Closing questions
Who pays the flip tax in a New York co-op sale?
A flip tax usually comes off the seller’s proceeds, but plenty of New York buildings shift it to the purchaser. Why the rider has to name the paying party.
Who pays the flip tax in a New York co-op sale?
Quick Answer
Who pays is a contract question rather than a statutory one. The cooperative corporation collects the fee under its own documents, and neither the proprietary lease nor the bylaws bind the parties on allocation. What binds them is the rider, which is why an unassigned flip tax becomes an argument on the day the managing agent issues its figures.
Calculation methods vary by building. Some charge a share of the sale price, some charge a per-share amount, some charge a flat figure, and some charge a share of the seller’s profit, which requires proving the original purchase price and the cost of documented improvements. The method changes the number a great deal, so read it before signing.
Assignment is a contract term. The rider should name the paying party in words, not by reference, because a fee described only as customary invites an argument on the day the managing agent issues its closing figures. Where the seller pays, it is deducted from proceeds. Where the purchaser pays, it lands on an already crowded buyer side.
Sponsor units and estate sales are where surprises cluster. An offering plan can shift the fee to the purchaser, and an estate may be entitled to a waiver or a reduced rate that nobody claims because nobody read the lease. Ask the managing agent for the flip tax calculation in writing well before the closing date.
Is a flip tax deductible or added to basis?
That is a question for the accountant on the file, and it turns on who pays and why. A seller generally treats a transfer fee as a cost of sale, while a purchaser who is charged one is looking at a different treatment. Nothing here is tax advice, and the number belongs in front of a tax preparer before closing.
Can a co-op add a flip tax after I buy?
Often yes, by amending the proprietary lease or bylaws under the procedure those documents set, which usually needs a shareholder vote at a stated threshold. A purchaser who plans a short hold should ask whether an amendment is pending, because a fee adopted after closing applies to the sale that follows.
What else should you read before closing?
In the glossary
- Flip taxA transfer fee charged by a co-op or, less often, a condominium when a unit changes hands. It is a creature of the building's governing documents, ...
- Transfer tax (RPTT and NYS)Taxes on the conveyance itself, one City and one State. Rates step up at higher prices, and who pays is set by custom and then confirmed by the con...
- Mansion taxA New York State tax paid by the buyer on residential conveyances of one million dollars or more, graduated upward through a series of higher price...
- Proprietary leaseThe occupancy lease a co-op corporation grants a shareholder for a specific unit. It is assigned at closing together with the stock certificate for...
- Closing statementThe itemized accounting of every credit, debit and disbursement at a closing. Commercial deals use a HUD-1 or ALTA settlement statement; consumer m...
Questions this raises
- Why will a co-op lender not close without a recognition agreement?A co-op loan is secured by shares rather than a recorded mortgage, so no lender funds until the building signs an agreement respecting its interest.
- Can a co-op board reject a buyer?A NYC co-op board can decline a purchaser without giving a reason, subject only to fair-housing law. What that means for a contract and a mortgage ...
- What happens at a co-op board interview?The NYC co-op board interview is a short fit check after the package is read. What directors ask, what to avoid saying, and how soon the vote usual...
- Who pays transfer tax on a sponsor sale?Sponsor sales usually shift the state and city transfer taxes to the purchaser, and the amount is grossed up. How the offering plan controls the al...
- What does a seller do to prepare a co-op for sale?Before listing a NYC co-op: locate the stock certificate and lease, confirm the payoff and lender custody, clear arrears and settle the flip tax in...
- What is the difference between common charges and maintenance?Condo common charges fund operations only, with taxes billed separately. Co-op maintenance bundles operations, property taxes and the underlying mo...
Building types
- Standard co-opThe ordinary New York City cooperative: you buy shares in a corporation and receive a proprietary lease to occupy a specific apartment.
- HDFC co-opAn affordable cooperative formed under Article XI of the Private Housing Finance Law, with an income cap on purchasers and a flip tax that runs to ...
- Sponsor co-op unitAn unsold share allocation still held by the building’s original sponsor, sold under the offering plan rather than through the ordinary board process.
The statute itself
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