Not Everyone In Favor of Flip Taxes Flipping Out

Everyone is feeling the crunch of the ongoing recession and as building communities look for ways to raise revenue without adding to their residents’ current financial worries with large assessments, flip taxes are becoming a hot topic.

In New York City, many co-ops already have a flip tax in place in order to gain needed revenue. A flip tax or transfer fee is money paid by the seller that goes back to the co-op each time an apartment is sold. Although some condominiums do have a flip tax, it is not very prevalent because of the laws governing ownership in condos.

“Originally people didn’t like the idea because it means sharing your profit with the cooperative but they have come to realize it’s the best way to keep the financial health of a cooperative strong and protect those who are remaining as shareholders,” says Sandra Jacobus, an attorney with the Manhattan-based law firm of Ganfer & Shore LLP. “There have always been some flip taxes around but more recently shareholders have realized it’s a way to get some income for the cooperative without having the shareholders having to increase cash flow.”

Although there is no defining number of co-ops that currently employ a flip tax in their building, a study done by the Manhattan law firm Stroock Stroock & Lavan a few years ago estimated that nearly 60 percent of co-ops in New York have a flip tax in place.

“A flip tax is an imposition on a sales price of an apartment,” says Edward Braverman, a senior attorney for Braverman & Associates PC. “I believe it was regressive and inappropriate. Most buildings found it an easy way of raising money without the necessity of having assessments.”

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4 Comments

  • As a board member of my coop, thank you for helping to elucidate the confusing elements of this debate. I still haven't formulated my position but realize it is complex and involves many elements. Many thanks for having taken the time to help us all.
  • A flip tax is a violation of the "pay as you go" philosophy of apartment house living. It unfairly forces sellers to subsidize the living expenses of those shareholders who continue to live in the building. Maintaining an adequate reserve fund as part of the operating budget and proper upkeep of the building obviates the need for a flip tax.
  • what prevents the board from raising the percentsge once the flip tax is implemented
  • My coop flip taxes counted by number of shares. 1 share transder fee is $110. Lets assume that one has 120 shaees. Transfer fee then is $12000. Until recently there were not any questions about. However, in August of the last year lenders, that insured by FDIC, received and operate under new guidelines, which is the following: in order to obtain mortgage, amount of fleep tax can not exceed 5% of selling price. Average price of co op in this area is between $100K - 175K and that is an ASKING price. Taking in consideration all of above its simple NOT possible for buyers to optain the mortgage. I tried to talk about it at annual board meeting and was very rudely cut off. Is there any way the problem with excessive transfer fee can be corrected?