We charge a flat $500 flip tax on sales to add a few dollars to the reserves each year. We have been doing an assessment annually, approximating the annual coop abatements/star/senior/vet credits granted by the city and state. It helps keep the maintenance down without taking extra money out of everyone's pockets.

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Instead of a $500.00 flip tax there should be a % which would most likely bring in more revenue to the building. What is the reason for doing an assessment annually? That's a little much. I agree in keeping maintenance down, but doing annual assessments is almost the same thing as maintenance increases, as far as I can see. We have a 1% Transfer Fee on a sale, some buildings have a 2% which can be paid by the seller or broker or split between both. The % is the % of the sale price. If you sell an apartment for $400,000, the Fee coming to the building would be $4000.00. That's better than a flat fee of $500.00. What do you think?

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Do most buildings exempt both or either sponsor owned units when the sponsor sells that unit and/or original shareholders (commonly called insiders) of the flip tax? If yes, can the 'rule' be changed to now charge them?

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Generally, the prospectus allows the sponsor to transfer shares to a buyer without incurring any fees from the coop corporation. So, they are basically exempt from paying it. You could still charge the flip tax and collect it from the buyer. Nothing says the tax must be paid by the seller.

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Thank you. Understand about the sponsor. What about original shareholders who brought during the 'red herring' period? Commonly called insiders, as they rented in the building prior to the conversion to coop status. Can they be required to pay the flip tax as well?

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Maintenance: A co-op's mandated, continuous, and predictable source of income. Used to pay a buildings operating expenses.

General Assessment: A co-op's mandated but time-period-limited source of income. Usually established for a set period of months and used to pay for a co-op's one-time expenses like capital improvements and repairs.

R/E Tax Abatement Assessment: A procedure used by co-ops to offset the R/E tax abatement the Dept of Finance grants directly to shareholders. The abatement reduces the amount of annual R/E tax the co-op owes, but since the money saved by the abatement is supposed to be passed through by the co-op directly to shareholders, the co-op never sees any direct benefit from the abatement. The R/E Tax Abatement Assessment is usually enacted each year by co-ops and is calculated to be the same amount as the abatement. Thus the net effect of the abatement on the co-op's operating income is negligible.

Transfer "Flip" Tax: A fee imposed by a co-op on the transfer of its shares from seller to purchaser. It can be an absolute fixed amount, a fixed amount per share, a percentage of the purchase price, a percentage of the net sales income, or any other calculation based on the transaction. Transfer Tax should be used to "top off" capital reserve accounts. It should never be relied on when calculating a budget or predicting annual income, because it is completely unpredictable. If there are no sales during a year, there's no additional income.

Bottom line: Each source of income serves a different purpose and in most circumstances they are not interchangeable. In governing a co-op, income predictability is paramount and the different revenue streams should be relied on accordingly.

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