Thanks to the new federal disclosure requirements, which go into full effect in March, Manhattan and Miami luxury real estate (click here to view site) buyers are going to be thrust into the spotlight.
No longer is anonymity the name of the game, with this new requirement, these high-end buyers are going to have the shield of a limited liability corporation taken away. While this will not result in the complete end of anonymous buyers, it is going to limit their “hiding” quite a bit.
This new requirement is an effort that has been put forth to try and uncover any illicit funds that are being laundered through luxury real estate in New York and Miami. According to the U.S. Treasury, cash purchases made in Manhattan and Miami through shell companies are going to be tracked and will apply to deals that are $3 million and more in New York and $1 million and more in Miami. This means that title insurance companies will be required to disclose the identity of the buyer to the government regulators.
Some strategies that buyers can use to help overcome these new requirements can be found here. While they are not ideal for everyone, they can provide some effective steps in avoiding this new tracking requirement.
Utilize a Straw Buyer
Buyers can set up a “nominee agreement,” with their chauffeur, where the chauffeur is being named the owner of the LLC that is purchasing the upscale condo. Once complete, the buyer is able to purchase the LLC, rather than the condo, from the chauffer. This means the transaction is not on the books.
Set Up a Non-LLC, Partnership or Trust
While each member of an LLC has to be identified, there are other legal entities that only have to disclose an owner that holds over 25 percent of total ownership. If the shell company has 100 shares that are divided equally among 10 different people, they are able to remain anonymous.
Purchase Via Wire Transfer
The government regulators are only tracking buyers who are paying by certified bank check or cash. If you pay with a wire transfer, all this can be avoided. However, there are some tight banking regulations that will require the customer be identified, as part of the “Know Your Customer” requirement.
Opt Out of the Title Insurance
There is really no comparison to a $1 million lawsuit when you have just purchased a multi-million dollar condo. While this is a rare occurrence, buyers can opt out of the title insurance completely.
Wait about Six Months
This new requirement will be effective starting March 1st and will expire on August 27th. If you are really nervous, just wait six months to make the purchase.
While this may seem obvious, the fact is, the current order only applies to the residential purchases made in Manhattan and Miami. All commercial purchases have been excluded, which means that buyers are able to purchase properties for investment while retaining a relative amount of anonymity.
For more information on luxury condos in Miami Beach for sale please contact One Sotheby’s International Realty office at (305) 336-0457.