On Monday, New Jersey became the 19th state to ban private transfer fees on real estate, also known as “reconveyance fees,” “capital recovery fees” or “home resale fees.”

The fees, the brainchild of a company called Freehold Capital Partners, essentially attach to a home in the development stage, as previously reported on AdvisorOne.com. According to the company, these “capital recovery fees” allow developers to lower the prices of the homes they sell, but each time the home is resold—for a period, generally, of 99 years—the 1% fee must be paid again by the homeowner. Therefore, if a home is resold five times in five years, the fee will be paid five times.

Decried by consumer groups and the National Association of Realtors, among others, the fees attach to the deed of the house and cause problems for sellers—who are often unaware of the existence of the fee till closing—and appraisers and title officers. In a tight real estate market, those opposed say they are one more obstacle to the sale of a home.

Freehold Capital Partners says on its website that such fees, which can be collateralized for resale, enable “the project developer/owner . . . [to] more fairly apportion costs and, in consequence, lower the sales price. Since a portion of the significant capital investment in the project can be recovered over time, current and future buyers will enjoy lower acquisition costs, which means lower closing costs and lower monthly interest payments.”

However, 19 states feel that such fees are not a good thing for the consumer. California requires a special disclosure of such fees. The Coalition to Stop Wall Street Home Resale Fees, with members that include a number of groups, has banded together to fight the fees across the country. States banning the fees are:

  • Arizona
  • California
  • Delaware
  • Florida
  • Hawaii
  • Iowa
  • Illinois
  • Kansas
  • Louisiana
  • Maryland
  • Minnesota
  • Missouri
  • North Carolina
  • New Jersey
  • Ohio
  • Oregon
  • Texas
  • Utah