Utah homeowners associations have long used reinvestment fees as a way to generate revenue when property is sold to help fund the costs of maintaining community amenities and infrastructure. The Utah Legislature recently made changes to how reinvestment fees may be established, calculated, and used.
What Is a Reinvestment Fee?
A reinvestment fee is a fee imposed on a buyer or seller when real property within a common-interest community is transferred. Under Utah Code § 57-1-46, the fee must be dedicated to benefiting the common areas or the community, including expenses associated with infrastructure, amenities, open space, recreation facilities, community programming, association expenses, and certain capital-intensive infrastructure maintenance.
Reinvestment fees are different from ordinary HOA transfer or administrative fees. A transfer-related administrative fee is generally intended to cover the association’s costs associated with processing a sale, while a reinvestment fee is a covenant-based charge intended to provide funding for the community itself.
New Cap on Reinvestment Fees
For most associations, the maximum reinvestment fee that can be charged is 0.5% of the value of the property. However, this year the Legislature created a new category called a “low-amenity association.” A low-amenity association is generally an association consisting exclusively of detached single-family homes that does not provide capital-intensive infrastructure maintenance services to its members. For these associations, the cap is reduced to 0.25% of the property’s value.
For example, on a $500,000 home:
- A typical qualifying association could charge up to $2,500.
- A low-amenity association could only charge up to $1,250.
The statutory caps do not apply to property located within a “large master planned development” (i.e. more than 500 acres or 500 homes).
At Least 50% Must Go Into Reserves
The new law also changes how reinvestment-fee revenue must be handled. Unless the association is a large master planned development, at least 50% of each reinvestment fee must be deposited into reserve funds. This change is particularly important for communities that have historically treated reinvestment-fee revenue as general operating revenue. Going forward, associations subject to the requirement should establish accounting procedures that clearly identify the portion of reinvestment-fee revenue that must be reserved for future capital needs.
Member Approval Is Now Required
The 2026 amendments also impose a new approval requirement. Beginning May 6, 2026, an association may not impose a reinvestment fee unless:
- The fee is authorized by the declaration or a reinvestment fee covenant; and
- A majority of the association’s voting interests, or a greater percentage required by the governing documents, approves the fee.
After the required approval, the association may establish the amount of the fee only in accordance with the declaration or reinvestment fee covenant and applicable notice requirements.
Owners Can Also Vote to Remove or Amend the Fee
The new statute gives association members a mechanism to challenge or modify an existing reinvestment fee. Members may call a special meeting to consider removing or amending the fee. At least 51% of the voting interests must attend and vote, and a majority of those voting must approve the change.
What Should Utah HOAs Do Now?
The 2026 amendments make it important for HOAs, condominium associations, and developers to review their existing reinvestment-fee provisions. In particular, associations should determine:
- Whether the reinvestment fee is properly authorized in the recorded governing documents;
- Whether a separate statutory notice of the reinvestment-fee covenant has been recorded;
- Whether the association qualifies as a low-amenity association;
- Whether the existing fee exceeds the applicable statutory cap;
- Whether the association’s accounting procedures properly segregate the required reserve contribution; and
- Whether the association has obtained the member approval when required.
For new developments, these changes should also be considered when drafting declarations, reinvestment fee covenants, budgets, and reserve plans. Reinvestment fees can provide a valuable source of long-term funding, particularly for communities with substantial amenities or capital-intensive infrastructure, but the covenant now needs to be structured with the new statutory provisions in mind.