Richards Layton & Finger

Delaware Real Estate Law Update: Delaware Prohibits Private Transfer Fees

August 5, 2010

On July 27, 2010, Governor Markell signed into law Senate Bill 322 prohibiting the charging of so-called private transfer fees on the transfer of real property. Delaware now joins many other states in the movement to prohibit these fees. The legislation prohibits the enforcement of a fee to be paid at the time of transfer of real property to allow such a transfer. These are fees that are unrelated to services or other consideration received in return for the payment, but are due solely for the right to transfer the property.  Over the past several years, transfer fees have been instituted in communities to create a perpetual stream of payments to a third party, often the original developer, whenever a property in the community changes hands. As in many states, the General Assembly appears to have viewed the imposition of such fees as creating an unreasonable impairment of titles. The law does not purport to affect local governments or community associations from charging assessments for services and other legitimate activities. Under this new legislation, the Attorney General may charge the use of a transfer fee covenant in violation of the law as a violation of consumer law.

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