Welcome back to Property Lines, a column by veteran real estate reporter Alexei Barrionuevo. Each week on Tuesday, Barrionuevo will report on housing trends, real estate deals, and major business moves right here on Curbed.
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During the heady years of Manhattan high-end real estate, one dirty little secret was that buying a condo in a pre-construction development was an easy way for buyers to avoid scrutiny. A wealthy buyer who had cash knew that a new development had yet to form a condo board, which meant fewer questions about the buyer's identity and source of funds. It fell to developers to ask those questions, and to press lawyers to provide proof that the buyer wasn't using ill-gotten gains.
Amid a buying wave—like the one Manhattan saw over the past five years—not every developer was willing to rock the boat, despite potential liability. "It was a no-questions-asked" environment, one prominent high-end Manhattan broker recently said. The new condo development loophole is just one way in which the real estate transaction system had become all too opaque. Wealthy buyers, both in the United States and abroad, have also widely used limited liability companies, or LLCs, to shield their identities, mostly for privacy reasons, but also to avoid scrutiny back home.