Developers now required to explain LLC disclosure order to buyers

Offering plans must inform buyers of Treasury's plan to unmask LLCs: AG memo

New York /
Feb.February 09, 2016 01:37 PM

Rockwell’s bemoaning 1984 hit “Somebody’s Watching Me” would be a choice anthem for the tortured souls just looking to buy a little luxury real estate anonymously.

The New York State Attorney General’s Real Estate Finance Bureau released a new memorandum Monday that requires condominium sponsors to make clear that the US Treasury intends on obtaining buyers’ true identities when they buy luxury apartments through LLCs in all-cash deals.

Treasury’s “geographic targeting order,” which requires title companies to disclose LLC members involved in financing-free purchases of Manhattan homes priced over $3 million, goes into effect this March, so any qualifying new development condo for sale at that time must now come with this disclaimer in the offering plan.

According to the memo, condo sponsors will have to amend their previously filed plans to include detailed explanations of the Treasury order. Any new applicants are also instructed to include the complete details of the disclosure order in their offering plans. So any hopes developers may have had that buyers anxious for anonymity wouldn’t realize their shell companies were at risk of being unmasked have certainly been dashed. Although, that wasn’t likely to begin with—the new rules are something transaction lawyers have been buzzing about for the last month.

(Download the Real Estate Finance Bureau’s memo on TRData.)

Given that there are well over 100 active and pending condominium plans in Manhattan that could be covered by the order, the Real Estate Finance bureau, notorious for being weighed-down by an archaic paper records system, is likely to have its hands full processing all the new amendments to offering plans. Late last year, however, the agency announced that it would transition to digital application requirements in February of this year.

The Treasury’s geographic targeting order, which looks to crack down money laundering in real estate in both New York City and South Florida, goes into effect on March 1 and expires on Aug. 27, at which point many say the government will asses what it has learned and impose more permanent and comprehensive regulations.

Earlier this week it was announced that current Real Estate Bureau Chief Erica Buckley is stepping down from her post to join top law firm Stroock & Strock & Lavan’s condo and co-op practice. Her last day with at the Bureau is Friday.


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