Brokers say NY bill revealing LLC owners to the public would chill sales
- The LLC Transparency Act goes farther than the 2021 federal law to unmask anonymous owners
- If signed into law, brokers say international and luxury buyers who want privacy will look elsewhere
The New York state bill would require LLCs to reveal owners’ names and business addresses to the state, information that would then be added to a public-facing database.
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Brokers say a bill awaiting Governor Kathy Hochul’s signature that would publicly reveal the owners behind limited liability companies is “extraordinarily invasive” and would deter luxury and international buyers from buying in New York City.
The pending legislation is called the LLC Transparency Act and it was approved by the state legislature in June. It is a stricter version of the 2021 federal law, the Corporate Transparency Act, which requires LLCs and other corporate entities to unmask their owners to the federal government beginning in February. The New York state bill goes farther, obligating LLCs to reveal owners’ names and business addresses to the state, information that would then be added to a public-facing database.
[Editor's note: After this article published, Assemblymember Emily Gallagher, who introduced the legislation, contacted Brick with a statement; it is appended below.
December 23rd update: Governor Kathy Hochul signed an amended version of the legislation that removed the public-facing database, making ownership information available only to law enforcement and government agencies.]
Like the federal law, the goal of the LLC Transparency Act is to fight money laundering and other types of fraud that can occur with anonymous ownership in real estate and other industries. According to government watchdog organization Reinvent Albany, 37 percent of properties in Manhattan are owned by an LLC.
As Gothamist reports, Hochul has until Dec. 31st to sign the legislation, and hasn’t indicated which way she is leaning.
Raising security concerns
Brokers tell Brick the state law is too broad and would encourage would-be NYC buyers to look elsewhere.
Nikki Field, a broker at Sotheby’s International Realty, calls the New York bill “alarming.” Nearly three-fourths of her clients are international. Many international and luxury deals involve an LLC, unless the buyer is looking at a co-op.
“In 2021, those of us who specialize in international buyers supported the federal law as a welcome restriction to weed out the dirty money,” Field says. “We wanted that clarity,” she adds.
But the New York law raises concerns for international and domestic buyers, she says.
On the one hand, it’s simply unnecessary, she says, pointing out that international buyers are typically looking to invest in property or buy a place for their child in NYC. “They will follow every regulation” in an effort to comply with the law and make the deal happen, she adds.
Then there are the modern luxury buyers who value privacy. It’s a contrast with “old wealth,’” Field says, which “likes to announce they have arrived.”
Today’s luxury buyers “don’t need or want that publicity for their privacy and safety. They don’t want others to know where or how much they are spending,” Fields says, adding that the bill raises deep concerns among her clients about security, calling it “extraordinarily invasive.”
“Once these deals are publicly recorded the press will be all over them,” she says. “This will absolutely deter the international buyer.”
As for domestic buyers, “do finance types need another reason to move to Greenwich?” she asks.
An unwelcome message to foreign buyers
To Kobi Lahav, director of sales at Living NY, who also works with an international clientele, the New York state bill casts an unnecessarily broad net.
“Most buyers are not using LLCs specifically to do money laundering,” he says with exasperation in his voice, adding that he doesn’t think it will accomplish its intentions. “If someone wants to launder money they have a lot of options,” Lahav explains, and can spare themselves the hassle of buying NYC real estate.
The bill is yet another deterrent to buying here that sends an unwelcome message: “Let’s send all our buyers to London. If someone wants a big city with lots of culture, it’s really what we’re doing,” he adds. “It would deter a lot of international buyers. Miami is happily taking our buyers,” he adds.
In particular, bill would eliminate NYC as a financial haven for foreign buyers from unstable countries. “You’ll be taking them out of the equation,” Lahav says. These are buyers who face a lot of opportunity costs when buying in NYC, even when paying all cash. For them it will make more sense to buy elsewhere or even put their funds in certificates of deposit.
“The ability to remain anonymous is important. It should shield you from liability and unwanted contact," Lahav says. “I don’t know why New York state would want to go farther than the federal law.”
Misplaced goals
David Kong, an agent at Keller Williams NYC, describes his international clients as being very careful to follow the law. “The last thing Asian buyers want is an audit.” he says.
His clients, which pay close attention to news in the U.S., are seeing better yields in other parts of U.S. Kong travels to Korea regularly and says buyers are aware which states are more business friendly.
Still, he adds that despite barriers to buying here—like the mansion tax and high broker fees, NYC has remained a draw to foreign buyers.
But the LLC Transparency Act could change that if it becomes law and “we see things like frivolous lawsuits that make it more difficult to be a landlord or transfer wealth,” he says.
While the intent of the state law is good, he adds that he’s not sure it is practical.
“Buyers have a right to privacy. Why make the list of names public facing?" he asks. "The public is not responsible for fighting money laundering."
Transparency for renters
However, if approved, Assemblymember Gallagher says the legislation would be beneficial to another significant part of the NYC real estate market—renters.
"While brokers for high-end international sales are certainly one stakeholder in this policy debate, so too are tenants, government watchdogs, unions and law enforcement agencies who support it," Gallagher says.
"The federal disclosure requirements for LLCs are a positive step but will not make crucial ownership information available to state housing regulators, building code inspectors, campaign finance enforcement, and New Yorkers who simply wish to know to whom they're paying rent each month. That's why, after passing with broad and bipartisan support, the district attorneys for Manhattan, Brooklyn, and the Bronx, as well as Attorney General Letitia James and Comptroller Thomas DiNapoli, are calling on the governor to sign the LLC Transparency Act," she says.
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