In May 2015, NYC Mayor De Blasio’s administration passed new disclosure requirements for “shell companies” seeking to purchase condominiums in New York City. These requirements are meant to increase transparency in the real estate industry, , which previously allowed for individuals to use shell companies to make expensive real estate purchases, and to own property, almost anonymously under a corporate name. Previously, only one member of a shell company was required to identify him or herself to make a real estate transaction. Now, all members of shell companies are required to disclose their identities and their taxpayer identification numbers to the city when making a real estate sale or purchase.
These new requirements impact how real estate is sold and purchased in New York City. These changes are outlined in the NYC-RPT Real Property Transfer Tax Return form. If you are considering doing real estate-related business with or as part of a shell company, discuss your plan with an experienced real estate attorney first to ensure that you comply with these new rules.
What is a Shell Company?
A “shell company” is generally refers to a corporate entity that has no business, and usually has no office or employees, but whose sole purpose is to own real property, letting the true beneficial owner escape personal liability that may arise from ownership. A shell company may also be a vehicle for the buyer to obtain financing for the purchase of real estate, without involving his/her own income andassets. The recent legislation was fueled by the City’s concern that shell companies can provide the true owners of the property with a way to avoid paying city income taxes. These companies can be registered anywhere – outside of New York or even outside the United States.
Legally, individuals who have property in the city and reside in that property 183 days of the year or more are required to pay city income taxes. However, corporate entities do not. Thus, by utilizing a corporate entity, individuals who want to own property in New York may seek to avoid these income taxes. By doing so, the individuals behind these shell companies can gain an unfair advantage in New York’s difficult real estate market. To put it into perspective, an estimated 89,000 of New York’s condominiums and co-ops are owned by individuals who reside outside of the city. These properties were valued at $20 billion according to city tax assessment data, but are estimated to actually be worth approximately $80 billion. In 2014, more than half of condominiums purchased in New York were purchased by corporate entities.
New York Real Estate Attorneys
These new requirements did not make it illegal to own property through a shell company; they simply imposed new disclosure requirements upon shell companies and beneficial property owners to disclose their identities. If you are considering starting a shell company or making a sale to one, be sure to fully understand all of the new requirements and what they require of you. Violating these requirements can lead to steep penalties.
Contact our team of experienced real estate attorneys at Menicucci Villa Cilmi PLLC today at 718-667-9090 to discuss your real estate questions and concerns during your legal consultation with our firm. We have three convenient locations to serve you better: Manhattan, Brooklyn, and Staten Island. We can answer any questions you have about real estate law and if you are involved in a dispute, represent your case in court. Do not wait to make the call – start working with a member of our firm today.
New York Real Estate Attorney. If you have legal questions regarding Real Estate, Mortgage or are in need of a Real Estate Lawyer in Staten Island, Brooklyn or New York contact the Law Firm of Menicucci, Villa, Cilmi PLLC for a no cost case evaluation. We are a Real Estate Law Firm with offices in Staten Island, Brooklyn and New York City.
Staten Island Real Estate Lawyer – Staten Island Mortgage Lawyer – Staten Island Land Use Attorney – Brooklyn Real Estate Lawyer – Brooklyn Mortgage Attorney – Brooklyn Land Use Lawyer – New York City Real Estate Attorney- New York City Mortgage Attorney – New York City Land Use Lawyer.