Why Transfer Fees? – The Potential Value for Your Building or HOA

October 26, 2017

The Cooperator
By Mike Odenthal

Maintaining a residential cooperative or condo association does not come cheap. Shareholders and unit owners contribute regular maintenance payments, to be sure, but that only covers so much. What happens in the event of a rainy day? Well, there are reserves – but what happens if it rains again, a month and a half later? The truth is, an association can use every penny it can get. That said, it also cannot stand to put undue burden on its residents, who could rightfully push back should they feel as if the board is constantly asking for more and more dough. Thus, it’s on the board to find fair and reasonable ways to accrue a surplus without alienating those who would contribute thereto.


Variety Be the Spice

How transfer fees are implemented and collected can vary slightly, depending on the association, its bylaws, its current needs and foreseeable expenses.

“A transfer fee is a legitimate way for a cooperative to raise money from its shareholders outside of maintenance and assessments,” agrees Andrew P. Brucker, a partner with law firm Montgomery McCracken Walker & Rhoads LLP, in Manhattan. “Typically a transfer fee is imposed on the seller of a co-op apartment upon the sale of that apartment. There are some instances where the designation of the party that shall pay the fee is written as to be purposefully vague and, in those cases, it is assumed that the payment would be negotiated between the buyer and the seller.”

“There are several examples of transfer fees,” he continues. “The first, and perhaps most common, comes via a percentage of the gross selling price. For example, if the fee is 2 percent of the gross sales price, then, when a shareholder sells their apartment for $1 million, that shareholder must pay the cooperative corporation the sum of $20,000 at closing.”

“Another form of transfer fee would be based upon the profit of the selling shareholder. This would typically allow the shareholder to also reduce the profit by the amount of the broker’s fee. Often these fees allow an adjustment to the ‘profit’ based upon any capital improvements made in the apartment.”

Brucker concludes: “Finally, a third type of transfer fee would involve a flat, per-share payment. Something like $20 per share.”


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