Q: A month earlier than I bought my Higher Manhattan co-op, I found that I must pay a flip tax of two p.c of the sale value on the closing. It’s a major quantity! When my spouse and I purchased the house in 2013, the vendor paid $20 per co-op share for the flip tax. I requested the co-op board for proof that they’ve the appropriate to gather this tax. The board despatched me paperwork about how the co-op operates, which included nothing concerning the flip tax. Are they allowed by regulation to demand this tax? Can I struggle it?
A: Flip taxes — also called a switch charges — assist co-op buildings elevate cash for repairs and capital enhancements, and so they should be described in your governing paperwork. If the phrases of the flip taxes in your constructing modified sooner or later, it is best to have acquired written discover of a shareholder vote to make that change.
That’s as a result of amendments relating to the flip tax often can’t be made unilaterally by a co-op board.
“Until the language of the proprietary lease provides the board the discretion to lift the flip tax now and again, which is atypical, the flip tax can solely be elevated by means of an modification of the proprietary lease, which usually requires the approval of tenant-shareholders proudly owning two-thirds of the co-op’s shares,” mentioned Scott S. Greenspun, principal with Braverman Greenspun, in Manhattan.
If you happen to can’t recall such a vote, look in your governing paperwork, together with your proprietary lease and your bylaws, for language authorizing the change. The phrases are often included in a bit of the lease that incorporates guidelines governing how shares will be bought. If the tax isn’t expressly permitted within the lease, the board can’t forestall you from promoting your shares should you don’t pay it, Mr. Greenspun mentioned.
Co-op shareholders who’ve confronted improperly carried out flip taxes have been profitable in court docket. “You’ll have grounds to problem its validity in court docket after closing,” mentioned Ruta Behrend, a companion who practices actual property regulation at Tane, Waterman, & Wurtzel, P.C., in Manhattan.
You would search a refund of the flip tax if it wasn’t legitimately adopted. Your lease may will let you recoup the authorized charges you incur if you’re profitable in difficult the flip tax in court docket, Ms. Behrend mentioned.
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