All You Need to Know About The NYC Flip Tax

You have probably heard the term ‘flip tax’ a lot, especially if you are in the real estate world. The term at a glance sounds big and scary, and may intimidate you, but it is a pretty simple expression, as long as you take the time to understand it.

In simple phrasing, flip tax is just a private transfer fee. It has nothing to do with the government. The fee is pressed upon shareholders by New York coops. At the end of the nineteen hundred, home owners made a large profit off buying their converted properties and selling them at a higher price, the boards after realizing this profit and their loss of money, made the unanimous to create the ‘flip tax’ on these transfers, to dissuade it.

It is a way for coops to raise money for necessary requirements, without having to charge residents for things like maintenance fees.

Coops and condos alike both impose flip tax as a way to build up their funds to help them stay on top of the high costs of maintaining their buildings.

It is easier for condos and condo buildings to impose flip tax legally. Not many coops enforce flip taxes, this is because to put flip tax into action, there needs to be a vote made, and it is easier to get the votes in a condo, than it is in a coop.

There are many ways to calculate this flip tax, and all buildings prefer different methods, some of them are:

1. Percentage of the Gross Sale Price.
2. Set Number of Dollars Per Share.
3. Flat Fee.
4. Percentage of Net Profit.

Contrary to popular belief, it is not always the sellers who have to pay this tax. Sometimes, flip tax is imposed on the buyers. The Dakota, 834 Fifth and 740 Park all tax their buyers. This is because the building owners believe that as the buyers will be the ones to benefit from spending the money on improvements and repairs, they should be the ones to pay.

HDFC coop is a New York City affordable housing program that enforces flip taxes as a way of keeping the buildings with their residences affordable. The flip tax is used to cover costs for things like maintenance, and fixing broken equipment. The flip tax is usually about thirty percent of the total profit earned, however this amount has been lessened in some buildings to fifteen percent, as time went on.

The tax is supported by New York City courts. In 1986, the New York State Legislatures came up with a set of rules concerning the tax to keep the process legal. They came up with rules in which flip tax can be imposed, they rules are:

• If it is clearly stated and agreed upon in the co-op’s propriety lease.

• If the lease is approved of by more than at least two third of shareholders in question.

So, as you can see, flip tax is a simple process, and most of the time, benefits the residents.