Can a Mississippi HOA charge a transfer fee when a homeowner sells the property?

Plain-English summary

Representative Tom Miles asked the AG whether Mississippi's 2019 amendment to § 89-1-69 (the private-transfer-fee ban) prohibited HOA management companies from charging a transfer fee in connection with the sale of a home, where the fee was used to settle outstanding HOA balances and update ownership records.

The AG said the answer was no, with conditions. The 2019 amendment to § 89-1-69 generally voids private transfer fees ("PTFs"): obligations in deed restrictions or covenants that require future transferees to pay a fee in connection with a future transfer to the declarant, the person imposing the covenant, or a third party the transferor designated. The statute makes such covenants, and any lien securing them, void and unenforceable.

But the statute kept three carve-outs in § 89-1-69(3): fees payable to (a) a property owners' association managing the subdivision (with more than one platted lot, with the right in a recorded covenant); (b) a 501(c)(3) entity, with the right in a recorded covenant; or (c) a governmental entity. So an HOA could still charge a transfer fee, as long as the fee right was in a deed restriction or covenant running with the land filed in the public land records.

The fees the legislator described, used to settle outstanding HOA balances and update ownership records, fit comfortably within the (a) carve-out, assuming the HOA's authority to charge them was in the recorded covenants.

Currency note

This opinion was issued in 2020. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion said for each audience, at the time

For Mississippi homebuyers in 2020

If you bought a home in an HOA, you might be charged a transfer fee in connection with the sale. Under the opinion, that was lawful if the HOA's right to collect the fee was "evidenced by a deed restriction or covenant running with the land filed in the public land records." The legislator's request described such a fee as one used to provide the balance, if any, owed by the seller and to transfer the property ownership records in the HOA documents.

For Mississippi home sellers

Sellers should expect the HOA to require a settlement payment for any outstanding balance before the closing. The transfer fee would generally be paid by the buyer (per HOA convention), but the underlying balance the seller owed had to be resolved.

For HOA management companies

The 2020 framework was that fees were charged through the HOA, not directly through the management company as a separate party. The management company could collect on behalf of the HOA, but the right to charge had to be the HOA's right, anchored in the recorded covenants.

For developers and pre-2019 deed restrictions

Under § 89-1-69(2), a deed restriction or covenant requiring a transferee to pay a declarant, the person imposing the covenant, or a third party designated by the transferor a fee in connection with a future transfer is "prohibited," and any such covenant or lien is "void and unenforceable." The three carve-outs in subsection (3) are the exceptions to that prohibition.

For real estate attorneys

The opinion ties the validity of an HOA transfer fee to the conditions in § 89-1-69(3)(a): the fee must be payable to a property owners' association that manages or regulates the subdivision (or its managing agent), the subdivision must contain more than one platted lot, and the right to collect the fee must be evidenced by a deed restriction or covenant running with the land filed in the public land records.

Common questions

Q: What was the 2019 amendment to § 89-1-69?
A: Mississippi's general ban on private transfer fees (PTFs). The amendment voided deed restrictions and covenants that required transferees to pay a fee to the original developer or other third party at every future sale, with three carve-outs: HOAs, 501(c)(3) entities, and governmental entities. The carve-outs all require the fee right to be in a recorded covenant.

Q: What is a private transfer fee?
A: In the terms of the statute, it is a fee that a deed restriction or covenant running with the land requires a transferee (or the transferee's heirs, successors, or assigns) to pay "in connection with a future transfer of the property" to a declarant, the person who imposed the covenant, or a third party the transferor designated. Section 89-1-69(2) prohibits those covenants and makes them void and unenforceable, except for the three carve-outs in subsection (3).

Q: How would a buyer find out if there's a transfer fee?
A: The opinion ties a valid HOA transfer fee to a "deed restriction or covenant running with the land filed in the public land records." So the right to charge the fee, if it exists, would appear in the recorded covenants for the subdivision in the public land records.

Q: What's a "platted lot"?
A: A piece of land that has been formally divided and recorded on a plat (subdivision map) filed with the county. Section 89-1-69(3)(a) requires the subdivision to contain more than one platted lot, so single-lot "subdivisions" don't qualify.

Q: Is the fee due even if I'm just gifting the property to a family member?
A: The statute defines the term broadly. Section 89-1-69(2) says that "for purposes of this section, a conveyance of real property includes a conveyance or other transfer of an interest or estate in real property." The opinion did not separately address gifts or other specific transfer types, so a buyer in that situation should look to the recorded covenants and current law.

Background and statutory framework

Section 89-1-69(2), as amended in the 2019 legislative session, prohibits a deed restriction or covenant running with the land that requires a transferee to pay a fee in connection with a future transfer to the declarant, the person imposing the covenant, or a third party designated by the transferor. Such a covenant, and any lien securing it, is void and unenforceable.

Subsection (3) carves out three categories of fee that the prohibition does not reach: fees payable to (a) a property owners' association that manages or regulates the subdivision (or its managing agent), where the subdivision contains more than one platted lot and the right to collect the fee is "evidenced by a deed restriction or covenant running with the land filed in the public land records"; (b) a 501(c)(3) entity, with the same recording requirement; and (c) a governmental entity.

The statute defines "property owners' association" as an incorporated or unincorporated association that is designated as the representative of the owners of property in a subdivision, has a membership primarily consisting of the owners of the property covered by the dedicatory instrument, and manages or regulates the subdivision for the benefit of the owners. The opinion concluded that an HOA may charge a transfer fee, but only in the manner the statute requires.

Citations and references

Statutes:
- Miss. Code Ann. § 89-1-69, ban on private transfer fees with carve-outs for HOAs, 501(c)(3)s, and governmental entities
- Miss. Code Ann. § 89-1-69(3)(a), HOA transfer-fee carve-out (subdivision with more than one platted lot, recorded covenant)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2021/01/T.Miles_October-5-2020-Mississippi-Code-Annotated-Section-89-1-69.pdf

Original opinion text

October 5, 2020

The Honorable Tom Miles
State Representative, District 75
807 Highway 35 South
Forest, Mississippi 39074

Re: Mississippi Code Annotated Section 89-1-69

Dear Representative Miles:

The Office of the Attorney General has received your request for an official opinion.

Question Presented

Does Mississippi Code Section 89-1-69, as amended during the 2019 Legislative Session, prohibit HOA management companies from charging a purchaser a transfer fee in connection with a sale, in order to provide the balance, if any, owed by the seller and to transfer the property ownership records in the HOA documents?

Brief Response

Pursuant to Section 89-1-69, a subdivision's property owner's association may charge a "fee in connection with a future transfer of the property," but only in the manner "evidenced by a deed restriction or covenant running with the land filed in the public land records."

Applicable Law and Discussion

Section 89-1-69 provides:

(1) In this section, "property owners' association" means an incorporated or unincorporated association that:
(a) Is designated as the representative of the owners of property in a subdivision;
(b) Has a membership primarily consisting of the owners of the property covered by the dedicatory instrument for the subdivision; and
(c) Manages or regulates the subdivision for the benefit of the owners of property in the subdivision.

(2) A deed restriction or other covenant running with the land applicable to the conveyance of real property that requires a transferee of real property or the transferee's heirs, successors, or assigns to pay a declarant or other person imposing the deed restriction or covenant on the property or a third party designated by a transferor of the property a fee in connection with a future transfer of the property is prohibited. A deed restriction or other covenant running with the land that violates this section or a lien purporting to encumber the land to secure a right under a deed restriction or other covenant running with the land that violates this section is void and unenforceable. For purposes of this section, a conveyance of real property includes a conveyance or other transfer of an interest or estate in real property.

(3) This section does not apply to a deed restriction or other covenant running with the land that requires a fee associated with the conveyance of property in a subdivision that is payable to:
(a) A property owners' association that manages or regulates the subdivision or the association's managing agent if the subdivision contains more than one (1) platted lot and the right to collect a fee in connection with a future transfer of the property is evidenced by a deed restriction or covenant running with the land filed in the public land records;
(b) An entity organized under Section 501(c)(3), Internal Revenue Code of 1986 if the entity has a right to collect a fee in connection with a future transfer of the property evidenced by a deed restriction or covenant running with the land filed in the public land records; or
c) A governmental entity.

Miss. Code Ann. § 89-1-69 (emphasis added to show language added by 2019 legislative amendment). Accordingly, a subdivision's property owner's association may charge a "fee in connection with a future transfer of the property," but only in the manner "evidenced by a deed restriction or covenant running with the land filed in the public land records." Miss. Code Ann. § 89-1-69(3)(a).

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,

LYNN FITCH, ATTORNEY GENERAL

By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General