After receiving over 4,200 comments on a proposal that would have eliminated flip taxes and transfer fees in co-ops, condos and HOA communities, the Federal Housing Finance Authority (FHFA) has reconsidered its position and will allow cooperatives, condominiums, homeowner associations and certain tax-exempt organizations to continue to use the private transfer fee proceeds to benefit their properties.
Private transfer fees—typically one percent of the sale price or higher as specified in the original governing documents—are fees paid when a condo or co-op unit is resold. They are paid from the purchaser to one of four groups: (1) the community association, (2) tax-exempt groups that provide a direct benefit to HOA owners, (3) tax-exempt groups that don’t provide a direct benefit to HOA owners (like the Sierra Club), or (4) third-party developers or investors. Private transfer fees that do not directly benefit a subject property, (i.e., those paid to developers, investors or third parties) would be barred, according to the proposed rule.
Concern from REBNY, FNYHC,
CAI and Others
The original proposal announced in August 2010 provoked an outcry nationwide from supporters of cooperatives, condominiums and homeowner associations, where flip taxes and transfer fees typically go back to the community to help maintain the housing.
Addressing the concerns raised by the Real Estate Board of New York (REBNY) and its members, the proposed FHFA rule announced Feb. 1, 2011 is a relief to co-ops, condos and HOAs. The proposed ruling would have had a crippling impact on property sales throughout New York City.
“Barring lending in buildings with a flip tax would have had devastating consequences for New York City’s residential sales market,” said Steven Spinola, REBNY president. “We’re thrilled that as a result of our efforts, buildings with a flip tax are now exempt from the FHFA’s proposed ruling.”