Prohibition against covenants requiring payment of a fee upon the transfer of real property; exception

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  1. In this section, "property owners' association" means an incorporated or unincorporated association that:
    1. Is designated as the representative of the owners of property in a subdivision;
    2. Has a membership primarily consisting of the owners of the property covered by the dedicatory instrument for the subdivision; and
    3. Manages or regulates the subdivision for the benefit of the owners of property in the subdivision.
  2. A deed restriction or other covenant running with the land applicable to the conveyance of real property that requires a transferee of real property or the transferee's heirs, successors, or assigns to pay a declarant or other person imposing the deed restriction or covenant on the property or a third party designated by a transferor of the property a fee in connection with a future transfer of the property is prohibited. A deed restriction or other covenant running with the land that violates this section or a lien purporting to encumber the land to secure a right under a deed restriction or other covenant running with the land that violates this section is void and unenforceable. For purposes of this section, a conveyance of real property includes a conveyance or other transfer of an interest or estate in real property.
  3. This section does not apply to a deed restriction or other covenant running with the land that requires a fee associated with the conveyance of property in a subdivision that is payable to:
    1. A property owners' association that manages or regulates the subdivision or the association's managing agent if the subdivision contains more than one (1) platted lot and the right to collect a fee in connection with a future transfer of the property is evidenced by a deed restriction or covenant running with the land filed in the public land records;
    2. An entity organized under Section 501(c)(3), Internal Revenue Code of 1986 if the entity has a right to collect a fee in connection with a future transfer of the property evidenced by a deed restriction or covenant running with the land filed in the public land records; or
    3. A governmental entity.


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