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Local Transfer Taxes and Private Transfer Fees

Local Transfer Taxes and Private Transfer – Boulder CO Real Estate Agent

This article discusses local transfer taxes (i.e., real estate transfer taxes), private transfer fees, and documentary fees in Colorado. We will start by discussing local transfer taxes (i.e., real estate transfer taxes) and follow up with the latter two topics. Understanding how these topics differ and how they are related is the key to demystifying them and applying them correctly when filling out Colorado Real Estate Commission approved forms.

Section 15.4 of the Colorado Real Estate Commission approved contract for residential transactions addresses whether a “local transfer tax” must be paid at closing and which party will pay it. There is a discussion of the most common approach to the aforementioned section below. For now it is important to understand that a local transfer tax is simply another way of describing a real estate transfer tax (RETT).

Simply put, a real estate transfer tax is a local tax assessed by a community on transfers of real estate located within the jurisdiction of the community. While the concept itself is straightforward enough, the application is not.

To make sense of why only some of Colorado’s cities and towns impose real estate transfer taxes and others you might otherwise expect to have real estate transfer taxes do not, it is essential to have context. In the late ‘70s some of Colorado’s mountain resort communities began adopting real estate transfer taxes to bolster specific purposes. From the start the sole purpose of Vail’s 1% real estate transfer tax has been the acquisition and maintenance of open space. In Aspen there are two real estate transfer taxes totaling 1.5%, with .5% going to support the Wheeler Opera House and the remaining 1% going to support the Aspen Pitkin County Housing Authority. Funds collected from Winter Park’s 1% real estate transfer tax are deposited into the Town’s General Fund. For a number of years communities adopted real estate transfer taxes for various purposes.

In the handful of Colorado communities that levy real estate transfer taxes, the percentages assessed on transactions can range from 1% to 4% of the purchase price of the property, depending on the location. In addition to Aspen (1.5%), Vail (1%) and Winter Park (1%) a number of other resort communities in Colorado continue to have real estate transfer taxes, including Breckenridge (1%), Frisco (1%), Gypsum (1%), Snowmass Village (1%), Minturn (1%), Avon (2%), Crested Butte (3%), Telluride (3%), and Ophir (4%). If you are a Colorado real estate broker or unrepresented party involved in a transaction in any of these cities or towns be sure to check with the local authorities to confirm this information.

While a number of communities still have real estate transfer taxes in place, no new real estate transfer taxes have been passed and no existing transfer taxes have been increased since 1992. Colorado communities have been prohibited from assessing new real estate transfer taxes or increasing the transfer taxes already in place since an amendment to the Colorado Constitution known as the Taxpayer’s Bill of Rights (TABOR) narrowly won passage in 1992, following several failed attempts. As a result, Colorado communities that did not have generally applicable real estate transfer taxes prior to December 31, 1992 (e.g., Silverton, Steamboat Springs, Nederland, Boulder, Denver, etc.) still do not have real estate transfer taxes and will continue to not have real estate transfer taxes unless the relevant provisions of TABOR are overturned by a supermajority of Coloradans (55%).

Section 15.4 of Colorado’s standard form residential real estate purchase and sale contract is drafted such that the determination of who will pay local transfer taxes (i.e., real estate transfer taxes) is negotiable, with check-the-box options for “None,” “Buyer,” “Seller” and “One-Half by Buyer and One-Half by Seller.” The de facto approach in most transactions is to negotiate the purchase price with the understanding that the buyer will ultimately be responsible for payment of the transfer tax. Sometimes transfer taxes are split between the parties. On rare occasions they are paid solely by the seller.

There is another type of fee, similar in effect to a real estate transfer tax, that can be found in Denver, Boulder, Broomfield, Westminster, and other cities throughout Colorado. It is called a real estate transfer fee or a private transfer fee and is addressed specifically in Section 15.5 of the standard form, Colorado Real Estate Commission approved, Contract to Buy and Sell Real Estate (Residential). The authority to impose private transfer fees is derived not from governmental entities but from community associations (i.e., homeowners’ associations) by way of agreements called covenants that buyers take subject to when they close. Like real estate transfer taxes, the determination of who pays for a private transfer fee is decided by the parties. Whether a property is subject to such a private transfer fee depends on the subdivision. If you do not know for sure whether a private transfer fee is required, it is always best to check.

Note that that real estate transfer and private transfer fees are not the same as the .01% “documentary fee” paid to the local clerk and recorder’s office that applies to any transfer of real estate for which the sale price exceeds $500. Such documentary fees are paid, by default, by the buyer. For information on documentary fees, see C.R.S. § 39-13-101 et seq. or contact the clerk and recorder’s office for the county in which the property is located.

Questions regarding real estate transfer taxes, private transfer fees and documentary fees can require a complex, fact-specific analysis so, as with all of the information provided on this website, this is meant to be used for general educational purposes only and does not constitute legal advice. For specific information, contact an attorney. If, however, you are looking to purchase or sell real estate in Colorado and are seeking the assistance of a knowledgeable, experienced real estate agent, contact Colorado real estate broker Ashley Newell today.

If you are looking for Boulder real estate agents with a results oriented approach tailored to your specific needs, contact Royal Arch Real Estate. We are knowledgeable and experienced brokers who always have your best interests at the forefront of our minds, whether you are buying or selling a home, vacant land or a new construction.