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House passes bill curbing third‑party transfer fees, requires recorder notice
Summary
The House approved HB280 to ban most third‑party transfer‑fee covenants going forward while preserving reinvestment fees tied to property improvements; sponsors said the change improves disclosure and prevents burdens on future owners. The bill passed 68‑0.
The Utah House of Representatives on March 1 approved a bill to restrict certain long‑running transfer‑fee covenants that can burden future property owners.
Representative Rebecca Lockhart, the bill sponsor, said the measure redraws the law to distinguish reinvestment‑fee covenants that benefit a property from third‑party transfer‑fee covenants that do not. "So we will have 2 different kinds of these covenants," Lockhart said, adding the bill requires a separate notice filed with county recorders for the covenants to remain enforceable going forward.
Supporters said the bill increases transparency and prevents hidden liens from traveling with property. Representative Webb told colleagues such fees can become long‑term liens: "These are liens against property," he said, and explained how a relatively small percentage can compound into large present‑value obligations over decades.
The bill, crafted after negotiations among homeowners associations, realtors, builders and title insurers, allows reinvestment fees that directly add value to property (for example, HOA reinvestment for amenities) while prohibiting future recording of third‑party transfer‑fee covenants that have no logical nexus to property value. Sponsor Lockhart said existing transfer‑fee covenants may be grandfathered only if a new notice is recorded; otherwise they become unenforceable going forward.
Lawmakers raised disclosure and grandfathering questions during debate; Representative Massaquero asked whether new homes could have fees after the bill passes and Lockhart responded, "There will be no new transfer fee covenants. What this bill will allow is reinvestment‑fee covenants...which are those that are directly related to increasing the value of the property." Representatives also emphasized the bill requires county recording so title companies and buyers will have notice.
The House voted to pass the first substitute for HB280 by voice and later the clerk reported the roll: first substitute HB280 passed the body with 68 yes, 0 no, and 7 absent. The bill will be transmitted to the Senate for further consideration.
What happens next: the bill moves to the Utah Senate for its consideration and possible further amendment.
