Association of Realtors (NAR) and the American Land Title Association (ALTA) have made killing transfer fees a top priority, and have formed the Coalition to Stop Wall Street Home Resale Fees to achieve their goals.  The coalition's title has a nice populist ring to it, but the real objective is to protect fees and profits for the two notoriously anti-consumer special interest groups that sponsored the coalition.

Here's how it works.  Developers file a type of private transfer fee covenant that spreads development costs over those who will benefit from the improvements.  Developers then package up the income stream into a type of "development bond."  This allows developers to recover development costs from a source other than the initial buyer.  In return, developers lower the sales price.

Freehold Capital Partners works with developers across the country, and requires that 5 percent of every transfer fee must go to a non-profit.  This requirement is embedded within the documents, is administered by a trustee, and cannot be changed.  Non-profits then use the funds for clean air, clean water, the environment, open space, parks, affordable housing and a wide variety of uses that benefit the community, with no strings attached.  According to Freehold Capital Partners, developers nationwide have signed up hundreds of billions of dollars worth of projects, which are expected to generate hundreds of millions of dollars for non-profits every time the portfolio turns over.

But not if the "coalition" has its way.  The coalition's latest salvo is to urge FHFA to pile higher interest payments onto every homeowner in America that buys property with a transfer fee.  The coalition hopes this will help stop the spread of transfer fees, and seems unconcerned with the path of destruction that will be left behind, and the non-profits that will be left high and dry.

So why do these two special interest groups care so much?  According to veteran real estate attorney Robert Wilson, the answer is profits.  He said, "The NAR fears that Realtors will be asked to absorb the transfer fee.  The title industry fears they will miss the fee, and have to pay claims.  Together, these two groups have launched an all-out war on this funding source, with total disregard for the impact on consumers and non-profits.  This self-interest at the expense of consumers harkens back to the days when the Justice Department had to sue the NAR to allow homeowners access to MLS data, and it explains why the Title Industry has been called a quasi-monopolistic cartel that fleeces homeowners out of their equity."

The bad news is that these two powerful special interest groups have little trouble finding policy-makers willing to help them out. The good news, for non-profits and for companies like Freehold Capital Partners, is that there are just as many policy makers who see this ploy for what it is, and who are willing to resist the lobbying dollars, and the strings that come attached to them, in order to do what's best for their communities.

SOURCE Job Coalition Organization, a California non-profit