There are some good reasons for wanting to buy your apartment under an LLC. The reasons are privacy, asset protection and a safeguard against liability claim. If you are buying in a condo then the process is pretty simple. Unless there is some rule in the by-laws against LLC’s which is unlikely you can just go ahead and buy in an LLC.
If you are buying in a co-op then you need to find out about a buildings policy prior to moving forward. There used to be a section of the Internal Revenue Code in the co-op policies that required buyers to be individuals and not an entity like an LLC or trust. This law was changed many years ago however you may find some older co-ops still have the language in their documents.
If you are buying in a co-op then you need to find out about a building’s policies prior to moving forward. There used to be a section of the Internal Revenue Code in the co-op policies that required buyers to be individuals and not an entity like an LLC or trust. This law was changed many years ago however you may find some older buildings that have failed to change the language in their documents. This means that the rules technically prohibit a purchase by an LLC.
In addition, some boards are edgy about selling to an LLC buyer and with good reason. The big concern is that an LLC could potentially could potentially sublet or sell their apartment without board approval. Here is how it is done! If the LLC is the owner and, you own the LLC and then you sell your interest in the LLC to someone else, then you haven’t “technically’ sold the apartment. Co-ops have a right to not approve a sale or sublet. “It’s a similar issue with transferring the occupancy of the apartment to a member of the LLC. The board loses control of who can occupy an apartment if it is owned by an LLC.”
For this reason, find out what a building’s policy is for allowing transfer of shares to an LLC. If they don’t specifically allow it or the board resists, you may still be able to buy in an LLC.
Co-ops usually want an occupancy agreement or an inducement agreement,” “That puts restrictions on the sale of the apartment as well as who is allowed to occupy it. It will say that any change in occupancy is deemed a sublet or a transfer, and that any change in the ownership of the LLC is a transfer and requires approval of the board. In addition, co-ops might want the individual purchasing the co-op as an LLC to personally guarantee the payment of the maintenance charges.”
This is because it can be legally difficult to go after an LLC in the event that maintenance isn’t being paid, so boards feel more secure having an individual on the hook.
Another thing you’ll want to clear up in advance: While individual owners are allowed to have immediate family, members occupy the apartment with them, the same rules don’t apply to an LLC, since an LLC isn’t a person and can’t have immediate family members.
Some co-ops ignore this and treat the immediate family issue as they would if you owned the apartment directly. However, some say that it can only be you and your significant other who are allowed to occupy. No immediate family members unless your children still live with you. You need to make sure that the board is that you and the board agree
In my opinion co-ops should allow an LLC to purchase so long as the buyer isn’t using the LLC to get around the building’s approvals process.
However, do keep in mind that you will pay the legal fees associated with drafting the extra agreements and that some co-ops even charge extra monthly or annual fees.
That said before deciding to purchase in an LLC be sure to check into the building’s policy and costs before moving forward.