09 Oct 2019
A dispute over home conversions in suburban Rockland County threatens to upend Manhattan’s luxury condominium market.
Lawmakers in the county drew up state legislation to prevent the anonymous purchase of homes through the creation of limited-liability companies. Some residents suspected their new neighbors of making illegal home conversions or subdivisions, and getting local authorities to enforce the rules is more difficult if a property is owned through an LLC.
Now the legislation—which took effect last month—is having unintended consequences for the legions of billionaires, celebrities and other privacy- seeking condo owners: Every buyer’s name will be publicly available under the state’s Freedom of Information Law.
Many wealthy owners prefer to purchase through LLCs, also known as shell companies. Some want privacy, and others want to protect assets from lawsuits.
In most new Manhattan luxury-condo buildings, buying through an LLC has become commonplace. At the midtown residential tower known as 220 Central Park South, more than 85% of all purchasers so far bought through entities ending with “LLC,” according to property records.
That includes the most expensive home in the country: a $240 million unit bought by billionaire investor Ken Griffin, who bought it under the name “NYCP LLC,” property records show.
There are about 61,000 1-to-four family properties owned by limited-liability companies in New York City, a Wall Street Journal analysis of city tax records found, including 12% of all condos and 5% of houses. About 30% of all condos built since 2008 are owned by LLCs. Co-ops aren’t covered under the new law.
Federal officials say some buyers use LLCs to launder money or hide ill-gotten gains.
New York City brokers said the state law was another blow to a weak luxury market that has come under pressure from too much new supply, a retreat among foreign buyers and because of government actions.
Donna Olshan, a broker who collects data on the luxury market in Manhattan, pointed to a new federal tax law that reduced the deductibility of state and local taxes, a change that raised the cost of owning real estate. She also cited new state taxes on the sale of mansions, and the stricter LLC reporting requirements.
“At the end of the day they are strangling New York real estate,” Ms. Olshan said.
New York City asks for information on members of LLCs, but the information is kept confidential and isn’t available to the public.
By Josh Barbanel, The Wall Street Journal, 8 October 2019
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