In New York, Anonymous Condo Purchases Are a Thing of the Past
If you’ve ever considered using an LLC to mask your identity while you participated in a real estate deal, you may be unpleasantly surprised by a law that went into effect in September. The new law doesn’t stop you from purchasing the property with an LLC, but it does make your identity completely available to anyone who puts in an FIA request.
The law applies to sellers as well as buyers. Every party involved needs to make the names of everyone who will have some ownership share of the property available. This could prove a problem for properties with hundreds of thousands of smaller owners and funds, who may be reaping a portion of the real estate dividends without involving themselves any further in the property than signing up for a portfolio.
The law has already slowed down some real estate deals, and is expected to continue causing problems.
The law stemmed from the number of LLCs that were using real estate purchases to launder money, or as a place to park ill-gotten wealth. There were also concerns from some individuals about illegal home conversions.
In New York City, an illegal conversion is “an alteration or modification of an existing building to create an additional housing unit, without first obtaining approval from the New York City Department of Buildings.”
Here’s an example from the news. Earlier this year, NPR reported on a pair of Manhattan landlords who decided to double their rentable space by cutting two condos in half to create a bunch of tiny apartment.
None of the new “apartments” were safe living spaces. Some had ceilings as low as 4.5 feet. In some cases the inspector had to kneel in an improvised hallway. The inspector also found unpermitted electrical and plumbing work.
As many as 50,000 illegal apartments are operating here on Long Island. Some are safer than others. Some Long Island homeowners consider them a threat to their quality of life.
There are already penalties for illegal rentals here on Long Island. For example, in the Town of Islip, illegal rentals may be punished by jail time of up to one year, or a fine as high as $10,000.
Prior to the passage of the law, prior real estate deals accounted for 30% of condo sales since 2008. Celebrities, business magnates, and other professionals have all used anonymous purchases for completely legitimate privacy reasons.
What should you do in response to this new law?
Consult with an experienced real estate attorney to create a strategy either for complying with it, for fighting it, or both.
See also:
5 Ways to Minimize Liability at Your Long Island Rental Property