Business entities in Washington State including associations, companies, firms, partnerships, corporations, limited liability companies, and limited liability partnerships are regulated by various state laws, which govern such things as registration, licensing, labor and tax requirements.
These business entities include real estate investment trusts (REITs), which are companies that own or finance income-producing real estate that may include residential or commercial real estate properties, or both. Most REITs trade on major stock exchanges and are regulated by federal securities laws, and under certain circumstances the Securities Act of Washington. REITs are also subject to regulations that cover other business entities.
The Office of the Secretary of State (OSOS) among other duties is responsible for registering private corporations and limited partnerships. Registration includes collecting information related to the name of the entity, agent name, principal office address, duration of the entity, and articles of incorporation or certificate of formation.
The Corporate Homeowner Registration Program is established within OSOS. Entities with an ownership interest in 20 or more applicable housing units in the state of Washington shall register with the Corporate Homeowner Registration Program and report contact information, number of units owned, property uses, purchase price, and a list of states and countries that the entity does business in to OSOS. The registration must be updated within 60 days after the sale is closed on any applicable housing units or if any information contained in the initial or renewal registration changes.
The following are exempted from the registration requirements:
The Corporate Homeowner Transparency Account (CHT Account) is created in the custody of the Office of the State Treasurer and is subject to allotment procedures, but an appropriation is not required for expenditures. The CHT Account may be used to administer the registration of entities that own or are divesting applicable housing units.
OSOS shall determine the Corporate Homeowner Registration Program registration fee by rule and may adopt other rules necessary to implement the act. The fee revenue must be deposited into the CHT Account.
PRO: The bill adds transparency and gathering of information around corporate ownership of single-family homes. Corporations are buying up the lower price starter homes which is important for Washington families. Young couples cannot compete with all cash offers. Individuals purchasing their homes have 30-year loans and mortgages, they must pay interest, while institutional investors do not have those barriers. Often when corporations purchase homes, they are taking them off the market permanently.
The bill is a registry that provides important information so good policy can be made. You don't change what you don't measure.
Bill contains exemptions for purchasing to build to rent so new development is not impeded and there is a time period granted for banks needing to foreclose.
The bill is needed so we can identify who is in our communities. It monitors the purchases of private corporations entering all areas of the housing market. They often use limited liability companies or shell companies to mask the true ownership. Homeowner associations are frequently managed by property managers that are investors. Property managers know which homes are in financial distress. They give that information to investors, and they know how to outbid in sheriff's sales. The bill allows us to see who owns in these communities and who sits on association boards.
CON: Why the registry? What are the practices it is trying to get at? Is it corporate flipping of homes? Is it a cross-the-board rental play? What is it doing to the price of housing? Why is corporate purchase of single-family homes taking place in the marketplace? This is getting in the way of building housing for low and medium incomes. Knowing the answers to these questions will shed light on some of the issues builders face.
OTHER: Office of the Secretary of State (Office) currently does not collect this type of information. Implementation will be challenging and represents a new book of business and will require the Office to gather a lot more information than it currently does for corporations. This will require the Office to build a whole new system. The Office estimates it will cost $2.2 million each year for the next two years. The Office does not have regulatory authority, so it will not know if an entity should have registered. The Office cannot force entities to register. For current corporation registration the Office sends annual renewal notices to entities.
Realtors see the merit of a registry but not sure this will end artificial scarcity that corporate purchases of single-family homes is having on the marketplace. These corporate owned homes are sometimes being taken off the market and not available for an individual purchase, or worse may sit empty. Choosing to prevent or limit corporate purchases is more important than creating a registry.