Shell companies involved in securing real estate properties in New York City are now mandated to reveal the names of their buyers or sellers. This is following the release of the new disclosure requirement imposed by New York City officials.
The new disclosure rule is aimed at removing the "veil of secrecy" around luxury real estate transactions, reports the New York Times. Shell companies are now required to reveal the names of all the members of the company or individuals buying or selling properties, said Finance Commissioner Jacques Jiha. The new ruling came at an opportune time when the use of limited liability companies that conceal the buyer's identities are on the rise.
Jiha also told the New York Times that the publication's February articles that tackled the issue, was partly what spurred him to make the change. Those articles revealed that the high-end real estate market in New York has become "less and less transparent," thereby making it appealing to foreign buyers. Also, of the properties examined by the publication, a good number of them were purchased by international buyers via shell companies. Some of these buyers reportedly have been the subject of government inquiries around the world.
City officials explained that the new disclosure requirement was imposed to help identify property owners who may be avoiding income tax payments by claiming legal residency outside New York or the country, reports BisNow. However, some are worried that the new ruling may infringe on the buyers' privacy rights, states Jay Neveloff, lawyer and member of the board of governors of the Real Estate Board of New York. Meanwhile, others are thinking the new disclosure requirement did not go far enough. Their argument is that true owners may just add another layer of ownership and leave their names out of the transaction.
Douglas Kellner, a New York lawyer who specializes in identifying and returning lost assets told the Times: "They're just inviting another layer in order to conceal it. It doesn't solve the problem."
New York's new disclosure requirement took effect in May 2015.
