Proposed tax may reduce NY property values

A proposed federal tax could change the way condominiums and co-ops in New York operate and drive property values down, NY1 reported. “The proposed legislation would essentially prohibit Fannie and Freddie and the federal home loan bank from investing in mortgages where the building, be it a co-op or condo, has a flip tax,” said Eva Talel, a partner at Strook & Strook & Lavan. Since a majority of the buildings in New York have a flip or transfer tax, the stability of the local real estate market could be in danger. Last year, the Federal Housing Finance Agency proposed the guideline in an effort to prevent developers from requiring buyers to pay them a fee whenever a property is re-sold. But in New York City, the flip and transfer taxes are generally paid to the buildings themselves and are almost always used for maintenance and capital improvements. “They are going to have to find a source for money to replace what used to come from flip taxes and the transfer fees,” Talel said, adding that maintenance or common charges would go up, which would then drive property values down. Talel said the solution is an easy one. “Carve out flip taxes where the money goes back into the building,” she said. “That’s all that is really required in order to make this bill palatable and non-punitive.” [NY1]