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The "Flip Tax" Creative Financing or a Coop Cop Out ?
The flip tax is a transfer fee that many new york coops and condos impose on shareholders and owners. In the early 80's when many rental buildings converted, huge profits were being made by former renters who bought their units at inside prices and then resold them. Called "flipping" The boards decided to impose the transfer fee and call it a flip tax on sellers to disuade flipping.
Due to high oil costs, insurance particularly terrorist insurance, neccessary repairs and increases in expenses many buildings need to build their reserve fund and are trying to impose flip taxes. In order for the flip tax to pass 2/3 of the shareholders have to vote in favor of it. It requires a quarum. An absent vote is a no vote. Condop buildings often have investor owners from out of town.
There are several ways they try to impose the flip tax. There are arguments on both sides for every type. In my opinion none are good for sellers. In my opinion it is better to help pay the buildings expenses when you live there and can enjoy the improvements and not when you sell. Why should a seller give a going away present to the coop because the coop is not fiscally disiplined.
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