FLIP-TAX SURVEY, P.2

One 900-unit property in Morningside Heights charges a whopping 15 percent of the net profit of an apartment sale. Another property charges just $2 per share. Still another charges a five percent flip tax that drops by one percent for every year that the owner has owned the apartment before selling it.

One type of flip tax has fallen out of favor: a charge meant to supply a significant part of a property's operating budget. Although most flip taxes are designed to make this illegal, managers say that some buildings did not listen to their professionals who warned against the danger of depending on flip income for day-to-day expenses. Properties that depend on flip taxes to pay for their heating oil or electricity bills will eventually hit a year like 2009, when none of their apartments sold and they derived no income from the flip tax.

"It's like fiscal suicide," observes Michael Wolfe, president of Midboro Management.

Indeed, as many have subsequently realized through sad experience, in boom times, flip income is gravy. But in bad times, it's not even garnish.

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