Are you seeing a “flip tax” line item in your Upper East Side co-op sale or purchase and wondering what it really means? You are not alone. This building-charged fee can change your net proceeds or your all-in cost, sometimes by thousands of dollars. In this guide, you will learn what a flip tax is, who usually pays it, how UES co-ops structure it, and how to model it in your numbers. Let’s dive in.
What a flip tax is
A flip tax is a charge that a co-op corporation imposes when a shareholder transfers an apartment. It is not a government tax. It is a contractual fee the co-op collects and uses for building purposes, such as reserves, operating expenses, or capital projects. The authority and formula come from the co-op’s governing documents or a board policy.
Who usually pays
The proprietary lease or by-laws usually state who pays. In many UES buildings, the seller pays by default. That said, the parties can agree otherwise in the contract, and some boards will accept a buyer or split payment if the documents allow it. Always confirm the rule for your building before you set price expectations or submit an offer.
Common UES structures
Upper East Side co-ops use several standard formulas. Exact terms vary by building, so always review the documents for your unit.
- Percentage of sale price: Often 1% to 3% in NYC co-ops, sometimes with a sliding scale by holding period.
- Per-share fee: A set dollar amount per co-op share allocated to the apartment.
- Flat dollar fee per unit: Less common in larger Manhattan co-ops.
- Sliding scale by holding period: Higher if you sell within a short time, lower for longer ownership.
- Gain-based or hybrid formulas: Some buildings use sale gain or combine methods. These are less common.
- Waivers or exceptions: Family transfers, certain trusts or corporate transfers, or hardship cases may qualify if allowed by the documents.
Where to find the exact terms
Your building’s rule lives in its official documents. Do not rely on hearsay.
- Start with the proprietary lease, by-laws, and offering plan.
- Check house rules, board resolutions, and shareholder meeting minutes for updates.
- Review the resale package during contract stage, which should disclose the current flip tax.
- Verify with the managing agent or co-op secretary and request written confirmation. Ask for the precise formula and a sample calculation for your unit.
At closing, the flip tax is usually collected through the closing attorney or escrow as an adjustment. The managing agent typically verifies the number.
How it impacts your math
If you are selling, build the flip tax into your net sheet from day one. If you are buying, note whether the seller is paying, or if you are asked to share or cover it.
Typical seller net proceeds components include:
- Sale price
- Less: broker commission (commonly 5% to 6%, negotiable)
- Less: flip tax per building rules
- Less: transfer taxes and city/state charges that are separate from flip tax
- Less: attorney fees, move-out or elevator fees, prorations, and any mortgage payoff
- Plus/minus: credits and adjustments negotiated in the deal
Two quick examples
These examples are for illustration. Always use your building’s actual formula.
Example A, percentage model:
- Sale price: $1,200,000
- Broker fee: 5% → $60,000
- Flip tax: 2% → $24,000
- Net before other costs and mortgage payoff: $1,200,000 − $60,000 − $24,000 − other costs
- Takeaway: If your documents say the seller pays, you should treat this as a planned closing deduction.
Example B, per-share model:
- Sale price: $850,000
- Apartment shares: 350
- Flip tax per share: $15 → 350 × $15 = $5,250
- Broker fee: 5% → $42,500
- Takeaway: A per-share fee can be much smaller than a percentage in some buildings, but you still need the exact formula.
Pricing and offers
Flip taxes change how you price and negotiate.
- Sellers: Set your list-to-net model with the flip tax already included. Market comparables govern list price, so you may need to accept the flip tax as a cost of sale.
- Buyers: You are usually not directly affected unless you agree to pay it or the seller prices higher to offset it. Watch for price or credit requests that reflect the flip tax.
- Negotiation: Parties often negotiate who “effectively” pays by adjusting price and credits, even if the building requires the fee at closing. Some boards strictly follow the written policy, so get deal terms into the contract early.
- Lenders: If the seller pays, your loan amount is based on the sale price, not reduced by the flip tax. If you agree to pay, your lender may treat it as a closing cost and could limit how much you can finance. Check with your lender early.
Legal and tax notes
Flip taxes must be authorized by the co-op’s governing documents. A board cannot impose a flip tax if the documents do not allow it, and it cannot make it retroactive without proper authority. If you are unsure, have your attorney review the lease and by-laws.
For taxes, sellers who pay a flip tax at closing generally treat it as a selling expense that reduces the amount realized for capital gains calculations. Buyers who pay may treat it as part of cost basis. Because tax rules and personal circumstances vary, speak with a CPA or tax attorney.
Make sure your contract states who pays the flip tax and that you have written confirmation from management before closing. If a waiver applies, you will need a board resolution and written approval in hand.
Due diligence checklists
Use these steps early, ideally before listing or before you sign a contract.
Sellers
- Get the proprietary lease and by-laws and locate the flip tax clause.
- Ask management to confirm the current policy in writing and to provide a sample calculation for your unit.
- Build a net sheet that includes commission, flip tax, transfer taxes, legal fees, mortgage payoff, and a capital gains estimate.
- Decide whether you will price to offset the flip tax or treat it as a sale cost.
- Share the confirmed flip tax terms with your listing broker for buyer disclosures.
Buyers
- Request the flip tax documents for the specific unit during diligence, not after contract.
- Clarify who pays in the building’s rules, then negotiate responsibility in the contract if needed.
- If you agree to pay, confirm how the fee will be shown on the closing statement and whether price will adjust to offset it.
- Ask your lender how they will treat a buyer-paid flip tax and whether any limits apply.
Upper East Side factors
The Upper East Side has many prewar and post-war co-ops, and flip taxes are common. Prestige co-ops often publish clear, formal policies and enforce them closely. Smaller buildings may use simple per-share formulas. A visible or large flip tax can affect buyer perception and comparable sales, so your pricing and negotiations should reflect what similar UES buildings require.
Next steps
The single best move you can make is to obtain your building’s exact flip tax language and a current calculation for the specific apartment. Build that number into your pricing, offers, and loan planning from the start. If you want help modeling your net proceeds or preparing an offer that accounts for the flip tax, connect with Sonal Patel for calm, legally informed guidance tailored to the Upper East Side.
FAQs
What is a flip tax in a UES co-op?
- A flip tax is a co-op-imposed transfer fee collected at resale to support building purposes, and it is not a government tax.
UES co-op sales: who typically pays the flip tax?
- The proprietary lease or by-laws control, and sellers often pay unless the parties negotiate a different arrangement permitted by the building.
UES co-op due diligence: where do I find my building’s flip tax?
- Check the proprietary lease, by-laws, offering plan, and any board resolutions, then confirm the current policy in writing with the managing agent.
UES co-op closings: when is the flip tax collected?
- It is usually collected at closing through the attorneys or escrow, and the managing agent or co-op secretary verifies the calculation.
UES buyer financing: does a buyer-paid flip tax affect my loan?
- Lenders may treat a buyer-paid flip tax as a closing cost and can limit what is financed, so speak with your lender early.
UES seller taxes: how is a flip tax treated for capital gains?
- A seller-paid flip tax is typically treated as a selling expense that reduces the amount realized, so consult a CPA for your specific situation.
