Naming names: Bringing transparency to property ownership

On Jan. 1, a new federal law requiring more detailed information on who owns real estate, and controls corporations, went into effect. The Corporate Transparency Act requires U.S. companies to publicly disclose the names of so-called “beneficial owners,” or individuals who own or control the companies.

They must, under the law, report the information to the Financial Crimes Enforcement Network, a bureau within the U.S. Department of the Treasury.

The law includes limited liability corporations (LLCs) and properties held by trusts. Trusts are assets within an entity that are in a fiduciary relationship between a trustor and a trustee. Assets filed in trusts run the gamut of the financial system, including cash, securities and real estate.

On the Shelter Island Building Department website, a Geographic Information System map lists 405 LLCs that own property on the Island, and 343 trusts hold titles to others, as of July 2023.

Companies that were created or registered prior to Jan. 1, 2024 have until next Jan. 1 to report ownership, listing a name, date of birth, address, and either a non-expired U.S. driver’s license or passport, or a non-expired foreign passport.

Companies created in 2024 have 90 days to file after receiving notice that their company’s registration is in effect. Noncompliance with the federal law will result in heavy fines — $500 per day, up to $10,000 — and possible incarceration for up to two years.

There are 23 types of entities that are exempt from the new legislation, according to the Treasury Department, including publicly traded companies and nonprofits.

The purpose of the law, according to the Treasury Department, is to “safeguard the financial system from illicit use, combat money laundering and its related crimes including terrorism, and promote national security through the strategic use of financial authorities and the collection, analysis, and dissemination of financial intelligence to curb illicit finance …”

 In July 2023, the Business Law Section of the New York State Bar Association wrote in opposition to the new disclosure legislation: “The public disclosure of legitimate NY LLC owners is likely to lead to many undesirable outcomes. The beneficial owners could become targets of various crimes, including identity theft, as well as physical and property-related crimes, such as robberies. Beneficial owners may be subject to protests from fringe groups and targeted by unwanted and harassing sales and other solicitations.”

Shelter Island-based real estate broker Penelope Moore, who has been in the business since 1998, told the Reporter that she’s not “versed on the intricacies of this, so I can’t say whether this is positive or negative,” but is hearing “opinions that are wide ranging.”

Some prospective buyers, Ms. Moore said, feel “boxed out of entry-level properties that come to the market, as there have been a number of LLCs that have bought single-family homes in residential areas in recent years for staff housing, often with more favorable terms.” These more favorable terms can include quick closing and payment in cash, Ms. Moore added. 

She also mentioned that many homeowners have the impression that property held by LLCs will house “people who are transient, don’t have a personal interest or investment in the community and that these houses are not subject to rental registration laws, which include safety measures.” But the broker said there is opposition to the new requirements of personal information. “People who purchase properties under LLCs feel they have a right to privacy and that as long as they are not breaking laws, what they buy should not be for everyone to scrutinize and weigh-in on when these sales are published,” Ms. Moore said. Naming names: Bringing transparency to property ownership