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.”