Utah narrows HOA transfer rules and tightens reserve expectations after 2026 session

Aaron Ryder, director of the Utah HOA Ombudsman Office, summarized legislative changes from the 2026 session that affect how homeowners associations charge and account for fees and reserves.

Ryder said the statute now refers to transfer fees as "administrative setup fees," and that such charges "are void and unenforceable unless used only to pay expenses related to the transfer of real property." He added that managers who collect administrative setup fees must provide an annual accounting of fees collected by December 31 each year.

The legislature also clarified reinvestment fees—charges intended for capital-intensive infrastructure maintenance—and set caps tied to association type. Low-amenity associations (detached single-family communities without capital-intensive services) are capped at 0.25% of the property price; most associations remain capped at 0.5%. Large master-plan developments (described in the session as developments of at least 500 acres or 500 units with committed infrastructure or amenities) are not subject to a cap. Ryder told attendees that at least 50% of reinvestment-fee revenue must be placed into reserve funds for all associations except large master-plan developments.

On the legality of privately recorded transfer covenants, Ryder pointed to SB96 and said a recorded notice of an otherwise invalid transfer-fee covenant can constitute a wrongful lien that creates a right of action and renders the covenant invalid. He advised real estate professionals and sellers to check county records and consult counsel if a transfer fee appears on a closing statement.

Ryder also warned that secondary-market lenders have heightened scrutiny: "Freddie Mac and Fannie Mae are looking for higher reserve funding," he said, noting lenders are increasingly reviewing reserve studies and, in some cases, expecting associations to adopt the highest recommended reserve allocation from a reserve study and to target roughly 15% of assessments toward reserves. "That is a lender requirement," he added, and not state law, but it can affect whether an FHA-backed loan is available to buyers in an association.

Real estate agents, managers and boards were urged to label fees correctly on closing statements and to work with counsel: mislabeling an administrative setup fee as a reinvestment fee (or vice versa) could affect enforceability.

The office recommended that boards consult attorneys about reserve studies and compliance; Ryder said homeowners retain rights to see reserve analyses and that associations should adopt prudent reserve funding practices to avoid large, unexpected special assessments.

The Ombudsman Office plans to post the webinar and related resources, including a home-buyer checklist and guidance for managers, on its website.