A flip tax, also known as a transfer fee, is a levy imposed by co-op buildings to raise funds for repairs and capital improvements. This fee is typically paid by the seller of a co-op unit at the time of closing and must be explicitly stated in the building's governing documents.
A co-op owner in Upper Manhattan discovered just before selling his apartment that he was required to pay a flip tax amounting to 2 percent of the sale price. Previously, when he bought the apartment in 2013, the seller paid a flip tax of $20 per co-op share. Questioning the legitimacy of this fee, he asked the co-op board for documentation proving their authority to collect it. The board provided governing documents, which did not mention the flip tax.
Flip taxes need to be included in the co-op's proprietary lease and bylaws. Any changes to the flip tax terms usually require a shareholder vote. Scott S. Greenspun, a principal at Braverman Greenspun, explained that amendments to the flip tax typically need the approval of tenant-shareholders owning two-thirds of the co-op's shares unless the proprietary lease specifically grants the board the discretion to adjust the tax, which is uncommon.
Steps to Take:
1. Review Governing Documents: Examine your proprietary lease and bylaws for any mention of the flip tax. The rules governing share sales often contain this information.
2. Check for Shareholder Vote: Verify whether there was a shareholder vote authorizing any changes to the flip tax terms.
3. Legal Challenge: If the flip tax is not expressly permitted in the governing documents, you may challenge its validity. Ruta Behrend, a partner at Tane, Waterman, & Wurtzel, P.C., noted that co-op shareholders have successfully contested improperly implemented flip taxes in court. If victorious, you could be refunded the flip tax and potentially recover legal fees.
Flip taxes are a common but sometimes contentious issue in co-op buildings. They provide a critical source of funding for building maintenance and improvements, yet their implementation must comply with legal and procedural requirements. Ensuring transparency and proper shareholder approval is key to their legitimacy. #RealEstate #CoopLiving #FlipTax #TransferFees #LegalAdvice #NYCRealEstate #HousingLaw #ShareholderRights #PropertyManagement
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3moIt’s usually in the occupancy agreement or bylaws, no one reads them