September 20, 2019
Advantage Title: Industry Bulletin 2019-04
NYS Law Chapter 297: Transfer Tax Returns for Residential Real Property Owned By a Limited Liability Company
On September 13, 2019, the State of New York enacted Chapter 297 of the Laws of 2019, which amends New York Tax Law § 1409(a) and adds a new subdivision (h) to § 11-2105 of the NYC Administrative Code (collectively, the “Act”). The Act creates a new recording requirement for deeds transferring certain types of real property.
While the full text of the Act can be found at https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=A07190&term=2019&Summary=Y&Text=Y, in summary, the Act requires that transfer tax returns for the sale of residential real property containing 1 to 4 family dwelling units be:
“accompanied by a document which identifies the names and business addresses of all members, managers, and any other authorized persons, if any, of such limited liability company and the names and business addresses or, if none, the business addresses of all shareholders, directors, officers, members, managers and partners of any limited liability company or other business entity that are to be the members, managers or authorized persons, if any, of such limited liability company. The identification of such names and addresses shall not be deemed an unwarranted invasion of personal privacy pursuant to article six of the public officers’ law. If any such member, manager or authorized person of the limited liability company is itself a limited liability company or other business entity, the names and addresses of the shareholders, directors, officers, members, managers and partners of the limited liability company or other business entity shall also be disclosed until full disclosure of ultimate ownership by natural persons is achieved. For purposes of this subdivision, the terms “members”, “managers”, “authorized person”, “limited liability company” and “other business entity” shall have the same meaning as those terms are defined in section one hundred two of the limited liability company law.”
Although the Act appears to apply only to residential 1-4 family properties, the Company has been informally advised by the Department of Taxation & Finance (the “Department”) that a residential condominium unit is subject to the Act. It is unclear if mixed-use real property will be subject to the Law. In addition, since the Act applies to transfers by deed, transfers of co-op apartments will not be subject to the Act.
The Act requires a “document” (the “Disclosure”) submitted with the TP-584 and, if applicable, the NYC RPTT that discloses the ultimate ownership by natural persons of the real property owned by the limited liability company (“LLC”). The Disclosure has not been promulgated by New York State or New York City. Nevertheless, there are accounts of a number of County Clerk’s currently requiring submission of a form of disclosure. So, effective immediately, the Company will have to be provided with information sufficient to allow it to disclose the chain of ownership of the LLC owning the real property until the chain of ownership results in the disclosure of ultimate ownership by natural persons.
Please note, the Act applies to Grantors and Grantees that are LLCs. It also applies irrespective of the amount of consideration paid for the conveyance. Finally, the Department has advised that formal guidance will be provided at some point next week.
The Company will keep you advised of any developments regarding the Act.
Please contact Drew Steigler, Chief Underwriting Counsel, at
631.424.6100 or firstname.lastname@example.org
with any questions.