Washington, DC – February 3, 2011 – (RealEstateRama) — Congressman Eliot Engel announced a victory for co-op owners when the Federal Housing Finance Agency (FHFA) reversed itself on a plan to ban private transfer fees on real estate sales, an action which would have penalized co-op owners.
Rep. Engel filed formal comments with the FHFA explaining how the proposed rulemaking change, as initially written, would hurt co-op owners here and across the nation.
The transfer fee, called the flip tax, is used by co-ops to fund capital improvements and hold down maintenance and common charges. Had the FHFA gone through with its proposal, it would have denied this money to the co-ops forcing increased charges for co-op apartment owners.
Rep. Engel said, “The flip tax is not onerous when it directly benefits the community and individual homeowners by funding reserves, capital improvement projects, and ongoing co-op association obligations. This enables monthly maintenance fees for co-op dwellers to remain affordable. In its absence, co-op boards would need to substantially increase rates to afford improvements and daily upkeep.”
The FHFA had proposed banning private transfer fees to eliminate an abuse of the system by unscrupulous developers and real estate investors who impose a transfer fee of one percent which must then be paid by a home seller every time the house is resold during the next 99 years. As a result, someone with no ownership stake or interest in a property can continue to collect revenue from that property every time it is resold for generations to come.
“It is unfair that the vast majority of developers, investors and the hard-working families who live in co-ops suffer due to the shady methods by some to ‘game the system.’ As our housing market struggles to recover from the devastating effects of the past three years, we must not add to the problems and hinder both resale prices and current living expenses,” said Rep. Engel. “I am glad the FHFA understood the critical and necessary role transfer fees play for millions of Americans who benefit from it.”
Stephen Budihas, president of the Association of Riverdale Cooperatives and Condominiums, said in a letter to his membership after the Congressman contested the FHFA proposal, “You should recall that Congressman Engel moved quickly in response to ARC’s concerns, writing to the FHFA in support of those cooperatives that collected flip taxes that were returned to the benefit of the cooperators.”
