A state law prohibiting anonymous property ownership through LLCs has been quietly altered after pushback from the industry.
The law, passed in September, required LLCs involved in residential real estate transactions to disclose the identities of all owners, managers and agents associated with the company. The language in the original bill suggested the law was limited to buildings containing one to four units, however a state guidance issued later that month said it applied to residential condominiums — triggering widespread panic in New York City, where LLCs are common in property transactions, particularly among celebrities.
This week, the State Department of Taxation and Finance issued a new memo that notably made no mention of condos. Screen shots from the department’s original guidance, both in October and today, show the mention of condos has been quietly deleted.
(CLICK TO ENLARGE)
“The Department’s initial understanding of the new law was generated based on the agency’s preliminary reading of the bill language and how it interacted with other relevant sections of the law,” a representative of the state tax department said in an email. “Since that time, the bill sponsors have clarified their intent.”
“The law is intended to apply to sales of a residential building with 1 to 4 dwellings, not the sale of individual condo units.”
The apparent walk back follows pushback from the industry. A number of real estate attorneys and other industry professionals appealed to the state to modify the law after the original guidance came out.
“The original legislation never said condos and somewhere along the line, someone decided condos should be included,” said Stuart Saft, a partner at Holland & Knight LLP.
“Those of us in the field contacted the state and the city and the title insurance companies, and pointed out that the language that was in the initial guidance wasn’t in the statute and wasn’t what was meant to be covered.”
In an interview with The Real Deal in October, Democratic State Sen. Liz Krueger, who co-sponsored the bill, acknowledged that when she initially read a memo about the bill before it passed, she thought it would simply codify measures already in place in New York City and apply them statewide. But after Gov. Andrew Cuomo signed it into law September 13, she was surprised to see the law interpreted to include all residential condos in New York.
Write to Sylvia Varnham O’Regan at so@therealdeal.com