What is a Flip Tax and Why do Coops Charge it?
A Flip Tax, which is better described as a “transfer tax”, is monies paid to the cooperative by the seller once a coop apartment is sold (or the transfer of ownership occurs). A coop’s flip tax, if it has one, will be spelled out in the cooperatives offering plan, and can be a flat fee, a per share amount or a percentage of sales. For example, a coop that has imposed a 5% percentage of sale flip tax, would collect $15,000 at closing from the seller on a $300,000 sale.
Why do coops charge flip taxes? Well, its a great way to collect money to fund the coop ’s reserve funds so that the corporation has monies available for any necessary capital projects that arise without having to access the shareholders, or increasing the coop’s debt service by taking out a loan.
Flip taxes are a necesary evil that you have to take into consideration when you purchase a coop.
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