Legislature Considering "Impact Fee Deferral Covenants"

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People dealing with development “impact fees” should keep track of House Bill 1652, which was introduced into the Legislature on February 4. The bill would significantly alter how development impact fees are collected by local governments. It would do so by requiring local governments to set up a system for collecting impact fees that contains a process for recording a covenant requiring payment in full of the impact fee either at closing or 18 months after the building permit is issued, whichever comes first. The payment must come out of the seller’s proceeds unless otherwise agreed to by the parties in advance. It would also require seller or the seller’s agent or both to disclose the covenant, presumably on the Seller Disclosure Statement, and would also require the local government to release the covenant at an unspecified time. As an alternative, the legislation authorizes a process where the applicant can apply for a deferral of the impact fee until final inspection or occupancy.

If passed in its present form, the legislation would complicate real estate transactions significantly. It would require an additional disclosure by the Seller. It would insert another negotiating item into the transaction, since impact fees can be substantial (for example, the King County Metro Capacity Charge is almost $10,000.00). This in turn could complicate how property is appraised, and in addition, closings could be affected due to the additional encumbrance. A final concern is that local governments may create alternative procedures, leading to potential inconsistences between jurisdictions.

The bill has been referred to the House Local Government Committee and at present, it’s fate is unknown. To learn more about this development or other changes in real estate, contact Mike Spence


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