The current Geographic Targeting Order (GTO), issued by the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of Treasury, is set to expire this Friday, November 16, 2018. In essence, the GTO provides that when a buyer uses a corporate entity (such as an LLC) for cash purchases of residential real estate in South Florida of over $300,00 (i.e., the buyer does not finance the purchase with a bank—not that he has an actual suitcase full of cash), there are burdensome reporting requirements for the buyer and closing agent. There also have been various GTOs in place in parts of New York City, San Francisco, and San Diego.
Potential buyers, real estate brokers, real estate lawyers, and title companies all need to be aware of the specific GTO requirements that apply when working on high-end (over $300,00) residential real estate transactions.
Media commentators have often labeled the GTOs issued by FinCEN as a purported crackdown on potentially “dirty” money purchases of residential real estate by shell companies in these geographic areas. Despite the connotations in the media, there are many legitimate reasons buyers acquire andown residential real estate with a corporate entity and without bank financing, such as estate planning, co-ownership, or tax planning.
Even though the current Federal Government administration has taken “anti-regulation” positions on many topics, there has yet to be strong and organized lobbying interests against the GTOs imposed by FinCEN. The GTO regulation has been labeled “temporary” in nature, but FinCEN and the U.S. Government have already renewed it multiple times, and most people in the real estate industry expect it to be renewed, once again, before it is set to expire on Friday, November 16, 2018.
David Podein is a partner with Haber Law. He concentrates his practice in the areas of real estate and construction law, condominium and community association representation, commercial leasing, secured financing, and business and commercial litigation. A substantial portion of Mr. Podein’s practice involves representation of community associations in the financing, approvals, and contract negotiation for multi-million dollar capital improvement, repair, and/or building upgrade projects.