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recent analysis of real estate transfers in the South Fork area reveals that over 51% of transactions involved at least one limited liability company (L.L.C.). In total, approximately 1,257 purchases were made within a 52-week period ending August 17, with about 37% involving one L.L.C. and 15% involving two L.L.C.s. About 44.8% of the total involved the sale of a property from an individual, estate, or trust to an L.L.C.
The use of L.L.C.s in real estate transactions is not unique to the South Fork, but it has become increasingly common here. According to Investopedia, an L.L.C. protects its owners' assets from lawsuits and creditors. The Internal Revenue Service allows individuals, corporations, other L.L.C.s, and foreign entities to be controlling members of an L.L.C., which can remain largely anonymous.
The 1,257 transactions examined by The Star represented about $3.07 billion in total sales. Some notable deals included the $22 million sale of 1 Main Street in East Hampton Village to an L.L.C. controlled by Bernard Arnault and the $112.5 million sale of 700 Meadow Lane in Southampton Village to Meerkat L.L.C.
The use of L.L.C.s has been a topic of discussion among local officials, with some viewing it as a legitimate business tool and others seeing it as a way to hide ownership information. In June 2023, the New York State Legislature passed the L.L.C. Transparency Act, which created a public database of true owners.
Local attorney Denise Schoen explained that there are three main reasons why L.L.C.s are used in real estate transactions: privacy, liability protections, and single and separate ownership. She noted that with the L.L.C. Transparency Act, anonymity is no longer guaranteed.
The prevalence of L.L.C.s has also led to concerns about community preservation funds. Assemblyman Fred W. Thiele Jr., a co-sponsor of the L.L.C. bill, stated that "with rare exceptions, that information should be public" and that the law was necessary to prevent conflicts of interest or other violations of the public trust.
In East Hampton and Southampton Towns, there are streets with entire rows of tony houses owned by L.L.C.s. Local residents have expressed concerns about the impact of widespread L.L.C. ownership on community cohesion and transparency. However, some argue that it is simply a different form of ownership and not inherently problematic for the town.
A local attorney noted that one potential downside of putting a property in an L.L.C. is that fewer banks are willing to lend money when a mortgage is sought, and interest rates tend to be higher in such cases.
