One of the last bastions of real estate inflexibility—co-op purchasing restrictions that limited buyers to flesh-and-blood human beings—is crumbling amid pressure to allow sales to limited liability corporations (LLCs) that preserve buyer anonymity and reduce potential tax penalties. Habitat magazine reports that more co-op buildings are allowing buyers to structure their purchases through an LLC or a family trust. The reasons include the enormous wealth of some buyers, which is already structured in an international corporate fashion, the desire for privacy among celebrities, an attempt to reduce the likelihood of a residency audits (city residency for more than half the year is accompanied by a sizable tax penalty), and to avoid onerous inheritance taxes upon the death of an co-op member.
Co-ops are avoiding the pitfalls of selling to paper legal entities by requiring buyers to sign a personal guaranty that a named person of the LLC would be held personally liable for any debts and that residency and transfer of the property would be limited to designated people unless permission is granted by the co-op board. Of course, last year author and uber co-op chronicler Michael Gross wrote about the differences between co-op and condo buyers: "Nowadays, condo buyers tend to be foreigners, absentee owners, empty nesters and corporate types with an instant-gratification streak..." Yikes! Sounds like he was describing LLCs!
· Co-ops of the Rich / Famous: Should You Let Limited Liability Corporations Buy? [Habitat]
· Co-op coverage [Curbed]