The risks of trying to keep the identity of a development or owner under wraps outweigh the benefits
David W. Meyer
Bullivant, Houser, Bailey, PC
Privacy and anonymity is difficult these days with computer spyware intrusion and cameras at every ATM machine, street corner and cell phone. Privacy in real estate ownership is extremely difficult to maintain since the public record with the local Treasurer’s Office, Auditor’s Office, Secretary of State, Department of Licensing, and Department of Revenue all carry information available to the public about the individual owner or, in the case of corporate ownership, individual directors or officers of the owner, complete with information about them and their addresses. Even the prices paid and values of the real property asset are easily available on line, or by telephone to a public agency. The press, of course, has access to all this information and routinely publishes the names of parties to a real estate transaction, the price paid, and the property’s location. How, then, can someone hope to prevent the entire world from immediately knowing what he owns and where he lives?
The first instinct of many people is to form an LLC or corporation for purchase of the property, but those entities will generate public records including information about individuals controlling the entity that can be obtained by inquiry to the Secretary of State or Department of Revenue unless, to the degree possible with the form of entity chosen, the ownership structure, and the appointment of a third-party entity as the registered agent, the individual principals’ identity and addresses can lawfully be left out of the public record.
Less sophisticated thinking sometimes leads to the temptation of keeping transactions, and true ownership, of real estate a matter of unwritten agreement to avoid documentation. Caution: Do not enter into real estate deals verbally and on a handshake! The Statute of Frauds requires every real estate deed and every real estate transaction to be in writing, or it is unenforceable. Entering into a verbal agreement for real estate is a terrible risk, yet it is done frequently with a fairly high percentage of ultimate dispute and loss.
At a minimum, a party desiring anonymity should enter into an option or purchase agreement through a straw man or "nominee," with a confidentiality clause between himself and the nominee. It is not illegal, and will cause no extra excise tax or other expenses upon later transfer of the deed from the nominee to the actual principal, which can be a corporation or LLC. The ultimate owner, if a corporation or LLC, does have to be in existence at the time of the agreement with the nominee, and the agreement between the nominee and the principal for buying the land as the entity’s straw man must be in place before the property purchase agreement is executed or else there will be duplicate excise tax. If the purchasing entity is an LLC, another entity, either corporation or LLC, can under present law be the manager and with careful planning, such a structure keeps the owning individual’s name out of the immediately available public record. The use of trusts in similar fashion can have the same result.
True ownership ultimately can be traced in virtually every case, however, and the cost of privacy in such a transaction would be significant, so most of us must simply brave being known for what we own.
David W. Meyer is an of-counsel attorney with the Vancouver office of Bullivant, Houser, Bailey, PC, a West Coast regional, multipractice law firm with seven offices in four states. His practice emphasizes strategic planning, contract drafting and negotiation for clients under the areas of business law, estate planning, real estate and land use. He can be reached at 360-737-2301 or david.meyer@bullivant.com.
