Should an UWS Co-op Sell to a Buyer Via an LLC?
March 31, 2015 — In the past few years, New York City co-op boards have begun to let residents buy units as limited liability corporations, or LLCs. Many boards now allow residents to change their ownership from an individual to a family trust as part of estate planning. As New York real estate values soar, the types of people buying apartments in the city's most expensive neighborhoods are changing and want anonymity — celebrities and buyers with enormous wealth, for example — and layers of financial protection. Those who live here less than half the year owe no city residency tax, and owning as an LLC can help reduce the risk of a residency audit.
A shareholder in a co-op on the Upper West Side wants to know, however, whether such an owner can simply sell the LLC later, to avoid a normal share transfer and a review and approval by the board.
In this week's "Ask Real Estate" column in The New York Times, Ronda Kaysen explains that LLCs are common in many transactions in the luxury market, especially among foreign and investment buyers. Many co-ops still ban the practice and it's much more common in condominiums. But assuming this UWS co-op is open to letting a buyer purchase through an LLC, Kaysen urges the board to "pay close attention to the approval documents. They should be crafted to protect the co-op. The co-op’s lawyer should include safeguards preventing the sale of the L.L.C. or a controlling interest in an L.L.C. without proper notice and approval from the co-op board. Any sale of the L.L.C. would be considered a sale of the apartment."
For a deeper dive into LLC waters, be sure to check out our in-depth piece on whether co-op boards should let LLCs buy.