Sometimes Jumping on the Bandwagon is a Good Thing: An Analysis of North Carolina’s Prohibition of Transfer Fee Covenants

BY Christopher D. McEachran

For the past ten years, homeowners across the country have been discovering that when it comes to contracts to purchase real property, it pays to read the fine print. In the early 2000s, a Texas company began attaching private transfer fee covenants (“TFCs”) to properties in residential communities. A TFC purportedly allows the developer to collect one percent of the sales price from future sellers every time the property is sold for the next ninety-nine years.  There are many problems with this practice, but the principal concern is that a private third party, who has no legal interest in the property other than the TFC, will receive the benefit of the covenant—one percent of all future sales—while future buyers receive no benefit and bear the burden of paying the one percent transfer fee.

DOWNLOAD PDF | 89 N.C. L. Rev.2201 (2011)