Drake Law Review
Developers have recently begun creating, and attaching to the property they sell to consumers, what is known as a "recovery fee." These recovery fees are "new" in that most lawyers are not familiar with them and in that they seem to operate in a novel manner and are bottomed on novel claims. In essence, they create and levy a fee on subsequent owners each time the property is transferred, which fee purports to reimburse developers for infrastructure and other development costs. Because they seem new, and because they involve transfers from relatively small and unsophisticated parties to relatively large and more sophisticated parties, they have engendered substantial controversy and opposition.
But they are not really new. They are actually simply a type of covenant, condition, and restriction. Covenants are among the most basic property concepts studied by most first-year property students. These recovery fees are merely a new type of covenant that has recently emerged as a new tool for real property developers to generate additional revenues.
This Article primarily seeks to describe these recovery fees, to place them in their proper context within the extant universe of known encumbrances, and to warn legislators and lawyers against overreacting to them through a flurry of unnecessary and ultimately unhelpful laws. The Article does this by describing recovery fees and the various "solutions" that states have begun promulgating in response thereto. This desire for solutions is understandable, as recovery fees do pose some problems, but, I argue, these problems arise not from the intrinsic nature of these covenants, but from the manner in which our recording system accomplishes its notice function. Though entirely statutory in nature, the recording system effectively relies upon history and custom such that a new variation on even a well-established property interest or encumbrance can undermine notice. Therefore, I ultimately suggest a restrained solution that both ensures notice and avoids the difficulties associated with imprudent laws and prohibitions. I conclude that this restrained solution, by working within the context of existing notice structures, will minimize any confusion associated with recovery fees by maximizing the flow of information and eliminating the need for unwarranted and confusing laws and restrictions.
Chad J. Pomeroy, The Real Doctrine & Covenants, 65 Drake L. Rev. 481 (2017).