Brokers cry privacy in pushback on bill exposing LLCs
As legislation awaits Gov. Kathy Hochul’s signature, New York City residential brokers are pushing back against measures that would expose the ownership of limited liability companies.
State lawmakers advanced the proposed law, dubbed the LLC Transparency Act, to the governor’s desk on Tuesday. If approved, the bill would require the names of LLC owners and the addresses of their businesses to be published in a publicly searchable database maintained by the Department of State.
The legislation is intended to prevent the perpetrators of illegal activity such as money laundering and tax evasion from hiding behind anonymous shell companies, the bill’s sponsors have said.
But some brokers are criticizing the move for unnecessarily revealing information to the public they say could be limited to law enforcement agencies monitoring these bad actors.
“This is a law enforcement policy that I feel has been hijacked to create some kind of narrative,” Compass’ Leonard Steinberg said. “That is not serving the public well. That’s not serving the taxpayer well.”
Most buyers using LLCs to purchase real estate do so to maintain their privacy, Coldwell Banker Warburg president Frederick Peters said. He added that owners of LLCs are already required to register, the information is just not open to the public.
“The vast majority of corporate purchases are people who simply want to maintain their privacy and not see their names emblazoned across the media if they purchase an expensive property,” Peters said. “It is a terrible idea to further penalize the wealthy for spending money in our state, where such expenditure benefits us all.”
The public nature of the database could saddle some, especially those in the public eye, with security risks — and those concerns aren’t just limited to celebrities, Steinberg said.
“There are a lot of people who have absolutely valid security concerns that should not be overlooked,” Steinberg said, citing judges or psychiatrists with volatile patients as examples.
With these safety concerns top of mind for buyers, Steinberg said he anticipates an increase in demand for high-security, doorman buildings.
The bill would allow some LLC owners to submit a waiver for certain privacy concerns, though real estate attorney Samantha Sheeber expressed concerns that the legislation doesn’t define what concerns would qualify for the waiver.
“It is just extraordinarily overreaching,” Sheeber, who is the managing partner at Starr Associates and is working with REBNY to block some of the legislation’s current provisions ahead of the governor’s review, said.
However, real estate attorneys will likely work with buyers to find alternative ways to conceal owners’ identities, “which is going to probably, you know, fly in the face of what’s trying to be accomplished here,” Sheeber said.
“Any attorney is going to now try and come up with creative ways to protect their clients as they should be protected,” Sheeber said.
Despite the privacy concerns, several brokers say they don’t expect the law to have an inordinate impact on the market. The one exception could be foreign buyers, who may hesitate to buy property in New York due to concerns about the new guidelines and how to circumvent them.
“It will potentially turn off some foreign investment,” Nest Seekers’ Michael Fabbri
said. “People who want to buy in New York will buy in New York. They’ll figure out a way.”