BILL REQ. #:  S-0409.1 

Read first time 01/14/11.   Referred to Committee on Judiciary.

     AN ACT Relating to private transfer fee obligations; adding a new chapter to Title 64 RCW; and declaring an emergency.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION.  Sec. 1   The legislature finds and declares that the public policy of this state favors the marketability of real property and the transferability of interests in real property free of title defects or unreasonable restraints on alienation. The legislature further finds and declares that private transfer fee obligations violate this public policy by impairing the marketability and transferability of real property and by constituting an unreasonable restraint on alienation regardless of the duration of the obligation to pay a private transfer fee, the amount of a private transfer fee, or the method by which any private transfer fee is created or imposed. Thus, the legislature finds and declares that a private transfer fee obligation may not run with the title to property or otherwise bind subsequent owners of property under any common law or equitable principle.

NEW SECTION.  Sec. 2   This chapter may be known and cited as the private transfer fee obligation act.

NEW SECTION.  Sec. 3   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Association" means: An association of apartment owners as defined in RCW 64.32.010; a unit owners' association as defined in RCW 64.34.020; a homeowners' association as defined in RCW 64.38.010; a corporation organized pursuant to chapter 24.06 RCW for the purpose of owning real estate under a cooperative ownership plan; or a nonprofit or cooperative membership organization composed exclusively of owners of mobile homes, manufactured housing, timeshares, camping resort interests, or other interests in real property that is responsible for the maintenance, improvements, services, or expenses related to real property that is owned, used, or enjoyed in common by the members.
     (2) "Payee" means the person or entity who claims the right to receive or collect a private transfer fee payable under a private transfer fee obligation. A payee may or may not have a pecuniary interest in the private transfer fee obligation.
     (3) "Private transfer fee" means a fee or charge payable upon the transfer of an interest in real property, or payable for the right to make or accept such transfer, regardless of whether the fee or charge is a fixed amount or is determined as a percentage of the value of the property, the purchase price, or other consideration given for the transfer. The following are not private transfer fees for the purposes of this section:
     (a) Any consideration payable by the grantee to the grantor for the interest in real property being transferred, including any subsequent additional consideration for the property payable by the grantee based upon any subsequent appreciation, development, or sale of the property, if such additional consideration is payable on a one-time basis only and the obligation to make such payment does not bind successors in title to the property. For the purposes of this subsection (3)(a), an interest in real property may include a separate mineral estate and its appurtenant surface access rights;
     (b) Any commission payable to a licensed real estate broker for the transfer of real property pursuant to an agreement between the broker and the grantor or the grantee including, but not limited to, any subsequent additional commission for that transfer payable by the grantor or the grantee based upon any subsequent appreciation, development, or sale of the property;
     (c) Any interest, charges, fees, or other amounts payable by a borrower to a lender pursuant to a loan secured by a mortgage against real property including, but not limited to, any fee payable to the lender for consenting to an assumption of the loan or a transfer of the real property subject to the mortgage, any fees or charges payable to the lender for estoppel letters or certificates, and any shared appreciation interest, profit participation, or other consideration, and payable to the lender in connection with the loan;
     (d) Any rent, reimbursement, charge, fee, or other amount payable by a lessee to a lessor under a lease or license including, but not limited to, any fee payable to the lessor for consenting to an assignment, subletting, encumbrance, or transfer of the lease or license;
     (e) Any consideration payable to the holder of an option to purchase an interest in real property or the holder of a right of first refusal or first offer to purchase an interest in real property for waiving, releasing, or not exercising the option or right upon the transfer of the real property to another person;
     (f) Any tax, fee, charge, assessment, fine, or other amount payable to or imposed by a governmental authority;
     (g) Any assessment, fee, charge, fine, dues, or other amount payable to an association pursuant to chapter 64.32, 64.34, or 64.38 RCW, payable by a purchaser of a camping resort contract, as defined in RCW 19.105.300, on a timeshare, as defined in RCW 64.36.010, or a recorded servitude encumbering the real property being transferred, as long as no portion of the fee is required to be passed through or paid to a third party;
     (h) Any fee payable, upon a transfer, to an organization qualified under section 501(c)(3) or 501(c)(4) of the internal revenue code of 1986, if the sole purpose of such organization is to support cultural, educational, charitable, recreational, conservation, or similar activities benefiting the real property being transferred and the fee is used exclusively to fund such activities;
     (i) Any fee, charge, assessment, dues, fine, contribution, or other amount pertaining solely to the purchase or transfer of a club membership relating to real property owned by the member including, but not limited to, any amount determined by reference to the value, purchase price, or other consideration given for the transfer of the real property;
     (j) Any fee charged by an association or an agent of an association to a transferor or transferee for a service rendered contemporaneously with the imposition of the fee, provided that the fee is not to be passed through to a third party other than an agent of the association.
     (4) "Private transfer fee obligation" means an obligation arising under a declaration or covenant recorded against the title to real property, or under any other contractual agreement or promise, recorded or not, that requires or purports to require the payment of a private transfer fee upon a subsequent transfer of an interest in the real property.
     (5) "Transfer" means the sale, gift, grant, conveyance, lease, license, assignment, inheritance, or other act resulting in a transfer of ownership interest in real property located in this state.

NEW SECTION.  Sec. 4   (1) A private transfer fee obligation recorded or entered into in this state on or after the effective date of this section does not run with the title to real property and is not binding on or enforceable at law or in equity against any subsequent owner, purchaser, or mortgagee or holder of any interest in real property as an equitable servitude or otherwise. Any private transfer fee obligation that is recorded or entered into in this state on or after the effective date of this section is void and unenforceable.
     (2) A private transfer fee obligation recorded or entered into in this state before the effective date of this section is not presumed valid and enforceable. Any such private transfer fee obligation must be interpreted and enforced according to principles of applicable real estate, servitude contract, and other law including, without limitation, restraints on alienation, the rule against perpetuities, the touch and concern doctrine, and the requirement for covenants to run with the land, as well as fraud, misrepresentation, violation of public policy, or another invalidating cause.

NEW SECTION.  Sec. 5   Any person who records, or enters into, an agreement imposing a private transfer fee obligation in the person's favor after the effective date of this section is liable for (1) any damages resulting from the imposition of the private transfer fee obligation on the transfer of an interest in the real property including, but not limited to, the amount of any private transfer fee paid by a party to the transfer, and (2) all attorneys' fees, expenses, and costs incurred by a party to the transfer or mortgagee of the real property to recover any private transfer fee paid or in connection with an action to quiet title. If an agent acts on behalf of a principal to record or secure a private transfer fee obligation, liability must be assessed to the principal, rather than the agent.

NEW SECTION.  Sec. 6   (1) Any contract for the sale of real property subject to a private transfer fee obligation must include a provision disclosing the existence of that obligation, a description of the obligation, and a statement that private transfer fee obligations are subject to certain prohibitions under this chapter. If a contract for the sale of real property does not conform to the requirements of this section, the contract is not enforceable by the seller against the buyer, the buyer is not liable to the seller for damages under the contract, and the buyer under the contract is entitled to the return of all deposits made in connection with the sale of the real property.
     (2) If a private transfer fee obligation is not disclosed under subsection (1) of this section and a buyer subsequently discovers the existence of the private transfer fee obligation after title to the property has passed to the buyer, the buyer may recover (a) any damages resulting from the failure to disclose the private transfer fee obligation including, but not limited to, the amount of any private transfer fee paid by the buyer, or the difference between (i) the market value of the real property if the property were not subject to a private transfer fee obligation and (ii) the market value of the real property as subject to a private transfer fee obligation, and (b) all attorneys' fees, expenses, and costs incurred by the buyer in seeking the buyer's remedies under this subsection.
     (3) Any provision in a contract for the sale of real property that purports to waive the rights of a buyer under this section is void.

NEW SECTION.  Sec. 7   (1) The payee of a private transfer fee obligation imposed before the effective date of this section shall record, before December 31, 2011, against the real property subject to the private transfer fee obligation, a separate document in the office of the recorder of deeds for each county in which the real property is located that includes all of the following requirements:
     (a) The title, "Notice of Private Transfer Fee Obligation," in at least fourteen-point boldface type;
     (b) The amount if the private transfer fee is a flat amount, the percentage of the sales price constituting the cost of the private transfer fee, or another basis by which the private transfer fee is to be calculated;
     (c) If the real property is residential property, actual dollar-cost examples of the private transfer fee for a home priced at two hundred fifty thousand dollars, five hundred thousand dollars, and seven hundred fifty thousand dollars;
     (d) The date or circumstances under which the private transfer fee obligation expires, if any;
     (e) The purpose for which the funds from the private transfer fee obligation will be used;
     (f) The name of the payee and specific contact information regarding where the funds are to be sent;
     (g) The acknowledged signature of the payee or a representative of the payee; and
     (h) The legal description of the real property purportedly burdened by the private transfer fee obligation.
     (2) When there is more than one person or entity who claims the right to receive or collect a private transfer fee under a private transfer fee obligation, those persons or entities shall designate a single person or entity as the payee for purposes of that private transfer fee obligation.
     (3) The payee may file an amendment to the notice of private transfer fee obligation containing new contact information. The amendment must contain the recording information of the notice of private transfer fee obligation which it amends and the legal description of the real property burdened by the private transfer fee obligation.
     (4) If a payee fails to file the notice required under subsection (1) of this section before December 31, 2011, the grantor of any real property burdened by the private transfer fee obligation may proceed with the conveyance of any interest in the real property to any grantee and, in so doing, is conclusively deemed to have acted in good faith and is not subject to any obligations under the private transfer fee obligation. In such event, the private transfer fee obligation becomes null and void and the real property thereafter must be conveyed free and clear of the private transfer fee and private transfer fee obligation.
     (5) If a payee fails to file the notice required under subsection (1) of this section, the grantor, on the recording of an affidavit under subsection (7) of this section, may convey any interest in the real property to any grantee without payment of the private transfer fee and is not subject to any further obligations under the private transfer fee obligation. In such event, the private transfer fee obligation becomes null and void and the real property thereafter must be conveyed free and clear of the private transfer fee and private transfer fee obligation.
     (6) If the payee fails to provide a written statement of the private transfer fee payable within thirty days of the date of a written request for such written statement to the address shown in the notice of private transfer fee obligation, the grantor, on the recording of an affidavit under subsection (7) of this section, may convey any interest in the real property to any grantee without payment of the private transfer fee and is not subject to any further obligations under the private transfer fee obligation. In such event, the private transfer fee obligation becomes null and void and the real property thereafter must be conveyed free and clear of the private transfer fee and private transfer fee obligation.
     (7) An affidavit stating the facts enumerated in subsection (8) of this section must be recorded in the office of the recorder of deeds for each county in which the real property is situated prior to or simultaneously with a conveyance pursuant to subsections (5) or (6) of this section of real property unburdened by a private transfer fee obligation. An affidavit filed under this subsection must state that the affiant has actual knowledge of, and is competent to testify to, the facts in the affidavit and must include the legal description of the real property burdened by the private transfer fee obligation, the name of the person appearing by the record to be the owner of such real property at the time of the signing of the affidavit, a reference, by recording information, to the instrument of record containing the private transfer fee obligation, and an acknowledgment that the affiant is testifying under penalty of perjury.
     (8) When recorded, an affidavit filed under subsection (7) of this section constitutes prima facie evidence that either:
     (a) The payee has failed to fully comply with subsection (1) of this section in the respects stated in the affidavit; or
     (b) A request for the written statement of the private transfer fee was sent to the payee at the address shown on the notice of private transfer fee obligation, and the payee failed to provide the written statement of the private transfer fee payable within thirty days of the date of the notice to the address shown in the notice.

NEW SECTION.  Sec. 8   This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect immediately.

NEW SECTION.  Sec. 9   Sections 1 through 8 of this act constitute a new chapter in Title 64 RCW.