SENATE BILL 504

50th legislature - STATE OF NEW MEXICO - first session, 2011

INTRODUCED BY

Phil A. Griego

AN ACT

RELATING TO REAL PROPERTY; PROHIBITING TRANSFER FEE COVENANTS; PROVIDING PENALTIES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF NEW MEXICO:

     SECTION 1. SHORT TITLE.--This act may be cited as the "Prohibition of Transfer Fee Covenants Act".

     SECTION 2. LEGISLATIVE FINDINGS.--The legislature finds:

          A. the public policy of this state favors the transferability of interests in real property free from unreasonable restraints on alienation and covenants or servitudes that do not touch or concern the property; and

          B. a transfer fee covenant violates this public policy by impairing the marketability of the title to the affected real property and constitutes an unreasonable restraint on alienation, regardless of the duration of the covenant or the amount of the transfer fee set forth in the covenant.

     SECTION 3. DEFINITIONS.--As used in the Prohibition of Transfer Fee Covenants Act:

          A. "association" means a nonprofit, mandatory membership organization composed of owners of homes, condominiums, cooperatives, manufactured homes or any interest in real property and created pursuant to a declaration, covenant or other applicable law;

          B. "transfer" means the sale, gift, grant, conveyance, assignment, inheritance or other transfer of an interest in real property located in this state;

          C. "transfer fee" means a fee or charge imposed by a transfer fee covenant, but does not include any tax, assessment, fee or charge imposed by a governmental authority pursuant to applicable laws, ordinances or regulations; and

          D. "transfer fee covenant" means a provision in a document, whether recorded or not and however denominated, that purports to run with the land or bind current owners or successors in title to specified real property located in this state and that obligates a transferee or transferor of all or part of the property to pay a fee or charge to a third person upon transfer of an interest in all or part of the property, or in consideration for permitting any such transfer. The term "transfer fee covenant" does not include:

                (1) any provision of a purchase contract, option, mortgage, security agreement, real property listing agreement or other agreement that obligates one party to the agreement to pay the other, as full or partial consideration for the agreement or for a waiver of rights under the agreement, an amount determined by the agreement, if that amount:

                     (a) is payable on a one-time basis only upon the next transfer of an interest in the specified real property and, once paid, does not bind successors in title to the property;

                     (b) constitutes a loan assumption or similar fee charged by a lender holding a lien on the property; or

                     (c)  constitutes a fee or commission paid to a licensed real estate broker for brokerage services rendered in connection with the transfer of the property for which the fee or commission is paid;

                (2) any provision in a deed, memorandum or other document recorded for the purpose of providing record notice of an agreement described in Paragraph (1) of this subsection;

                (3) any provision of a document requiring payment of a fee or charge to an association to be used exclusively for purposes authorized in the document, as long as no portion of the fee is required to be passed through to a third party designated or identifiable by description in the document or another document referenced therein; or

                (4) any provision of a document requiring payment of a fee or charge to an organization described in Section 501(c)(3) or 501(c)(4) of the Internal Revenue Code of 1986, to be used exclusively to support cultural, educational, charitable, recreational, environmental, conservation or other similar activities benefiting the real property affected by the provision or the community of which the property is a part.

     SECTION 4. PROHIBITED PRACTICE.--A transfer fee covenant recorded after the effective date of the Prohibition of Transfer Fee Covenants Act, or any lien to the extent that it purports to secure the payment of a transfer fee, is not binding on or enforceable against the affected real property or any subsequent owner, purchaser or mortgagee of any interest in the property.

     SECTION 5. PENALTIES.--A violation of the Prohibition of Transfer Fee Covenants Act constitutes a violation of the Unfair Practices Act.

     SECTION 6. SEVERABILITY.--If any part or application of the provisions of this act is held invalid, the remainder or its application to other situations or persons shall not be affected.

     SECTION 7. APPLICABILITY.--The provisions of this act apply to transfer fee covenants recorded prior to July 1, 2011, which covenants shall be invalid and unenforceable.

     SECTION 8. EFFECTIVE DATE.--The effective date of the provisions of this act is July 1, 2011.

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