Yesterday afternoon, Ohio Governor Ted Strickland signed H.B. 292 banning private transfer fee covenants.  Private transfer fee covenants are recorded with the covenants, conditions and restriction to real property that purport to require the payment of a one-percent fee, usually to the developer, every time a home sells for 99 years. 

The law now says that "a transfer fee covenant recorded in this state [after the effective date of the law] does not run with the title to real property and is not binding on or enforceable against any subsequent owner, purchaser, or mortgagee of any interest in real property as an equitable servitude or otherwise." 

At common law, a covenant that does not touch and concern the land, such a mere obligation to pay a sum of money, is considered personal in nature and does not run with the land.  Modern trends in real estate law are abandoning the touch and concern approach in favor of a more contractual approach to servitudes.  Because of the uncertainty surrounding the manner in which courts may interpret these types of covenants today, several Ohio organizations lobbied for this bill.  Lending their support were the Ohio Bar Association, the Ohio Bankers League, the Ohio Association of Independent Title Agents, the Ohio Land Title Association, and the Ohio Realtors Association. 

Ohio is the tenth state to adopt such a ban and 12 other states are working on similar legislation. There is just something fundamentally unfair about requiring people whose grandparents haven't even been born yet to pay a fee for which they receive no benefit in return.  Thankfully, our legislature has addressed the issue in a well crafted bill that makes it clear that they won't be enforceable here.