In New York City, many co-ops and condos use a practice called a "flip tax" in order to boost building revenue. As most co-op and condo owners know, a flip tax is a fee paid to the building, either by the purchaser or seller, each time an apartment is sold, or "flipped."
The idea of a flip tax is not new; it actually had its genesis in the early 1980's, when hundreds of rental buildings were converting into co-ops. These buildings often needed major capital improvements, and once the dust settled, there wasn't much change left in the reserve fund. According to Stuart Saft, a real estate attorney with the Manhattan law firm of Wolf Haldenstein Freeman Adler & Herz, "The feeling at the time was that tenants who bought at low insider prices and could make quick profits by selling their apartments at market rates should give something back to the building.
"At first, [flip taxes] were basically only done in co-op conversions," continues Saft. "Then about nine or 10 years ago, existing co-ops started implementing flip taxes as they were looking for new sources of income for their reserve funds."
The idea caught on--and held on. Today, it's estimated that more than 60 percent of the city's co-ops have a flip tax in place, and a study by the law firm of Stroock Stroock & Lavan found that a majority of condos are now considering instituting flip taxes too. And why not? They can bring in money--and they can help buildings reduce common charges and maintenance fees without cutting back on services or amenities.
Not Only in New York