Here's a new concept in real estate: buy a house and when you go to sell it years later, owe the original developer or builder 1 percent of the sales price.
Freehold Capital Partners, a company started in Texas, is selling developers across the country on a plan that would attach a private transfer fee to homes, allowing developers to profit for generations.
The fee, written into neighborhood restrictions, would encumber the property for 99 years and throw 1 percent of the sale price back to the developer —or his or her estate or another investor — and Freehold each time the home changes hands.
It's an idea that's drawn the attention of some state legislatures and real estate trade organizations, which are fighting to stop the transfer fees from gaining a toehold in the market.
Critics say that such fees could taint entire neighborhoods, making it difficult to sell homes and complicate title records for decades. If the fee is not paid by the seller, a lien is placed on the property and the title becomes muddy.
And then there's the basic question: “What it comes down to is, 20 years later, why is the developer still profiting?” asked Jeremy Yohe, director of communications with the American Land Title Association, the national association for title companies.
Freehold, which started in Austin, compares the transfer fees to mineral rights and calls land development a creative process on par with writing a book.
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