Front Foot Fee or Assessment (North Beach: sale, how much, buying a home)

[Gcoxusa]

I recently moved to Maryland and I'm in the process of buying a home in Anne Arundel county. It is a new home but it was not part of a new development. It was built on a vacant lot in an old established neighborhood. I was surprised to see something called a Front Foot Fee being assessed to the buyer. Sometimes it is called a Front Foot Assessment (FFA) or Front Foot Benefit.

I now understand this fee is related to the cost of installing the water and sewer lines. Still, I find it disturbing because it seems to be based on a roll of the dice. In the preliminary HUD-1 statement it was disclosed as a fee around $300. Now, a few days away from closing... surprise... the fee is now $750. I would appreciate it if anyone could answer some of these questions, or share your own experience with this fee.

What is this fee based on?
Are there any laws governing this fee?
Is there a cap on how much can be charged?
Is it tax deductible?
Do other counties have this fee?

[North Beach Person]

Is this a one time fee or charged yearly?

1) It's based on how much it cost to bring water/sewer to the neighborhood, total cost of principal plus interest to pay off the bond over the term of the bonding divided by number of customers or frontage.

2&3) Not really, the amount is usually set by the bondholder.

4) Sometimes, it depends on how it's set up.

5) Yes. We do it as a benefit charge which is the same for each user tap regardless of lot size. The front foot is set up so people who have a bigger frontage pay more.
If it's done by user and the area is being developed then, in theory, the fee will drop over time. Not so much if it's charged by frontage.

[CBMD]

Google: Douglas JJ Peters Front Foot Fees

[Gcoxusa]

Originally Posted by North Beach Person

Is this a one time fee or charged yearly?

1) It's based on how much it cost to bring water/sewer to the neighborhood, total cost of principal plus interest to pay off the bond over the term of the bonding divided by number of customers or frontage.

I understand what you have said. Still, there are a few things that are not clear. It might be helpful to know when this FFA practice was started.

This fee is charged every year for at least 20 years. It is difficult to understand how the fee is based on bringing water/sewer to the neighborhood when the neighborhood is over 30 years old. Many of the existing homes are older than 30 years. So it seems to me the fee should be based on bringing water/sewer to my house. The house I'm buying is new construction but it isn't new frontage. So I would assume one of my neighbors was paying the front foot fee which should now be reduced.

Hooking up water/sewer is not a new activity. It is a job the county or city has done many times. The point being they know the cost before hand, and they darn sure know the cost when the job is done. So I don't understand why there would be difficulty in disclosing this fee accurately to the buyer well before closing – unless the seller is acting in bad faith.

[North Beach Person]

Originally Posted by Gcoxusa

I understand what you have said. Still, there are a few things that are not clear. It might be helpful to know when this FFA practice was started.

This fee is charged every year for at least 20 years. It is difficult to understand how the fee is based on bringing water/sewer to the neighborhood when the neighborhood is over 30 years old. Many of the existing homes are older than 30 years. So it seems to me the fee should be based on bringing water/sewer to my house. The house I'm buying is new construction but it isn't new frontage. So I would assume one of my neighbors was paying the front foot fee which should now be reduced.

Hooking up water/sewer is not a new activity. It is a job the county or city has done many times. The point being they know the cost before hand, and they darn sure know the cost when the job is done. So I don't understand why there would be difficulty in disclosing this fee accurately to the buyer well before closing – unless the seller is acting in bad faith.

They might not have had water and sewer when the houses were built and it was installed later. Or, maybe more likely since the area is 30 years old, there have been upgrades to the system done (real possible for sewer).

It's not to just "bring it to your house", that's just shorthand, but the cost for the entire system-pipes, pumps, treatment plant, etc. but not operating cost, spread out over all the users. Usually the benefit charge is assessed on every property whether developed or not if it has access to the system (bondholder requirement).

I can't answer why the numbers were so different.

Did you have to pay a tap fee when you started construction?

[MidValleyDad]

I think the fee may have been assessed against the property when the system was installed but deferred until it was actually connected to the system. That was the case with a family members property. They built their house before public water was available in their end of town (for some reason they had sewer). 40 years later they were still using a well. I was told that the big problem with connecting to the water system was that they would still have to pay the frontage fee.

[North Beach Person]

Originally Posted by MidValleyDad

I think the fee may have been assessed against the property when the system was installed but deferred until it was actually connected to the system. That was the case with a family members property. They built their house before public water was available in their end of town (for some reason they had sewer). 40 years later they were still using a well. I was told that the big problem with connecting to the water system was that they would still have to pay the frontage fee.

Yeah. Bondholder requirements are all over the map. When we put in water about 20 years ago (sewer had been put in around 1958) everyone had to hook up, no exceptions. Empty lots still had to pay the benefit charge yearly (but if course no usage).

We still have one house in Town that's not hooked up to either (the house has been empty for 50+ years) and the owners have paid the benefit charge every year (except with the current "investor" owner we end up putting it up for Tax Sale every couple years for non-payment).

Our benefit charges for water/sewer are put on the property tax bill as a Special Assessment. That way the entire amount is deductible rather than just the interest portion. We do the same for trash.

[AeroGuyDC]

We recently built a house in MD.....our Front Foot Fee is about $40,000 over the life of the bond. We had the option to pay yearly or pay off in one lump sum. The lump sum option came with decent discount vs. the annual payment with interest. Just chalk it up to the annual cost of owning a newly constructed home. If it helps psychologically, just consider it part of your annual property tax.

[davecj]

Developers in MD are permitted to charge a deferred water and sewer charge (front foot benefit) to new homes to help offset the cost of installing the water and sewer infrastructure. Most are around 30-33 years and most seem to range around $300-800 per year.

[AeroGuyDC]

Originally Posted by davecj

Developers in MD are permitted to charge a deferred water and sewer charge (front foot benefit) to new homes to help offset the cost of installing the water and sewer infrastructure. Most are around 30-33 years and most seem to range around $300-800 per year.

Yep...ours was $800/year.