In the late 1970s, co-op housing corporations found a new source of revenue—the imposition of a transfer fee (commonly referred to as a “flip-tax”) payable when an apartment was transferred. Imposition of such fees, usually a percentage of the apartment’s purchase price, generated a decade of litigation, culminating in joint decisions by the New York Court of Appeals in December 1985 in Fe Bland v. Two Trees Management Co. and 330 West End Apartments Corp. v. Kelly.1 The Court of Appeals not only invalidated virtually all board-imposed transfer fees, but also raised serious doubts about the validity of any transfer fee that was not proportional to co-op share ownership, no matter how nor by whom imposed.
Within months, the New York State Legislature addressed this uncertainty by amending §501(c) of the Business Corporation Law and establishing the validity of share-disproportionate transfer fees which are either embodied in or authorized by the co-op’s proprietary lease, occupancy agreement, offering plan or amendments to such documents.2 Co-ops then had a road map of how to lawfully adopt, impose and collect transfer fees, and many did so.
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