New Law Requires Transparency in Real Estate LLCs
On September 13, 2019, Governor Cuomo signed into law a bill sponsored by Sen. James Skoufis which amends the state tax code to promote transparency in the ownership of limited liability companies (LLCs) that own residential real estate.
In recent years, LLCs have become the business entity of choice for the ownership of real property because of certain tax advantages and also because of simplicity of administration when compared to ownership by a corporation.
Municipal governments, seeking to hold landowners accountable when their buildings fall into disrepair or are cited for violations of local ordinances, have often been frustrated by their inability to identify the persons who own the LLC that owns the building. Generally, the identity of the members of an LLC is confidential information.
The new law applies only to LLCs that own residential real property containing 1 to 4 residential dwelling units. Buildings having 5 or more residential dwelling units are not covered. Commercial, industrial, agricultural, vacant land, and other kinds of real property are not covered.
The disclosure mechanism kicks in when the real property is sold or transferred. At closing the parties must complete and submit form TP-584. The new law provides that this form “may not be accepted for filing” unless it is accompanied by a document which identifies the names and business addresses of all the members, managers, and any other authorized persons of an LLC which is a seller or a buyer in the transaction.
If a seller or buyer LLC is owned or managed by one or more other LLCs, corporations, or other business entities, the individual owners of those other entities must also be disclosed “until full disclosure of ultimate ownership by natural persons is achieved.”
For good measure, the law provides that the identification of these names and addresses shall not be deemed an unwarranted invasion of personal privacy pursuant to Article 6 of the Public Officers Law.
Presumably, once municipalities can identify the individual owners of residential real property, they can undertake more effective enforcement action. Another consequence will be the ability to identify an individual who owns multiple parcels of real estate held in multiple LLCs. No doubt there will be other consequences, some unintended.
This is not intended to be legal advice. You should contact an attorney for advice regarding your specific situation.
Gary Schuster is a Partner with the firm and practices Business Law, and Arts & Entertainment. He can be reached by phone at 866-303-9595 toll free or 845-764-9656 and by email.
