New Disclosure Requirement for LLC Buying or Selling 1 to 4 Family Residential Property

IMPORTANT NOTICE
September 2019

EFFECTIVE IMMEDIATELY – On September 13, 2019, Tax Law Section 1409 and NYC Admin Code Section 11-2105 were amended to change the information that must be included on the TP-584 and NYC RPT forms that accompany deeds that are recorded where a limited liability company (“LLC”) is either a Grantor or Grantee.

WHAT THE LEGISLATION AFFECTS: Any deed conveying title to residential property containing 1 to 4 family dwelling units where the Grantor or Grantee is an LLC.

WHAT IS REQUIRED: The TP-584 and RPT form for the deed must now be accompanied by an attachment that discloses the following:
1. Names and business address of all members, manager, and any other authorized persons of the Grantor and/or Grantee LLC;
2. If any such member, manager, or authorized persons is a partnership or business entity, the names and business addresses of all shareholders, directors, officers, members, managers, and partners of such partnership or business entity
3. If any of the shareholders, directors, officers, members, managers, or partners are a partnership or business entity, it must list the names and addresses of the interested parties of that partnership or business entity until full disclosure of ultimate ownership by a natural person is achieved.

WHAT FORMS MUST BE USED: No form has been officially issued by New York State, but disclosure is still required. We suggest that you use the attached form to be completed at or prior to closing and attached to the TP-584 or the RPT.

FURTHER INFORMATION:

1. The law does not apply if the Grantor nor Grantee is a corporation, partnership, or other legal entity. Other business entities are covered ONLY if they are members, managers, or authorized persons for the LLC grantor or LLC Grantee. Example: if Grantor is a corporation, no disclosure is required. If Grantee is an LLC of which Corporation is a Manager, then all shareholders of the corporation must be disclosed.
2. The law applies even if the deed is for no consideration and/or if no tax due. Therefore, if the deed conveys a 1-to-4 family residential dwelling by or to an LLC, the disclosure must accompany the transfer tax form.
3. The law only applies to residential property containing 1-to-4 family dwelling units. There is no further definition of “residential property” within the new Tax Law Section 1409, nor in the definitions in Tax Law Section 1401. There is no further definition of “residential property” within the new Administrative Code Section 11-2105, nor in the definitions in Administrative Code Section 11-2101.

POTENTIAL PROBLEMS:

1. The public has been given little lead time to comply with the statute. The statute directs that the disclosure document must be filed with the tax return, whether the return is filed with the State Tax Department or with the County recording office. There is no word yet if and when recording officers will reject recordings for failure to have the required information attached to the TP-584 or NYC RPT form.
2. The current TP-584 has a box to check for Type of Property Conveyed. It does not list a 1-to-4 family residential property as an alternative. It does have a box to check for a 1-to-3 family. the disclosure applies if that box is checked. If “Other” is checked and the property is 4-family, the disclosure form must also be submitted.
3. The disclosure must continue down the chain of ownership until all natural persons who have an interest are disclosed. Example: if the Grantee is an LLC of which another LLC is a member (“LLC2”), of which a corporation is the manager, then all natural persons who are members of LLC2 and shareholders of that corporation must be listed in the disclosure.

 

 

Addendum_to_TP-584_and_NYC_RPT

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