Challenges Proposed Rule Which Would Increase Homeowner Fees

Washington, DC -- Congressman Eliot Engel (D-NY-17) has called on the Federal Housing Finance Agency (FHFA) to cancel plans to ban private transfer fees on cooperative apartment sales.  The proposed rule change would penalize cooperatives by eliminating the private transfer fee – or “flip tax” – which cooperatives use to fund capital improvements and hold down maintenance and common charges.  

Rep. Engel said, “The fee 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,” said Rep. Engel.

The FHFA is proposing to ban private transfer fees to eliminate the 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.  FHFA needs to understand the critical and necessary role transfer fees play for millions of Americans who benefit from it daily.  I advised the FHFA about this problem and I urged them to find a different way to make the changes so cooperatives can keep the fees but the unscrupulous do not.  I will continue to explore a legislative remedy, should the proposed rule go into effect,” said Rep. Engel.

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