NYC Flip Tax: What It Is, and the Court Case Behind It

A court said no in 1985. The legislature said yes in 1986.

What a flip tax actually is, and why it’s legal at all

A flip tax isn’t a government tax, despite the name. It’s a private transfer fee, written into your co-op’s own proprietary lease or bylaws, charged when a shareholder sells. It typically funds the building’s reserve fund.

Flip taxes emerged out of the wave of 1970s and 1980s rental-to-co-op conversions. They gave buildings a way to capture some of the windfall gain shareholders realized as co-op prices rose.

Here’s the part almost no competitor page covers: flip taxes weren’t always clearly legal. In Fe Bland v Two Trees Management Co, decided in 1985, New York’s Court of Appeals ruled that a co-op board couldn’t impose a flip tax under bylaw language authorizing only “a reasonable fee to cover actual expenses and attorneys’ fees, a service fee, and such other conditions as it may determine.” The court held that language was too vague to cover a percentage-of-sale-price transfer fee.

The New York State Legislature responded the following year directly. In 1986, the law was amended to explicitly allow co-ops to charge a flip tax. The Council of New York Cooperatives and Condominiums proposed it.

It applies as long as either the proprietary lease already authorizes it, or shareholders amend the lease with more than two-thirds approval. That’s the legal foundation behind every flip tax charged in NYC today, and it matters whether your building can even do this.

The flip tax NYC percentage, and how it’s actually calculated

One percentage, applied to a number a buyer already knows. Most buildings set their flip tax as a flat percentage of the gross sale price, typically 1% to 3%. The exact rate and structure vary building to building, since there’s no citywide standard. Some buildings calculate it on the seller’s net profit instead, which produces a very different number, so always confirm which method your specific building uses.

Flip taxes are overwhelmingly a co-op mechanism. Condos generally don’t charge one at all. The closest condo equivalent is a capital contribution fee, a structurally different charge our capital contribution fee guide covers in full. If you’re not sure which building type you’re buying into, it’s worth settling that distinction early.

The worked example, corrected, and who pays flip tax NYC

One number in the old version simply didn’t add up. Take a 2-bedroom Upper East Side co-op bought for $1,350,000 and sold seven years later for $1,600,000, in a building with a 1.5% flip tax.

The flip tax and transfer tax figures check out arithmetically. The mansion tax line is where an earlier version of this page got it wrong, stating $20,000 for a $1,350,000 purchase.

Since the 2019 mansion-tax restructuring, a purchase in the $1 million to under $2 million bracket owes a flat 1% of the full price. That’s $13,500, not $20,000. Always run your own numbers. A wrong figure in a worked example is worse than no example at all.

Flip tax vs transfer tax, and capital contribution fee vs flip tax

Three different charges, three different building types. It’s easy to confuse a flip tax with the transfer tax, but they’re not the same, and they go to different entities. The transfer tax is a government charge, split between NYC and NY State. The flip tax goes straight into your co-op’s reserve fund, set by your building, not by any government.

In some buildings, the buyer and seller can negotiate who actually pays the flip tax. Don’t assume it defaults to the seller. Confirm your specific building’s convention with your attorney before you write an offer. Run the real numbers with NestApple’s closing costs calculator so a flip tax doesn’t surprise you at closing.

For every other cost a co-op can charge beyond the mortgage, our co-op costs and rules hub covers special assessments, tax abatements, and capital gains together. If you’re selling and buying again with NestApple, our buyer rebate can offset part of what the next purchase costs.

Common questions

What percentage is a typical NYC flip tax? Most commonly 1% to 3% of the sale price, though each co-op sets the exact rate and calculation method in its proprietary lease or bylaws.

Is a flip tax legal in New York? Yes, since a 1986 legislative amendment followed a 1985 court ruling that limited co-ops’ ability to impose one under vague bylaw language.

Who pays the flip tax, the buyer or the seller? Convention varies by building, and it’s negotiable in some cases. Confirm your specific building’s practice with your attorney before writing an offer.

Is the flip tax the same as the NYC transfer tax? No. The transfer tax is a government charge paid to NYC and NY State. The flip tax is a private fee that goes to your co-op’s own reserve fund.

Do condos charge a flip tax? Rarely. The closest condo equivalent is a capital contribution fee, a structurally different charge typically paid at purchase rather than sale.

Written by Nicole Fishman Benoliel

Co-founder of NestApple and a lawyer admitted to the New York bar, not currently practising.