Subscribe for Daily Updates!
I live in a Coop which is 95% owned and regulated by the Corporation. I would like to know if the sponsor should pay the flip tax, when he sells his units off? I believe that they should pay as we the sellers of the Corporation should. Recently, one of the Shareholders sold his apartment, they charged him 4.50 per share flip tax, when at inseption the flip tax was 2.50. There was never an amendment for the increase, our building has been collecting an illegal amount for years, what should we do about this?
I agree with DavidG about the coop sponsor and flip tax. I've been on our board a long time, and as I understand it, the sponsor is usually and legally a Holder of Unsold Shares (complicated issue), and he doesn't have to pay coop fees such as a sublet fee or flip tax. If he sells one of his apts to someone who lives in the apt and doesn't fulfill the legal requirements that apply to "investors only" that person is then a shareholder and has to pay all coop fees and comply with all coop policies just like any other shareholder does.
I had the same thought myself ... but I quickly realized it wouldn't work.
The purpose of the flip tax was to tax the shareholders that bought a unit from the sponsor, usually at a discount price, then sold it at market price for a profit.
Over time, that tax has become a means for income.
A flip tax or increase must be voted in by a majority of shareholders ( 66% ) and amended to the property lease. Anything else would be illegal. I find it odd that your attorney would impose a 4.5 flip tax on sellers without an amendment to increase it.
It is the first, and most important, duty of every Shareholder, and especially those serving on the Board of Directors, to read and understand both of these documents thoroughly. (Kind of like a citizen with the Declaration of Independence and Constitution/Amendments.)
When did the original flip charge go into effect, by what process, and how was the amendment worded?
Can you account for all amendments since the PL was issued, and do any of them account for an increase?
Study the facts carefully, see if you have a case, before going further.
Introduce yourself to other members of Board Talk! Log in below or register here.
Board Talk members who registered prior to March 9th, 2016 will need to reset their password.
I would review your Prop Lease and By-Laws for clarity. As a board member on a building that went co-op over 25 years ago, the sponsor still owns 60% of outstanding shares we visited this issue with our independent attorney – who pointed out that our documents would prohibit the sponsor from paying the flip tax. Until we can change this wording in our governing documents, the sponsor continues to function without being charged the flip tax, being required to adhere to alteration and sublet polices etc.
Even though under the law all shareholders must be treated equally, sponsors often have ‘special rights”. This applies to our situation. I suggest you read your governining documents and consult with an attorney. I hope this helps.
As far as the amount of flip tax – if your governing documents allow a flip tax or charge, look through the board minutes and resolutions to confirm what the correct amount should be. The managing agent should be able to confirm or advise further. The charge should be the same for all applicable shareholders – or there could be liability.
Thank you for rating!
You have already rated this page, you can only rate it once!
Your rating has been changed, thanks for rating!
Board Talk members who registered prior to March 9th, 2016 will need to reset their password.