What a Transfer Fee Covenant Actually Is
A transfer fee covenant is a provision recorded against real property that requires the buyer or seller to pay a fee to a third party each time the property is sold. These provisions sometimes appear in subdivision declarations or development agreements. Arizona treats them as unenforceable.
A provision in a declaration, a covenant or any other document relating to real property in this state is not binding or enforceable against the real property or against any subsequent owner, purchaser, lienholder or other claimant on the property if it purports to bind successors in title to the specified real property and obligate the transferee or transferor of all or part of the property to pay a fee or other charge to a declarant or a third person on transfer of an interest in the property.
A.R.S. § 33-442(A)The key distinction is this: if a fee is triggered specifically by the transfer of the property and is payable to someone who is not a party to the actual transaction, Arizona will not enforce it. It does not matter whether the provision was recorded. Any lien that claims to secure such a fee is also invalid.
What This Law Does Not Block
This statute carves out several common real estate fees that remain perfectly valid. HOA assessments that touch and concern the land, broker commissions, loan assumption fees, lease assignment fees, and government-imposed charges are all exempt. The prohibition targets a specific type of private toll on property transfers, not the ordinary costs of buying and selling real estate. If you encounter a transfer fee provision in a recorded document, it is worth confirming whether one of these exceptions applies before assuming the fee is unenforceable.
