Tuesday, March 29, 2016
5 Things To Know About New York's LLC Disclosure Rule
By Wei Min Tan
1. What is the new rule?
New York is piloting a new disclosure rule that requires LLCs to disclose the names of its members. This new rule, on a test run, will take effect from March till August 2016. The rule is aimed at uncovering money laundering activity.
2. What types of property are affected?
The rule will only impact transactions involving:
(i) all cash
(ii) property priced at $3 million or higher
(iii) LLC (limited liability company) ownership
3. What is an LLC?
In this context, an LLC (limited liability company) is a company created to hold property. Owning through an LLC has advantages including anonymity for the actual owners and liability protection if the owner is sued. LLC owners are not liable for the entity, meaning creditors cannot go after their personal assets.
4. Is owning through an LLC common?
According to a New York Times article, about half of high end residential properties are owned through an LLC. For buyers requiring a mortgage, owning through an LLC is less common because traditional lenders require ownership directly by the buyer. Hence, the LLC option is commonly available only to cash buyers.
5. Who is policing this new rule?
The responsibility of enforcing this new rule lies with title insurance companies. This is because almost all buyers purchase title insurance.
The new rule will likely affect high end Manhattan real estate where buying through an LLC is quite common. Such high end buyers may take a wait-and-see attitude as result of this new ruling.
Wei Min Tan is a Manhattan, New York property broker focusing on global investor buyers. He has been interviewed by CNBC, CNN, New York Times and The Wall Street Journal on the Manhattan property market. Wei Min can be reached at firstname.lastname@example.org