The de Blasio administration has adopted new disclosure rules for limited liability companies buying real estate in New York City.
According to a report from the New York Times, the new requirements, which went into effect last May, is meant to reveal the identities of real estate owners who are claiming residency outside the city or the country to dodge taxes. It also aims to increase transparency as foreign real estate investors flock to New York City because of its viability as a parking spot for wealth.
The rules were imposed after the publication of a lengthy Times investigative piece that revealed the identity of some foreign buyers. The series of articles, which were published in February, showed that some buyers are businessmen or politicians who have been implicated in corruption scandals.
The wealthy investors were said to have steered their money to the city because of permissive laws that allowed them to hide their identities.
The Times piece focused on one tower, Related Companies’ Time Warner Center. The newspaper’s investigation revealed that the building housed figures such as Vitaly Malkin and Dimitrios Contominas.
Malkin is a Russian politician who was said to have profited from the financing of Angola’s $5 billion debt. In 2010, a shell company linked to his family paid $15.65 million for a duplex unit on the property’s south tower. Contominas, a Greek politician, was arrested for allegedly using company funds for personal gain. His Time Warner Center condo, which he purchased for $21.4 million, was sold earlier this year.
Few details have been revealed about the new regulations. However, the Times said that the disclosures will not be available to the public.
The Finance Department will be responsible for handling the information. Also, the name of the beneficial owner is not required in the disclosure form.
A spokesman for the city finance department said, “The new requirement will help us improve the efficiency and effectiveness of NYC personal income tax compliance and business income tax compliance. This info will also help us in our efforts to prevent deed fraud.”
Some of the biggest real estate transactions in the city have involved buyers hiding behind an LLC. Last January, an unnamed buyer set a Manhattan record by paying $100.5 million for a penthouse unit at Extell Development’s One57 luxury residential tower.
The wave of foreign wealth has had a strange effect on the occupancy of Manhattan’s most affluent neighborhoods. According to Census Bureau estimates from 2014, 30 percent of apartments from 49th Street and 70th Street between Fifth and Park Avenue are vacant for 10 months out of the year.
The new requirements have raised fears that buyers would have to forfeit their rights to privacy.
However, one trade group is seeking clarification about the new rules before stating its position. Jamie McShane, a spokeman for the The Real Estate Board of New York, told the Times: “We’re seeking to get a better understanding of the new rules’ goals and assess whether it’s necessary and assess just how burdensome it would be for taxpayers and the industry.”
It’s still unclear what effects the new regulations will have on city’s real estate landscape. However, the movement of investment away from New York City may have profound effects.
According to figures from 2008 to 2014, investors with foreign addresses and LLCs accounted for about 30 percent of condo sales in large Manhattan developments.