Selling on the Upper East Side and hearing about a “flip tax” for the first time? You are not alone. Many UES sellers learn about it right when they start planning their sale, and it can change your net proceeds. In this guide, you will learn what a flip tax is, how it is calculated, who pays it, and how to plan your pricing and negotiations. Let’s dive in.
Flip tax basics
A flip tax is a fee that a co-op corporation, and less commonly a condominium association, collects when a unit is sold or transferred. The authority to charge it comes from the building’s governing documents, such as the proprietary lease, bylaws, and board resolutions. Buildings use this revenue to support operating expenses, reserves, or capital projects, and sometimes to discourage short-term flipping.
On the Upper East Side, flip taxes are common in co-ops. Condos more often have transfer or administrative fees rather than a traditional flip tax. Always confirm the exact policy in your building’s documents.
How UES buildings set the fee
Co-op boards rely on the proprietary lease, bylaws, and any shareholder-approved amendments to authorize a flip tax. If a change is proposed, the board must follow the amendment procedures outlined in those documents. For condos, transfer fees depend on the declaration and state condominium law.
If a fee is not authorized in the governing documents, trying to impose one without a proper amendment can be challengeable. Your attorney can review the authority and any relevant board minutes.
Common formulas and who pays
Buildings on the UES use several approaches. The most common structures include:
- Flat fee per transfer
- Percentage of the sale price
- Percentage of profit after allowable selling expenses
- Per-share formula tied to the unit’s proprietary shares
- Sliding scale that changes with length of ownership
Who pays depends on the documents. In many Manhattan co-ops the seller pays, but the purchase contract can shift responsibility if the co-op allows it. Some boards require the seller to pay because the charge is assessed on the shareholder who is transferring shares. The fee is typically collected at closing by the attorneys or escrow agent and remitted to the co-op.
How it affects your net proceeds
A flip tax that you pay comes right out of your proceeds at closing. You should build it into your pricing and your net sheet from day one. In markets where sellers commonly cover transfer-related costs, you may decide to absorb the flip tax to keep your listing competitive. In other cases, you can negotiate for the buyer to cover it or split it.
Tax treatment on your personal return can be nuanced. Some selling expenses reduce the amount realized for capital gains purposes, which can lower taxable gain. How a flip tax is treated depends on your specific facts and tax rules, so consult a CPA.
Transfer taxes vs. flip taxes
State and city transfer taxes and the state mansion tax are separate from any co-op flip tax. These statutory taxes are handled at closing based on your contract and local custom. A flip tax is a private building charge, not a replacement for government transfer taxes or recording fees.
What to review before you list
Pull these documents early so you can confirm if a flip tax applies and how it is calculated:
- Proprietary lease, bylaws, certificate of incorporation, and any shareholder-approved amendments
- Board resolutions that establish or modify the flip tax
- Recent board minutes that mention flip-tax policy or use of funds
- The building’s resale package or managing agent’s fee sheet
- Offering plan for background on original transfer provisions
Key questions to ask the managing agent or your attorney:
- What is the exact formula for this unit, including exemptions or sliding scales?
- Who is responsible for paying under the governing documents, and can the parties contract around it?
- When and how is the fee collected, and are certifications or escrows required?
- How does the building use the revenue: operating budget, reserves, or capital projects?
- Are there exemptions or reduced rates for estates, intra-family transfers, trusts, or long-term owners?
Smart pricing and negotiation moves
You can protect your bottom line by modeling a few scenarios before you go live:
- Seller pays flip tax: Price with that cost in mind or offer a closing credit elsewhere.
- Buyer pays flip tax: Position the listing accordingly and prepare to explain the policy to buyers.
- Split or credit: Use a buyer credit to offset the fee while keeping your asking price aligned with comps.
If your building’s flip tax is unusually high compared with nearby co-ops, ask your attorney to evaluate whether a waiver or reduction is possible. Boards sometimes grant limited relief in specific circumstances, subject to their rules.
Timing and closing coordination
Confirm the exact amount and payor early. Your attorneys, the buyer’s attorney, and the managing agent should align on the number and place funds in escrow if needed. Late surprises can derail a closing, so get approvals and certifications lined up well before your closing date.
When to bring in pros
It pays to involve specialists early, especially for high-dollar appreciation, estate matters, or transfers involving trusts or entities. An experienced NYC real estate attorney can confirm authority and procedures. A CPA can advise on potential tax treatment. Your listing strategy should reflect both.
A quick seller checklist
- Confirm the flip tax in your building documents and fee sheet.
- Ask who pays by default and whether the payor can be negotiated.
- Calculate a conservative estimate for pricing and your net proceeds.
- Decide your negotiation stance: pay, split, or ask buyer to pay.
- Disclose clearly in your listing remarks how the fee will be handled.
- Coordinate with attorneys and the managing agent to lock in the amount before contract.
How we help UES sellers plan
You deserve a clear picture of your proceeds before you list. With local Manhattan expertise and team-backed resources, we help you pull the right documents, confirm the exact formula for your building, and present buyers with clean, accurate information. If you plan pre-listing improvements, we coordinate vendors and timing so you hit the market with confidence.
Ready to talk through your building’s policy and run a detailed net sheet? Let’s connect at Unknown Company.
FAQs
What is a flip tax in a UES co-op sale?
- A flip tax is a building-imposed fee collected at the time of sale or transfer, authorized by the co-op’s governing documents and used for operating needs, reserves, or capital projects.
How do Upper East Side co-ops calculate the flip tax?
- Common methods include flat fees, a percentage of sale price, a percentage of profit, per-share formulas, or sliding scales tied to how long you have owned the unit.
Who typically pays the flip tax in Manhattan co-ops?
- Many buildings default to the seller paying, but responsibility can be negotiated in the contract if the co-op allows it; some boards require the seller to pay.
Does a flip tax replace NYC or NYS transfer taxes?
- No. State and city transfer taxes and the state mansion tax are separate statutory charges and still apply according to your contract and local custom.
Can paying a flip tax reduce my capital gains tax?
- It may count as a selling expense that reduces the amount realized, but treatment depends on your facts and tax rules; consult a CPA for guidance.
Are there exemptions to flip taxes for certain transfers?
- Some co-ops offer reduced rates or exemptions for estates, intra-family transfers, or long-term owners, as defined in their governing documents.
When is the flip tax paid during a UES closing?
- It is typically collected at closing by the attorneys or escrow agent and then remitted to the co-op, often after board certifications are confirmed.
