I feel we snagged something very interesting talking about transfer fees, as this commenter suggests, and wonder if anyone has anything to add:
I heard that this was in the works among several developers (led by Hillwood). It works as @BF says – the developer puts on a limited time period deed restriction (can’t be perpetual as it breaks some Texas(?) constitutionality laws) that requires each BUYER of that property each time the property sells to pay a transfer fee to the original developer. The time period in question is 99 years (or was when I was told about it).
The real kicker here is that the developer, after burdening all lots with that fee, is then going out to the secondary market and selling that income stream in return for its present value (insert fancy spreadsheets and probably unlikely growth assumptions). In some cases, your U.S. government is purchasing that income stream with TARP money. The theory there is that these developments are “troubled assets” and can apply for TARP funds. The developer, after getting his money, is then, in theory, supposed to put those funds back into the development as improvements.
The beauty of the deed restriction transfer fee(from a purely technical and legal standpoint) is that it is totally without risk. It has to be paid each and every time the asset sells and cannot be removed. Thus, when the developer sells the income stream in the secondary market, it is a guaranteed income stream (albeit subject to the growth of real estate prices and the number of times that property is expected to change hands in 99 years).
Interesting, huh?
