New Real Estate Law Requires Disclosure of Shell Company Members


A new law passed by the De Blasio administration concerning real estate sales in New York City requires disclosure of the names of shell company members.  Over half the luxury condos that sold for five million or more last year were purchased by LLCs.  Depending on the state in which the LLC was formed, individual members may not need to be named.  (For example, filing for an LLC in Delaware offers anonymity protection to its members).  Prior to the enactment of this law, it was easy for those owning property in NYC to avoid paying taxes on it by claiming residency outside the city. 

The law was spurred by a recent New York Times investigation that uncovered many of the shell company owners and found that a large number of them were the subjects of inquiries, or had already been arrested for illegal monetary activities.  While some celebrities may wish to use shell companies to preserve their anonymity, others use it as a vehicle to hide assets.  Prior to the disclosure law, wealthy foreigners were able to purchase high-end condos and co-ops without revealing their identities, and avoided taxes by claiming that their NYC apartment was not their primary residence.  Although federal rules require banks to disclose any suspicions of illegal monetary activity, LLCs are exempt from such rules.  Therefore, with the usage of shell companies to purchase properties, it is difficult for authorities to detect money laundering and other financial crimes.  

In addition to all members of a company being named, the law requires the tax identification numbers of each individual who is a member of the company as well.  Finance commissioner Jacques Jiha has remarked that the new law will help to remove “the veil of secrecy” surrounding luxury real estate transactions.

If you are purchasing property, contact an experienced real estate attorney who can guide you through the process, and protect your legal rights.  Call Georgaklis & Mallas PLLC at (718) 238-2400 or (212) 779-2400.