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New York’s change to LLC law could transform NYC real estate transactions

Legal Developments, Other, Real Estate Developments, Real Estate Legality

The real estate world has been trying to digest the implications of a new law quietly passed in September that would require all buyers of property to have their names publicly available under the state’s Freedom of Information Law. As most will be aware, many individuals that purchase real estate in New York City do so quasi-anonymously by using a limited liability company (LLC). These include celebrities, other high-net worth individuals who value their privacy, and oftentimes wealthy foreign buyers. The provision was ostensibly included to better ensure compliance with building codes—a way for neighbors or landlords to reach anonymous owners. However, the nature of this legal change suggests it could have far-reaching consequences for the buying strategies at the high end of the city’s real estate market. [1]

More than 30 percent of condos sold since 2008 were purchased using LLCs, and the Wall Street Journal’s analysis indicates that 61000 one-to-four family homes were purchased using LLCs—indicating the large scale of this practice in the city. Somewhat ironically, the bill limiting the practice was pioneered by Hudson Valley lawmakers seeking to combat large-scale anonymous land purchases further upstate, but once passed the state’s regulatory agencies have chosen to interpret the language of the legislation as broadly as possible. The real estate industry has already mobilized against the law, arguing both that the law will scare of buyers who value their anonymity as well as be impractical, as Real Estate Investment Trusts (REITs) may have thousands of shareholders who cannot reasonably be named as co-owners of every condominium a REIT may own. This major legal development remains very much a live issue, and much like this summer’s rent law, marks a major shift for the city’s real estate market. [2]

[1] Plitt, A. (October 2019) New law could unmask secret buyers of New York City real estate from Curbed NY https://ny.curbed.com/2019/10/9/20906274/nyc-real-estate-anonymous-buyers-legislation Accessed October 16 2019

[2] O’Regan, S. (October 2019) Sweeping LLC law surprised even legislators from The Real Deal https://therealdeal.com/2019/10/15/sweeping-llc-law-shocked-even-legislators/?utm_source=Sailthru&utm_medium=email&utm_campaign=NY%20Daily%20-%2010.16.19&utm_term=New%20York%20Daily Accessed October 16 2019

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