New York City Real Estate Lawyer Natalia Sishodia Explains Flip Tax Rules for Co-op Transactions

Understanding real estate fees is essential for anyone buying or selling property in New York City, especially when it comes to co-ops. New York City real estate lawyer Natalia Sishodia (https://sishodia.com/what-is-a-flip-tax/) of Sishodia PLLC is helping clarify one often misunderstood cost, the flip tax. In co-op transactions, the flip tax can be a significant expense, and Natalia Sishodia emphasizes the importance of knowing how this fee affects both parties in the deal. With most of the city's residential inventory made up of co-ops, working with a New York City real estate lawyer is crucial to navigate these unique transactions.

Real estate closings in New York City often involve additional fees that may not exist in other markets, and the flip tax is one of them. Natalia Sishodia, a New York City real estate lawyer at Sishodia PLLC, explains that the flip tax is a fee imposed by the co-op corporation at the time of sale. Unlike a government-imposed tax, this is a charge collected by the building to cover costs like maintenance reserves. New York City real estate lawyers often deal with the impact of these fees during contract negotiations and closing procedures.

New York City real estate lawyer Natalia Sishodia notes that the flip tax is a common feature of co-op agreements, often ranging between 1% and 3% of the sale price. Co-op buildings have the flexibility to set the structure of this fee, which can be based on a flat rate, a percentage of sale price, the number of shares owned, or other formulas. The variability of flip tax terms makes it essential for buyers and sellers to consult with a New York City real estate lawyer to understand their financial obligations before entering a transaction.

Flip taxes originated in the 1980s when many rental buildings converted into co-ops. As part of this transition, co-op boards introduced the flip tax to raise funds without increasing maintenance costs for all shareholders. According to Natalia Sishodia, the flip tax also serves to discourage short-term ownership and flipping of units, thereby promoting long-term community stability within buildings. This is especially relevant in New York City, where high turnover can strain shared building resources.

Flip tax responsibility typically falls on the seller, but this is not a fixed rule. Natalia Sishodia advises that the party responsible for paying the flip tax is generally determined through contract negotiations. In slower markets, sellers are more likely to absorb the cost. In competitive markets, buyers may agree to pay all or part of the fee. New York City real estate lawyers like Natalia Sishodia ensure that this cost is properly addressed in the contract to avoid disputes at closing.

The flip tax is not deductible as a traditional tax on federal income returns. Natalia Sishodia points out that although the flip tax cannot reduce taxable income directly, it is treated as a transaction cost. This means it can be subtracted from gross proceeds when calculating capital gains, helping reduce the amount subject to capital gains tax. New York City real estate lawyers frequently assist clients in accounting for these types of costs when planning for post-sale tax obligations.

The structure of co-op ownership adds another layer of complexity to New York City real estate. Rather than owning a unit directly, buyers receive shares in the corporation that owns the building and a proprietary lease for the apartment. This arrangement creates legal and financial responsibilities that differ from traditional property ownership. Natalia Sishodia stresses that understanding the terms of co-op ownership- including flip taxes- is essential to making informed decisions in New York's real estate market.

Although co-op transactions can involve strict board approval processes, higher down payment requirements, and limited use restrictions, they remain an attractive option due to their affordability and long-term stability. Natalia Sishodia helps clients evaluate whether a co-op is a suitable choice by reviewing all legal and financial aspects, including recurring building costs and flip taxes. The presence of a flip tax does not make co-ops inherently less desirable, but it must be factored into the overall cost of ownership.

Sellers unfamiliar with flip taxes may find the fee reduces equity at the time of sale. Conversely, buyers might find that negotiating this cost upfront improves transparency and avoids unexpected expenses later. Natalia Sishodia encourages early discussions with a New York City real estate lawyer to understand how the flip tax will influence each party's financial outcome. Clear planning can reduce confusion and facilitate a smoother transaction.

Purchasing or selling a co-op in New York City requires a strong understanding of unique transaction fees like the flip tax. With guidance from New York City real estate lawyer Natalia Sishodia at Sishodia PLLC, clients gain clarity and direction through every phase of the deal. Knowing what to expect from the beginning helps all parties prepare for closing and avoid surprises tied to co-op policies.

For anyone entering the co-op market, a full understanding of the flip tax can make a significant difference. Natalia Sishodia works with local and international clients to ensure that every part of the transaction, including lesser-known fees, is reviewed and addressed. Taking the time to learn about co-op rules helps avoid costly mistakes and ensures a more secure investment.

About Sishodia PLLC:

Sishodia PLLC is a New York City-based law firm focused on real estate law. The firm handles transactions involving co-ops, condos, tax matters, and estate planning for clients in both local and global markets. Led by attorney Natalia Sishodia, the firm offers legal guidance on complex property transactions throughout New York City.

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Email: natalia@sishodialaw.com

Website: https://sishodia.com/

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