It’s no secret that New York City is home to thousands of high-end luxury apartments. Many films and television shows are set in Manhattan, not only because of the city’s reputation as an exciting metropolis, but also for the opportunity to shoot scenes that include breathtaking views of Central Park from the floor-to-ceiling windows of a sparkling penthouse loft. It’s also no secret that New York City is home to thousands of film and television celebrities, international businesspeople, real estate moguls, and founding family names like Rockefeller, Roosevelt, and Astor. And quite often, when these people purchase these apartments, they don’t put their own names on the deeds. Instead, the new owners of these apartments have names like 45 R2D2, LLC or 100 C3PO Holdings, LLC.
Why? The most frequent reason is to maintain their privacy. Deeds are of course recorded, and as part of the public record they are available for reading. By owning membership interests in an entity like an LLC (limited liability company), whose sole purpose is to hold title to the apartment, these purchasers can hide their identities from otherwise prying eyes.
Ironically, this ability to hide one’s identity has put these purchasers under the federal government’s spotlight. Under new Geographic Targeting Orders (GTO) issued recently by the U.S. Department of the Treasury, all-cash purchasers of high-end residential real estate in Manhattan (and Miami) who take title under a legal entity will have to disclose the identities of all the people behind that entity. This GTO, which will take effect in March, is part of the Treasury Department’s investigation of possible money laundering in the real estate industry.
The GTO will require New York title insurance companies to document and report the beneficial ownership of LLCs and other entities that purchase residential real estate priced at $3 million or more without using bank loans. All-cash purchases of multi-million dollar apartments occur quite frequently in Manhattan, so the Treasury Department’s requirements will affect a substantial number of transactions for New York title companies, as well as purchasers and their attorneys.
Whether or not such “dirty money” flows through the real estate market remains to be seen, but what is certain is that these requirements will create additional responsibilities (and liabilities) for title insurance companies who are accustomed to performing this type of due diligence while maintaining purchasers’ privacy.The GTO will run on a trial basis from March through August of this year, after which it could become permanent nationwide if sufficient evidence of money laundering is discovered. More specific details from the Department of the Treasury should be released soon.
World Wide Land Transfer is a New York Title Insurance company that provides comprehensive Escrow and Settlement services as well as recording in most counties throughout the nation. If you have any questions, please call our offices or contact us at email@example.com.
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