Voting "Yes" to Flip Taxes Generating Income WIthout Assessments

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

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11 Comments

  • The issue with the flip tax is that is fundamentally unfair. It takes money from people who are leaving the community to benefit those who stay. The payer gets absolutely nothing for their money. Assessments and realistic levels of common charges are a far more transparent and honest way to deal with budget issues.
  • after a mitchil lama coop voted to go private, is it reqd to vote again on thr black book??
  • ARE THE "FLIP TAX" FUNDS COMING INTO THE CO-OPS COFFERS CONSIDER TAXABLE INCOME ON THE CO-OP'S TAX RETURNS?
  • is there a statute of limitations on the time a person is bequeathed shares in a co op and the flip tax imposition
  • I am an owner of a Co-op in Forest Hills Queens. We currently have a flip tax of $2.00 per share. The Sponsor is pushing to amend this to make it 3% of the Sales Price. The Sponsor is also the Managing Agent and they do what ever they want regardless of what the minority shareholders say. Because of this great distrust the amendment has always been voted down. Because of this the Sponsor has found a way to get around this. At closing when the new purchaser is about to sign the deal the Sponsor will insist that they vote yes to the new flip tax proposal or they will not allow the sale. We were never told about this until a new purchaser told us at the lastest board meeting. The Sponsor told us that it was perfectly legal for them to do this. My question - Is this legal? Can the Sponsor also be the managing agent? Also the board is made up of 6 members, 3 from the Sponsor and 3 minority sharholders but because they have so many votes they always seem to get to pick a minority sharholder who votes for them making every vote in there favor. Is this board legal? Thank you for your time and any answers what be greatly appreciated.
  • Believe it will be illlegal soon. I've seen some managing agents already sent out urgent notice threatening if New York passes law to make flip tax illegal the maintenance fee will go rocket high.
  • I am an owner of a co-op in Woodside. The building has a flip tax of 25 percent of the difference between purchase and sale price. Which can be quite high. Recently one seller had to pay the flip tax of about $80,000. Is such excessive flip tax legal?
  • when you think about the difference between prices of buying the apartment in co-op and selling it, just consider the value of $,which dropped three-four times
  • As I have the same rights as the sponser. Does this mean that I should have not paid a fee to the coop board which basicallly a flip tax with a doifferent name?
  • The flip tax received by the coop is usually treated as a capital contribution. The seller paying the flip tax treats it as a capital contribution to the coop and is added to the seller's tax basis on the sale.
  • When I bought my coop there was no flip tax, then 6 years later the re--instituted the flip tax... my question is is that legal since I had no say in this what so ever, and did not sign anything to that effect?