If you are buying or selling a co-op on the Upper East Side, the flip tax can feel like a surprise line item that changes your numbers at the last minute. You want clarity early so you can price, negotiate, and close without drama. In this guide, you will learn what a flip tax is, how UES buildings calculate it, who typically pays, and how to plan your deal so the math works. Let’s dive in.
Flip tax basics
A flip tax is a fee your co-op corporation charges when an apartment changes hands. It is not a government tax. It is a building policy created in the proprietary lease, bylaws, or house rules and approved under the co-op’s amendment procedures.
Co-ops use flip taxes to raise operating cash, fund capital projects or reserves, and discourage quick resales. The exact formula, exemptions, and timing are spelled out in the governing documents for your building. Flip tax is separate from NYC and New York State transfer taxes, the Mansion Tax, and any mortgage recording taxes. Those are government charges you pay in addition to the co-op’s flip tax.
Common UES flip tax structures
Upper East Side co-ops use a range of formulas. Your building’s documents control the exact method and rate. Here are the most common structures you will see:
- Percentage of sale price. Example: X percent of the gross sale price collected at closing. This is common across Manhattan co-ops.
- Percentage of net profit. Example: Y percent of your gain, often sale price minus your purchase price and sometimes minus approved capital improvements or closing costs. This targets speculative flips and requires documentation of your basis.
- Per-share fee. Example: a dollar amount per share multiplied by the apartment’s allocated shares. This scales by apartment size.
- Flat fee. Example: a fixed dollar charge regardless of price. You see this more in smaller co-ops.
- Hybrid or tiered. Examples include a fixed minimum plus a percentage, different rates for internal transfers versus third-party sales, or reduced rates after a certain holding period.
Typical practice on the UES falls in the low single-digit percent of sale price, often around 1 to 3 percent, or the mid-teens to mid-twenties percent of profit for profit-based formulas. Per-share fees vary widely and reflect the building’s share structure. Always verify your building’s formula and any exemptions in writing.
Quick example calculations
- Sale price method: 2 percent on a $1,500,000 sale equals $30,000.
- Profit method: 20 percent of profit. Bought for $800,000 and sold for $1,500,000 equals $700,000 profit. Flip tax equals $140,000 before any allowed adjustments.
- Per-share method: $50 per share times 1,000 shares equals $50,000.
Who pays, when, and how
Who pays the flip tax depends on the governing documents and your contract. The seller pays in most UES co-ops, but parties can negotiate to split it or have the buyer pay. Boards can allow a waiver or reduction in limited cases if the documents or a shareholder vote permit it.
Flip tax is usually collected at closing. The managing agent or attorney provides the invoice, and the amount shows on the closing statement. Payment is typically taken from the seller’s proceeds or from buyer funds if negotiated that way. Boards expect proof of payment before they grant final approval.
Exemptions and special cases
Many co-ops list exemptions in the proprietary lease. Common examples include transfers to a spouse or children, transfers upon death through an estate, intra-family transactions, and transfers to entities wholly owned by the shareholder. Some buildings reduce or waive flip tax for long-term ownership or internal moves. Boards may consider hardship, but any waiver is discretionary and should be confirmed in writing.
Closing mechanics and lender considerations
Lenders treat flip tax as a closing cost. Some want the tax paid from the seller’s proceeds rather than added to the buyer’s cash requirement. Flip tax is not a lien on the apartment. It is a contractual entitlement of the co-op corporation. Unresolved flip-tax questions can delay board approval, so secure written confirmation from the managing agent on the amount and payor before you lock your closing date.
How flip taxes affect price, offers, and comps
Flip tax impacts both the seller’s net proceeds and the buyer’s total cash to close. Sellers should plan in net terms. Buyers should include any negotiated flip tax in their funds-to-close.
A simple net-to-seller equation looks like this:
- Net proceeds equals Sale Price minus Flip Tax minus Brokerage Commissions minus Closing Costs minus Mortgage Payoff.
For example, on a $1,500,000 sale with a 2 percent flip tax ($30,000) and 5 percent total brokerage ($75,000), the net before other costs and mortgage payoff would be $1,395,000. If you compare two similar apartments where one building has a 2 percent flip tax and the other does not, you should adjust for the flip tax to compare values fairly.
Seller strategy on the UES
Do your math up front. If you simply raise price to cover the flip tax, you can push your listing above comparable inventory. Many buyers normalize for flip tax across comps. A cleaner approach is to build your target net into your pricing strategy and state clearly who pays.
Flip tax can also be a negotiation lever. You can offer to pay or split it to secure a buyer or to differentiate your listing in a slower market. If your building uses a profit-based formula, gather basis and improvement documents early because the final amount can be large and timing-sensitive.
Buyer strategy on the UES
Convert every offer to an apples-to-apples comparison. If the seller pays the flip tax in one scenario and the buyer pays it in another, calculate your total cash to close in each case. When you evaluate similar co-ops with different flip-tax policies, adjust your analysis so you do not overpay relative to units in buildings with lower or no flip taxes.
Offer structure matters. You can propose a higher gross price if the seller pays the flip tax or request a credit equal to the tax while keeping the price the same. Clarify how your lender will treat any credits so you do not run into underwriting issues.
Due diligence checklist
Use this list to confirm your building’s policy and avoid surprises:
- Obtain and review the proprietary lease and bylaws. Locate the flip-tax clause, formula, and any listed exemptions.
- Ask the managing agent for the current flip-tax invoice format or a written statement of how they calculate and collect the amount.
- Confirm in writing who typically pays in recent closings in this building and whether any waivers or reductions have been granted.
- For profit-based taxes, identify what counts toward your basis, what expenses can be subtracted, and what documentation you must provide.
- Review recent sales in the building and nearby buildings, adjusting for flip tax to understand true market value.
- Coordinate early with your lender and real estate attorney on how the flip tax will appear on the closing statement and whether any escrow is required.
- Check recent shareholder meeting minutes or resolutions for any changes to the policy.
Negotiation and closing tips
- Put it in writing. Specify who pays the flip tax in the contract and attach the relevant clause from the building documents.
- Price to your net. As a seller, work backward from your target net proceeds and build the flip tax into your pricing strategy.
- Use the tax as a lever. Offer to pay or split it to secure favorable terms or to win in a competitive situation.
- Get a pre-closing confirmation letter. Ask the managing agent to confirm the amount, formula, and payor so your lender and attorneys can finalize numbers.
- Plan for complex cases. For profit-based formulas, consider an escrow or post-closing reconciliation process to handle documentation and timing.
- Involve your advisors. Engage your lender and real estate attorney early. Sellers should also consult a tax professional on whether the flip tax can be treated as a selling expense for capital gains reporting.
Two quick scenarios
- Scenario A: You want to net $1,300,000 after a 2 percent flip tax and 5 percent commission. Work backward to set your list price so that after the flip tax and commission, you arrive at your target net. Clarity on who pays the flip tax belongs in your listing and negotiations.
- Scenario B: You are choosing between two offers. In Offer 1, the seller pays the flip tax. In Offer 2, the buyer pays it. Convert both to total cash to close for you as the buyer and to net proceeds for the seller, then compare. This prevents confusion and keeps negotiations focused on outcomes, not just the sticker price.
The bottom line for the Upper East Side
Flip taxes are a standard feature of UES co-op deals. The key is to identify the formula and payor early, build it into your pricing or offer strategy, and lock in written confirmation before closing. With the right preparation, you can avoid delays, compare apples to apples, and negotiate with confidence.
If you want a precise, building-specific plan and net-sheet analysis for your sale or purchase, connect with Kimberly Jay for tailored guidance.
FAQs
What is a co-op flip tax and how is it different from transfer taxes?
- A flip tax is a building-imposed fee set in the co-op’s governing documents, while NYC and NYS transfer taxes and the Mansion Tax are separate government charges.
Who usually pays the flip tax in Upper East Side co-ops?
- The seller pays in most cases, but buyers and sellers can negotiate to split it or shift payment, subject to the building’s rules.
When is the flip tax due and how is it collected at closing?
- It is collected at closing and shown on the closing statement, typically paid from the seller’s proceeds unless the contract assigns it to the buyer.
How do profit-based flip taxes work and what documents should I gather?
- The building charges a percentage of your gain, so you should collect proof of your purchase price, approved capital improvements, and any allowable selling expenses.
How should I compare two UES apartments with different flip-tax policies?
- Adjust for the flip tax to compare net values and cash to close, converting each scenario to net-to-seller and total buyer funds.
Can a co-op board waive or reduce the flip tax?
- Some buildings allow waivers, reductions, or exemptions in specific cases, but these are limited and must be confirmed in the governing documents or in writing from the managing agent.
