On December 3, 2024 — a few weeks before the January 1, 2025 filing deadline for reporting companies existing prior to January 1, 2024 — a federal judge in Texas ruled that the Corporate Transparency Act (“CTA”) is unconstitutional and issued a nationwide preliminary injunction against the enforcement of the CTA. There have since been multiple appellate decisions regarding this injunction.  The US Department of the Treasury’s Financial Crimes and Enforcement Network (“FinCEN”), which oversees collecting and maintaining beneficial ownership information in accordance with the CTA, has most recently stated that, “[i]n light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.”  At this time there does not appear to be a consensus as to whether companies should voluntarily comply with the CTA requirements or delay filing their BOI Report until resolution of the court proceeding.  For more information on the CTA and the reporting requirements thereunder, please visit https://www.fincen.gov/boi

This alert is intended for informational purposes regarding a potential reporting requirement and is not intended to constitute legal advice.  Please consult with your corporate secretary or legal counsel about this reporting requirement, whether it affects you, and your responsibilities to ensure compliance with the CTA.

June 24, 2024 – The Supreme Court, Nassau County (Hon. James P. McCormack), issued a decision after trial in favor of the plaintiff easement holders, in Papalcure v. Canarick, Index. No. 612791/17.

The plaintiffs in the action, Papalcure and Schein, claimed to be the holders of an easement of the beach and bluff properties owned by the defendant, Paul Canarick, in the “Red Spring Colony” area of Glen Cove, NY.  The land had been set aside by the original developers, the Red Spring Land Co., in the late 1800s, as a common area for use and enjoyment of the subdivision owners.  In the mid-1900s, predecessor owners of both the plaintiffs’ and defendant’s properties went to trial over similar claims, and the Supreme Court ruled in favor of the plaintiff’s predecessors, in a case called Loening v. Red Spring Land Co., 198 Misc. 151 (1949).  Two appeals courts upheld the Loening decision — first the Appellate Division in 1950 (277 A.D. 1050) and then the Court of Appeals in 1951 (302 N.Y. 934).  Over 60 years later, the defendant claimed that he owned the property free and clear of any easement claims, in spite of the Loening decision.  He proceeded to block the plaintiffs’ access to the property, planted trees and shrubs to cut off their views of the water, and accused them of trespassing when they used the beach and bluffs as they had for many years.

On behalf of the plaintiffs, EHADP brought an action against the defendant in 2017, to obtain a declaration that the plaintiffs’ easement rights were valid, to enjoin the defendant from interfering with those rights, and to obtain damages for the defendant’s interference with the plaintiffs’ use and enjoyment of the easement.   The case reached trial in the summer of 2023, where it was tried over the course of nearly two weeks.

Justice McCormack’s Decision After Trial ruled in favor of the plaintiffs on all claims.

As to the existence of the easement, Justice McCormack found that the “outcome of this case is clear from the evidence presented.  Plaintiffs presented clear proof of the existence of the easement, and their use of it until Canarick began putting up impediments,” which not only prevented Plaintiffs from physically using the easement, but included “plantings that would completely block the water views from the Papalcure and Schein properties, while at the same time ensuring his own unimpeded view.”  Justice McCormack acknowledged the “unusual benefit of having a Court of Appeals decision directly related to these properties finding the easement existed,” and he declined the defendant’s invitation to find that it did not have to abide by the Court of Appeals’ precedent.

Justice McCormack also rejected the defendant’s claim to have extinguished the easement by adverse possession, finding that it “is clear that the property over which the easements are claimed was accessible, even if Canarick made it more inconvenient for Plaintiffs to do so.”

As to the easements, the decision concluded that the plaintiffs were entitled to a declaratory judgment that their easement exists and that the defendant interfered with the plaintiffs’ right of access, as well as an injunction to direct the defendant to remove the fencing and plantings that impede the plaintiffs’ rights.

Last, Justice McCormack found that the plaintiffs also proved that the defendant’s interference with the plaintiffs’ use and enjoyment of their land constituted a private nuisance, entitling them to damages of over $300,000, and rising, until the impediments are removed.

April 3, 2024 – In a 15+ page decision, the Supreme Court, Suffolk County (Hon. Maureen T. Liccione) has awarded a purchaser summary judgment on her claim for a return of her downpayment and attorneys’ fees, in Farrell v. Gardner, Index No. 613551/2022.  The case involved an $8 million contract to purchase a home in Sagaponack, NY, and, more specifically, customary “certificate of occupancy” (CO) and “as is” requirements found in many real estate contracts to sell Hamptons homes.  The home at issue was staged and shown with a finished third floor that included a bedroom and bathroom.  The purchaser paid an $800,000 downpayment on the contract, but the sellers, who had been aware that the third floor was illegal prior entering into the contracts, nonetheless agreed to deliver the premises in “as is” conditions, with a CO covering its improvements.  After the purchaser learned about the illegal third floor rooms, the sellers “gutted” the third floor by demolishing the bedroom and bathroom “and transforming the finished third floor into an enclosed unfinished attic space, all without permits.”  At the time-of-essence closing, the sellers insisted that they fulfilled their obligations under the contract by delivered the altered house and a 37 year old CO issued in 1985, before the illegal third floor conversion into a finished bedroom/bathroom space and before its subsequent gutting.  The purchaser, who appeared at the closing with the funds to complete the contract, refused to accept the property no longer in its “as is” condition, and without the promised CO.

In a thorough legal discussion addressing the interplay between the customary CO and “as is” contract requirements, the Supreme Court found “that: (1) Sellers breached the Contract by failing to deliver a valid and subsisting CO for the Property and could not deliver the Property in ‘as is’ condition at the closing, and (2) that Purchaser was ready, willing, and able to perform on the time of the essence closing date.”  The court agreed with the purchaser that the sellers were contractually required to deliver both a valid CO covering the buildings as they existed at contract and deliver the property in “as is” condition, but they failed to do either, because the 1985 CO was not valid on the day of closing and the property was no longer in its “as is” condition after the Sellers gutted the third floor.   Though the sellers argued “that it was impossible to deliver the house both in ‘as is’ condition and with a valid and subsisting CO,” the court found that this “argument actually underscores Purchaser’s claim that Sellers could not abide by the Contract terms requiring them to deliver the premises ‘as is’ and with a valid CO.”

After dismissing the sellers’ remaining arguments, the Supreme Court found that the purchaser was “entitled to reasonable attorneys’ fees and costs as the Contract authorized the recovery of attorneys’ fees from the unsuccessful party.”

December 11, 2023 – The Supreme Court, Suffolk County (Hon. Frank A. Tinari), has granted a plaintiff summary judgment in a specific performance action involving property in Southold, in Alta Real Estate Holdings, LLC v. Our Business, LLC, Index No. 611064/2020.  The action involved a pre-COVID contract of sale, which the defendant/seller refused to complete after the pandemic hit New York.  In the decision, the court rejected the seller’s attempt to avoid liability under the contract on the ground that a particular letter amendment adjourning the closing was intended to limit the seller’s liability to a return of the downpayment, because, under New York law, a “limitation of remedies ‘will not be implied and to be enforceable must be clearly, explicitly and unambiguously expressed in the contract.'”  The court then found that the plaintiff/purchaser proved that it was ready, willing, and financially able to close on the contract, and that it reasonably set a “time of essence” closing, which the seller refused to complete.  Finally, the court awarded the plaintiff its attorney’s fees because the contract included a specific clause entitling the prevailing party to recover its fees.

Enacted by Congress in 2021, the Corporate Transparency Act (“CTA”) will become effective on January 1, 2024. The purpose of the CTA is to increase transparency by identifying the individuals controlling and owning certain entities to prevent money-laundering, terrorist financing, tax evasion and other illegal activities through the use of anonymous shell companies. The CTA seeks to accomplish this transparency by creating a national registry of beneficial ownership information for owners of most entities created or registered to do business in the United States (“Reporting Companies”). These Reporting Companies will be required to report personal information about the individuals who own and control such entities (“Beneficial Owners”) to the US Department of the Treasury’s Financial Crimes and Enforcement Network (“FinCEN”). Additionally, it will require entities formed after January 1, 2024 to provide personal information regarding both the individual who files the formation documents for the entity as well as the person who directs the filing of the formation documents for the entity (“Company Applicants”). The required information is filed in the form of a Beneficial Ownership Information (“BOI”) report through FinCEN’s Beneficial Ownership Secure System.

A Reporting Company subject to the CTA is any entity that is either (i) created by filing paperwork with a Secretary of State or any similar office under the laws of any U.S. state or Indian Tribe or (ii) a foreign company registered to do business in the United States, unless it falls under one of several exceptions. Entities that are exempt from the CTA’s reporting requirements include, among others, (i) companies employing more than 20 full-time employees and having more than $5 million in annual gross receipts and an operating presence at a physical location within the United States, (ii) charities, (iii) entities that are already subject to significant governmental regulation and (iv) inactive entities that meet certain requirements (which requirements include that the entity must not own any assets). Single-owner entities that are ignored for federal income tax purposes are nonetheless subject to the CTA and must file a BOI report if they meet the definition of a Reporting Company.

The BOI report must include the Reporting Company’s name (and any alternative names), address, state of formation and tax identification number, as well as the full legal names, dates of birth, residential addresses and identification numbers from a state-issued form of identification (as well as a copy of such form of identification) for each Beneficial Owner and Company Applicant. A Beneficial Owner is any individual who exercises substantial control over the Reporting Company or owns or controls at least 25% of the ownership interests of the Reporting Company. Beneficial Owners include trustees and certain beneficiaries and grantors of trusts holding ownership interests in a Reporting Company.

The deadline for Reporting Companies to file a report will depend upon when the entity was created (in the case of domestic Reporting Companies) or registered (in the case of Foreign Reporting Companies). Reports for entities created or registered prior to January 1, 2024 must be filed with FinCEN no later than January 1, 2025, while entities created or registered on or after January 1, 2024 and before January 1, 2025 must file their report no later than 90 days from the date of creation or registration of the entity. Entities created or registered on or after January 1, 2025 must file their report within 30 days of creation or registration of the entity. Any updates or corrections to reported information must be filed with FinCEN no later than 30 days after the change in information or of becoming aware of any incorrect information.

The Reporting Company itself is responsible for filing the BOI report with FinCEN. The Reporting Company must also update and/or correct any of the information reported to FinCEN. At the time of filing the BOI report, the Reporting Company may request a FinCEN Identifier Number. A Beneficial Owner or Company Applicant may also separately obtain their own personal FinCEN Identifier Number through the FinCEN website by providing the required personal information directly to FinCEN rather than to the Reporting Company. They may then provide such FinCEN Identifier Number to the Reporting Company to provide in such entity’s BOI Report in lieu of providing their personal information. The individual would then be responsible for updating and correcting their own information instead of the Reporting Company.

Failing to file a BOI report with FinCEN can result in penalties including fines and imprisonment. For more information regarding the CTA, visit the following links for FinCEN’s Small Entity Compliance Guide and Beneficial Ownership Information:

FinCEN Website Information (external link)

Small Entity Compliance Guide (external link)

It should also be noted that the New York State legislature passed the New York LLC Transparency Act in June 2023, which is presently awaiting Governor Hochul’s review and signature. This law would impose similar requirements on limited liabilities companies formed or registered to do business in New York, and would take effect 365 days after it is signed by the Governor.

This alert is intended for informational purposes regarding a potential reporting requirement and is not intended to constitute legal advice. Please consult with your corporate secretary or legal counsel about this reporting requirement, whether it affects you, and your responsibilities to ensure compliance with the CTA.

November 15, 2023 – In a pair of decisions, the Supreme Court, Suffolk County (Hon. Joseph Farneti) has denied the legal challenges brought by neighbors and upheld the decisions of the Huntington Town Zoning Board and Planning Board, in connection with the project known as the Preserve at Indian Hills.  

In the “Article 78” proceeding against the Zoning Board, Justice Farneti issued a 21-page decision that addressed each argument made by the neighbors, as well a the responses from the project sponsors and the Town’s ZBA.  Among other things, Justice Farneti rejected the neighbors’ claims that the ZBA (1) committed procedural violations during its vote, (2)  “usurped” the powers of the Town Board, (3) failed to make proper findings, (4) failed to respond to a request for interpretive relief, (5) improperly limited its scope of review, and (6) failed to comply with the State Environmental Quality Review Act (SEQRA).  Justice Farneti found many of the neighbors’ claims misdirected against the ZBA, when they should have made those claims against an earlier decision made by the Town’s Planning Board. 

In the second proceeding against the Planning Board, Justice Farneti issued a 15-page decision in which he explained the Court’s ultimate finding “that the petition has been brought long after the Planning Board’s decision-making process had concluded and the time to commence any legal challenge had expired.”  Justice Farneti agreed with the project sponsors that, under established New York law, claims “challenging a subdivision approval must be raised in an Article 78 proceeding against the Planning Board commenced no more than 30 days after the Planning Board files its preliminary approval of a proposed project,” but in this case, “instead of bringing a timely Article 78 Petition against the May 18, 2021 approval, the petitioners waited over two years to bring the instant Article 78 proceeding, and they did so challenging only the final subdivision approval.”

EHADP represented the project sponsors in both proceedings.

October/November 2023 – In successive decisions, the Supreme Court, Suffolk County has upheld two Dune Road variance determinations made by the Zoning Board of Appeals of the Village of Westhampton Beach. The decisions illustrate the differences that can result in the variance analysis when comparing new construction on vacant parcels with the remodeling of pre-existing homes.

In the first case, Sprotte v. Village of Westhampton Beach ZBA, decided on October 10, 2023, the Honorable Christopher Modelewski upheld the ZBA’s decision to grant variances to allow a small addition to a pre-existing home on a narrow lot. Neighbors had challenged the ZBA’s decision primarily on the ground that it was inconsistent with other ZBA decisions, but Justice Modelewski found that the ZBA rationally distinguished those precedents because they involved “entirely new construction and not the remodeling of existing homes.”

In the second case, Egret Dune Corporation v. ZBA of Village of Westhampton Beach, decided on November 8, 2023, the Honorable George Nolan upheld the ZBA’s decision to deny variances to allow a new house to be built on a narrow, 35-foot-wide lot. As noted by the court, the “ZBA determined that granting the requested variances would negatively impact the character of the neighborhood as it would result in the creation of the narrowest oceanfront building lot in the Village and the construction of a ‘trailer-shaped home approximately 15 feet wide by 90 feet long, which is unprecedented within the oceanfront neighborhood along Dune Road.'” The court found that the ZBA’s decision had a rational basis and was supported by substantial evidence.