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BLOG / 08.14.24 /Kenneth R. Jacobs
Legal Update: Corporate Transparency Act, Eviction for Good Cause Law
Corporate Transparency Act Update – Filing Requirements for Co-ops, Condos and HOA’s
CTA UPDATE. Unfortunately, it looks like most Co-op’s and HOA’s will not be able to escape filing “Beneficial Ownership Information” under the Corporate Transparency Act (“CTA”). The Financial Crimes Enforcement Network of the Treasury Department (“FinCen”) is responsible for enforcing the CTA. In a July 25th letter responding to the Executive Officer of the Community Associations Institute, the Deputy Director of FinCen stated that since HOA’s are not listed as exempt from filing under the CTA, they are considered “reporting companies” until further notice. (Community Associations Institute is a national organization that provides advocacy and educational services for condos, co-ops and HOA’s.) For the full text of the letter, go Here.
The letter also stated that FinCen is authorized to grant further exemptions if it determines that requiring Beneficial Ownership Information from a class of entities would not serve the public interest, and would not be highly useful in national security efforts to detect money laundering. FinCen is “considering” CAI’s request for exemption of HOA’s. However, the written agreement of the Attorney General and the Secretary of Homeland Security would also be needed to grant an additional exemption. So until that exemption is granted, HOA’s, their Board members and senior officers remain reporting companies.
What about Condos? As detailed in prior E-blasts, Condos in New York might argue that they are not formed by filing with a state agency, so they aren’t “reporting companies.” However, we reluctantly recommend that Condo Associations file regardless. First, in most other states Condos are formed through state filings. Second, the New York Department of State has recently begun to demand that copies of Condo Declarations also be filed with them, which might satisfy the “filing with state agency” criterion. Third, the definition of “Homeowners Associations” under the Internal Revenue Code also includes condominiums, so there is other federal precedent for treating Condos as HOA’s. In addition, if a Board of Managers has incorporated, the Board likely needs to file on its own.
How to File. One way to start the filing process is to go to https://boiefiling.fincen.gov/, which allows you to file independently. You’ll need the tax ID for the Association and filing info for the Board members including a driver’s license, passport or other government-issued ID. Another way is to go on the Internet, where several companies offer to handle your filing requirements for a fee. (If you google “CTA beneficial ownership filing support” you’ll see several companies.) Your management company may also start offering that service for an additional fee.
What if We Don’t File? The deadline for filing is January 1, 2025. The law provides that entities that “intentionally” file false or misleading information can pay fines up to $10,000 or imprisonment for up to two years. At this point, we can’t say whether a Board member who refuses to provide their personal information would be individually liable or if the reporting company would incur liability for omitting that information because they can’t get it. Undoubtedly any company that files for you would require you to indemnify them against any liability for a false or incomplete filing.
Exemptions for “Large Operating Companies” Still Available. A large operating company has more than $5,000,000 in operating revenue and more than twenty (20) full-time employees. So if your Association happens to qualify on both counts, you are still exempt from filing under the CTA.
Do Co-ops and Condos Have to File under the Eviction for Good Cause Law Effective August 18, 2024?
Fortunately, it does not apply to landlords in buildings operated as cooperatives or condominiums, or whose tenants have received a “red herring” offering plan. Note that the exemption from the law also covers individual landlords of units in cooperatives or condominiums who are leasing or subleasing their units. HOA’s also are not ordinarily subject to the law unless the HOA itself owns and rents more than ten units (but their individual homeowners may be).
The form of Notice that must be used is the same for an exemption as for a non-exempt lease. That makes it ridiculously complicated and poorly constructed.
We are recommending that exempt landlords work with the cover letter and form of Notice that we have attached, [See Here and Here]. The format has been cleaned up by us to state as clearly as we can make it that the subject lease is exempt, while still using the required statutory language.Many other types of landlords still remain exempt, e.g., “small” landlords. You should check the statute for exemptions see [Here].
Non-exempt landlords could use a cleaned-up form for non-exempt leases, e.g., [See Here] to view , or simply use the poorly formatted form provided in the statute [See Here]. Either way, make sure to fill in the relevant sections of the form before you attach it. New York City has created a detailed website purporting to explain the law, go to https://www.nyc.gov/site/hpd/services-and-information/good-cause-eviction.page page. Unfortunately, it too is difficult to navigate and also lacks a form of notice for landlords.
In the meantime, for more information, please reach out to:
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