The luxury real estate industry can take a breath: Tracking down the true owners of New York properties will still require some detective work.
Gov. Kathy Hochul on Friday signed the LLC Transparency Act but made a critical change to keep information on limited liability companies out of public view.
Instead, the owners behind these entities will have to disclose their names and business addresses to the state government, which will keep it confidential. The change will be made through a chapter amendment to be approved by the state legislature.
In a memo explaining the amendment, Hochul wrote that the bill, as approved by the legislature, was “overly broad, and required changes to ensure it serves the core purpose of exposing unlawful activity while balancing personal privacy.”
Hochul’s revision satisfies concerns raised by real estate professionals. At an event this month, Real Estate Board of New York President Jim Whelan said REBNY supports requiring LLC owners’ information be shared with the state — as it already is with the IRS — but not with the public.
Disclosure would lead to harassment of owners and would deter celebrities and others from buying homes in New York, he said. Following the bill’s passage in June, residential brokers issued similar warnings that buyers keen to maintain their privacy would shop elsewhere.
The bill passed by the legislature required the state to create a searchable database where information on LLCs would be publicly available. Such information must already be provided to the government under federal law, but is not shared with the public. With the governor’s changes, this database will only be available to “those in the government who have a law enforcement interest in the information.”
The bill’s sponsors, Assembly member Emily Gallagher and Sen. Brad Hoylman, have said that the measure would help curb money laundering, tax evasion, deed theft, code violations by untrackable landlords, and other activities made possible by anonymity.
However, the penalty for failing to obey the measure’s requirements was paltry: a $250 fine. Hiring a lawyer to set up an LLC costs far more, and buyers intent on remaining private would have just paid the penalty. But the bill represented a foot in the door that alarmed the real estate industry.
Gallagher told The Real Deal in June that the measure would help identify bad actors in real estate without vilifying the entire industry. In the wake of a building collapse in the Bronx this month, reports highlighted the challenges of identifying the property’s owner, which was listed as an LLC.
“Disclosure to state and local governments is an important first step, but it is not transparency,” Gallagher said in a statement posted on the social media platform X on Saturday. “Tenants deserve to know who they pay rent to and employees should know who owns the companies mistreating them. That fight is not over.”
Most of the property market would have been unaffected by the original measure: Only 7 percent of properties throughout the state are owned by LLCs, according to an analysis by watchdog group Reinvent Albany. In Manhattan, though, that share is 37 percent.
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