Trading Privacy for Property: How New York State’s new disclosure requirements expose LLC members

New York State has now passed new legislation which requires additional disclosures for Limited Liability Companies (“LLC’s”) in real estate transactions. This law, which is effective immediately, requires that the purchase or sale of residential real property be linked to an actual person as opposed to an LLC.  This required disclosure of information seems to conflict with one of the more common reasons many create LLC’s, namely to remain anonymous with regards to real estate or other transactions.

On September 13, 2019, the State of New York enacted Chapter 297 of the Laws of 2019, which amends New York Tax Law § 1409(a) and adds a new subdivision (h) to § 11-205 of the New York City Administrative Code.  This law results in further information regarding an LLC’s members being available to the public and requires real estate professionals to obtain additional information in order to buy or sell residential real property in New York State.  While the legislation seems to only apply to 1-4 family residential properties, it is also intended to apply to single condominium units and single co-op apartments based upon answers provided by the bill sponsors’ staff immediately prior to the Governor’s signing.  The State has seemingly anticipated the above mentioned anonymity concerns by stating that the required disclosure shall not be deemed “an unwarranted invasion of personal privacy.”

Another important aspect of this new legislation is that it is effective immediately and therefore has given those involved in real estate transactions little time to adjust and understand its impact. It seems that the County Clerks have already begun to enforce this act.  Further, no form has been created by New York State that contains the information requested, despite the legislation passing, which has causes further confusion.  The absence of this form results in attorneys and other real estate professionals having to create their own documents for submission to the County Clerk’s office.

The relevant part of the new law states that when an LLC is buying or selling residential property, it must be:

…accompanied by a document which identifies the names and business addresses of all members, managers, and any other authorized persons, if any, of such limited liability company and the names and business addresses or, if none, the business addresses of all shareholders, directors, officers, members, managers and partners of any limited liability company or other business entity that are to be the members, managers or authorized persons, if any, of such limited liability company.  The identification of such names and addresses shall not be deemed an unwarranted invasion of personal privacy pursuant to article six of the public officers’ law.  If any such member, manager or authorized person of the limited liability company is itself a limited liability company or other business entity, the names and addresses of the shareholders, directors, officers, members, managers and partners of the limited liability company or other business entity shall also be disclosed until full disclosure of ultimate ownership by natural persons is achieved. For purposes of this subdivision, the terms “members”, “managers”, “authorized person”, “limited liability company” and “other business entity” shall have the same meaning as those terms are defined in section one hundred two of the limited liability company law.”

If you are the member of an LLC who considering the purchase or sale of residential real property in New York State, please contact Melvin & Melvin PLLC to gain assistance in maintaining compliance with these new changes and to avoid delays and added confusion. Contact us here.

 

 

 

For more information Contact Thomas G. Babcock at Melvin & Melvin, PLLC