Silverman Bill Requiring LLCs to Disclose Primary Ownership Moves Forward
Posted by Ashley Fox on December 04, 2018 at 7:32 PM
A bill initially introduced in July by D.C. Councilmember Elissa Silverman (I-At Large) that enables D.C. government to clearly identify and hold responsible all partners in real estate limited liability companies (LLCs) passed unanimously today on the first of two final votes. It is part of a package of legislation reforming the Department of Consumer and Regulatory Affairs (DCRA) put forth by Chairman Phil Mendelson (D-At Large).
“It shouldn’t be a battle to find out who is responsible when a home is damaged by a developer or neglected by a bad landlord hiding behind an LLC,” Silverman said. “By lifting the corporate veil, this bill will enhance consumer protections and allow the city to go after bad contractors and slumlords more strategically.”
The omnibus package incorporates and builds upon Councilmember Silverman’s Real Estate LLC Transparency Amendment Act of 2018 in two primary ways. First, the legislation expands the disclosure requirement to all business entities. Second, the omnibus legislation requires anyone with at least a 10-percent ownership interest, or who has decision-making authority for financial decisions or day-to-day operations, to be disclosed on business filings.
Currently, LLCs are only required to provide information about the Registered Agent, who does not necessarily have an ownership stake in the company and can be an employee or organizational representative. Therefore, the primary financial beneficiaries of the company can also remain anonymous. District homeowners and renters frequently cite an inability to discern LLC ownership as a major hurdle when trying to recoup damages to their home caused by construction projects at an adjoining property.
The omnibus legislation further reforms DCRA regulations by incorporating a provision from Councilmember Silverman’s Blighted Property Redevelopment Amendment Act of 2018 that removes cumbersome barriers for developers who are trying to put blighted properties back into working use. As proposed in the original bill, DCRA would now have the ability to reclassify a blighted property that is being renovated by a developer in a way that allows the owner to achieve vacant status and an exemption from higher tax rates.
“There will still be a high bar for developers to meet, but the ones who are acting in good faith will benefit from the change,” Silverman said. “This is a great example of the Council finding and removing an unnecessary regulation that is getting in the way of turning vacant buildings into productive housing.”
The omnibus package of DCRA reform legislation will have its final vote at an Additional Legislative Meeting scheduled for Tuesday, December 18.