LLC Transparency Act Awaits Governor's Signature 'Beneficial Owners' of Condo Units Must Be Named

LLC related concepts in word tag cloud isolated on white background

While co-op boards have an enormous amount of influence over who is - and is not - allowed to purchase shares and call their building home, condo boards have far less power in that regard. 

While co-op boards can (and usually do) reject buyers who conceal their actual identities through the use of single-purpose corporate entities or LLCs - usually for liability and tax reasons  - the only options available to condo boards faced with such a buyer is to invoke the right of first refusal. That means either finding an alternate buyer at the same price agreed to by the rejected one, or raising the funds and purchasing the unit from the seller themselves. Both moves represent such heavy administrative and financial lifts that the right of first refusal is very rarely invoked. According to William McCracken, a partner at the law firm of Ganfer Shore Leeds & Zauderer, that means that in a market where many buyers are from overseas or are corporate entities looking to invest in NYC’s seemingly ironclad real estate, the use of LLCs “is almost ubiquitous for the purchase of condominiums. It obscures who the beneficial owner of the property is.” 

New Law

A new law that passed both the New York State Assembly and New York State Senate earlier this summer would change part of that dynamic for condo boards. The LLC Transparency Act, or CTA, requires the identities of LLC owners to be disclosed.  According to the State Assembly web page on the new law, the CTA in part “relates to the disclosure of beneficial owners of limited liability companies and foreign limited liability companies and certain information about such beneficial owners; requires the secretary of state to maintain a public database of all business entities organized in the state and all foreign business entities with authority to do business in the state.”

McCracken says that time will tell if the new disclosure rule will be of significant, concrete benefit to condo boards, “But from the position of law enforcement and regulation, it’s better to have information than not. There is a general principle that the more ‘sunshine,’ the better. It’s useful for many reasons to be able to see who owns a property.” Among those might be an improved ability to go after owners in arrears to collect monies owed, or to enforce rules around subletting or using condo units as short-term rental properties - both of which can be tortuous when an owner is obscured behind walls of shell corporations and faceless legal entities.  

On the flip side, says McCracken, just because a buyer uses an LLC or other entity to shield their identity doesn’t automatically mean they’re up to something sketchy - many have perfectly legitimate reasons for not wanting a real estate purchase to be public knowledge. “Law-abiding citizens who just want to maintain their privacy will lose that ability when one can easily find out where they live,” he says. “Loss of privacy is a big issue today. There will be a lot of pushback from that direction. Particularly from celebrities.”  

The CTA is currently awaiting Governor Kathy Hochul’s signature. 

Related Articles

Chek mark and cross vector icons in trendy neumorphic style. Yes or not symbols Vector EPS 10

New Bill Aims to Increase Speed & Transparency of Co-op Purchases

INT 914 Now Before NYC City Council

Kiev, Ukraine - May 18, 2021: Buying Property with Cryptocurrency. Buying real estate with bitcoin. Gold bitcoin coin, model house on gray background. property. Copy space.

Co-ops, Condos, & Crypto

Some Basics Boards Should Know

Magnifying glass in front of an open newspaper with paper houses. Concept of rent, search, purchase real estate.

Condo, or Co-op?

A Shift in Attitudes Among Buyers?

Senior black couple sitting with a computer and calculator, considering different housing options, Vector illustration, no transparencies, EPS 8

Downsize....or Rightsize?

It's Not Always About Square Footage

Rebranding Buildings & HOAs

Rebranding Buildings & HOAs

People, Politics, & PR

Human resource manager looking at many different cv resume and choosing perfect person to hire. HR concept on virtual screen.

Assessing Buyer Applications

What Boards Should Look for—& Avoid