New York, NY – The number of
vacant storefronts continues to grow due to the COVID-19 pandemic, worsening an issue that has plagued New York City for many years, as landlords demand rents that only national chains and banks can afford. Today a new bill introduced by Council Member Ben Kallos, would require LLC's to disclose who the real humans are behind these corporations leaving New York City's storefronts empty.
Last year City Council Members Helen Rosenthal, Carlina Rivera, Speaker Corey Johnson, Ben Kallos, and others
introduced legislation to create a City registry of all storefront property that has been vacant for at least three months to better quantify the scale of the problem. Although having the list of locations available on a registry is helpful to identify vacant locations and the scale of the problem, it does not address the issue of identifying the “real humans” behind these vacant storefronts.
A (CO) certificate of occupancy states a building’s legal use and/or type of permitted occupancy and is issued by the City’s Department of Buildings (DOB). New buildings must have a CO, and existing buildings must have a current or amended CO when there is a change in use, egress, or type of occupancy. Further, all must apply for a building permit if conducting any construction, repairs, move, demolish, remove or change the use or occupancy of any building or structure in the city. This legislation would require LLC’s to disclose managers, officers, and owners (of 5% interest and greater) on applications for a CO or building permit allowing the City to know who the “real humans” are behind these corporations.
“It is no longer acceptable for faceless LLC‘s to undermine our City one storefront at a time. New York City has a lot of work to do to fully recover and having empty storefronts so that landlords can wait for higher rents is not going to help get us back on track,” said
Council Member Ben Kallos. “This legislation is about transparency about getting LLC’s who owe the City money in fines or who have been bad neighbors to be accountable in some way.”
Property owners can conceal their personal identities by using various corporate structures, such as Limited Liability Corporations (LLCs) making it difficult to work with them to help bring commercial tenants or for the City to
collect on outstanding fines. Knowing who the real owners behind these vacant storefronts will allow City officials to work with landlords to bring good commercial tenants into vacant storefronts and address quality of life concerns leading to the issuance of fines.
With New York City facing a
$8.33 billion revenue shortfall in this year’s budget and upwards to $4.84 billion next year, the City must improve on collection of outstanding fines.
Recent reporting details how this administration left more than $1.4 billion in uncollected fines for violations of quality of life regulations. A
report released last month by the Department of Investigations (DOI) into the City Environmental Control Board (ECB) summons enforcement and collection identified serious holes in the process that results in the City losing out on much-needed revenue. Increased enforcement is necessary to reclaim this money but has proved difficult due to a series of issues, including properties held by LLCs make it difficult for the Department of Finance (DOF) to aggregate the overall outstanding debt and collect it.
Kallos passed
Local Law 47 of 2016 (LL 47), providing that 13 City agencies issuing licenses, permits, or registrations have the ability to suspend, terminate, or revoke any licenses, permits, or registrations based on the failure of a respondent to timely pay their civil penalties. During the recent investigation,
DOI found that while some of the 13 agencies cited in LL 47 were unaware of this law, others, due to technological limitations, had not promulgated rules pursuant to LL 47. DOI determined that City agencies should prioritize and consider the existence of unpaid fines before granting or renewing City licenses and permits.
The proposed bill would require building owners to disclose their names, physical address, email address, and telephone numbers of any “real” person with at least a 5% ownership interest in the property when applying for a CO or a building permit. The ownership information would then be shared by DOB with any City agency to aid in the collection of unpaid fines. The collection efforts are meant to enforce violations of New York City’s codes, rules, regulations, and quality-of-life laws. These cover a wide range of issues, including street cleanliness, waste disposal, water and air quality, street vendors, fire regulations, building and construction codes, hazardous substances, as well as landmark and historic preservation.
Under State law, the City cannot convert these penalties to tax liens, meaning that the property cannot be sold or transferred until a tax lien sale. This leads to many property owners to leave these violations unpaid, as there are few options for the City to compel payment. Some penalties against property owners can become judgment liens against the property, but these liens are secondary to prior mortgages and judgments, and to federal and State tax liens, further making them difficult to collect.
Section 1. Section 28-118.4.1 of the administrative code of the city of New York, as added by local law number 33 for the year 2007, is amended to read as follows:
28-118.4.1 Applicant. The application for a certificate of occupancy shall be made by or on behalf of the owner of the building or open lot; and if made by a person other than the owner, the application shall be accompanied by a signed statement of the applicant stating that the applicant is authorized by the owner to make the application. [The] If the owner of the building or open lot is a natural person, the full names and addresses of the owner[,] and applicant[, and of the principal officers thereof, if a corporation,] shall be stated in the application. If the owner of the building or open lot is an entity other than a natural person, the name, physical address, e-mail address and telephone number of each manager and officer of such entity and of each person whose share of ownership of such entity exceeds five percent shall be stated in the application. Whenever an entity other than a natural person must be listed on the application under this section because it has a share of ownership that exceeds five percent, the name, physical address, e-mail address and telephone number of each manager and officer of such entity, and of each person whose share of ownership of such entity exceeds five percent shall also be stated in the application, such that all natural persons whose share of ownership in any entity required to be listed in the application exceeds five percent are disclosed. If the owner of the building or open lot is not a natural person, any change to the managers, officers or persons whose share of ownership exceeds five percent must be reported to the department within 30 days of such change. This provision is retroactive and applies to all applications for a certificate of occupancy that have been approved prior to the effective date of this provision, and applicants shall amend such previously approved applications to comply with this section by no later than December 31, 2024.
§ 2. Section 28-202.1 of the administrative code of the city of New York is amended by adding a new item 11 to read as follows:
The maximum civil penalty for failure to update a change in applicant information pursuant to section 28-118.4.1 shall be $2,500.
§ 3. Article 315 of title 28 of the administrative code of the city of New York is amended by adding a new section 28-315.12 to read as follows:
§ 28-315.12 Disclosure of natural owner s. By December 31, 2024, each owner of a building or open lot that is an entity other than a natural person shall comply with the retroactive requirements of section 28-118.4.
§ 4. Section 28-105.5 of the administrative code of the city of New York, as amended by local law number 141 for the year 2013, is amended to read as follows:
§ 28-105.5 Application for permit. All applications for permits shall be submitted on forms furnished by the department. Applications shall include all information required by this code, other applicable law or the rules of the department. The application shall include information regarding the ownership of the building, structure or open lot. If the owner of the building, structure or open lot is an entity other than a natural person, the name, physical address, e-mail address and telephone number of each manager and officer of such entity and of each person whose share of ownership of such entity exceeds five percent shall be stated in the application. Whenever an entity other than a natural person must be listed on the application under this section because it has a share of ownership that exceeds five percent, the name, physical address, e-mail address and telephone number of each manager and officer of such entity, and of each person whose share of ownership of such entity exceeds five percent shall also be stated in the application, such that all natural persons whose share of ownership in any entity required to be listed in the application exceeds five percent are disclosed. If the owner of the building, structure or open lot is not a natural person, any change to the managers, officers or persons whose share of ownership exceeds five percent must be reported to the department within 30 days of such change. The applicant shall list any portions of the design that have been approved for deferred submittal in accordance with section 28-104.2.6. The application shall set forth an inspection program for the project. An application for a permit shall be submitted no later than 12 months after the approval of all required construction documents (other than those documents approved for deferred submittal). The department shall provide written notification to owners of adjoining property at the time such application is submitted.
§ 5. This local law takes effect 120 days after it becomes law.
