Effective March 1, 2026, the Financial Crimes Enforcement Network (FinCEN) will begin enforcing a new reporting requirement for certain residential real estate transactions (RRE Rules). The RRE Rules, enacted under the Bank Secrecy Act, are designed to increase transparency in real estate transactions and combat money laundering and other illicit financial activities and are separate and distinct from the provisions of the Corporate Transparency Act (CTA) discussed in earlier E-Briefs.
This E-Brief provides an overview of the RRE Rules, including when they apply, who is responsible for reporting, what information must be disclosed, filing deadlines, and potential penalties for non-compliance.
Importantly, buyers and sellers of residential real estate will generally not be the party responsible for making this filing. Instead, the obligation is placed on certain real estate professionals, such as title companies, closing agents, and real estate attorneys. Nevertheless, all those involved in the transfer of residential real estate should be aware of the RRE Rules, and the increased obligations to provide the necessary information in order to comply with them.
When Does a Transaction Require Reporting under the RRE Rules?
A transaction must be reported to FinCEN when all four of the following conditions are met:
- The transfer involves residential real property;
- The transfer is non-financed;
- The property is transferred to a transferee entity or a transferee trust, rather than to an individual; and
- No applicable exception applies to the transaction.
If any one of these conditions is not satisfied, reporting is not required. Each of these terms is explained in greater detail below.
Key Definitions
Residential Real Property refers to property located in the United States that is designed for occupancy by one (1) to four (4) families. This can include:
- Single-family homes
- Small apartment buildings
- Townhouses
- Condominiums
- Cooperative housing shares
- Land purchased with the intent to construct residential dwellings (for example, new residential developments)
- Mixed-use properties that contain a residential component (for example, a commercial building with a residential unit above it)
- Corporations
- Limited liability companies
- Partnerships
- Estates
- Associations
- Statutory trusts
Non-Financed Transfer means a transfer that does not involve a loan (i) secured by the property and (ii) extended by a financial institution subject to anti-money laundering program requirements and suspicious activity reporting obligations. If a transaction is financed by a seller who is not subject to these regulatory requirements, it is still considered a non-financed transfer for purposes of the RRE Rules.
Transferee Entity is broadly defined to include any legal person other than an individual or a transferee trust. This encompasses:
- Corporations
- Limited liability companies
- Partnerships
- Estates
- Associations
- Statutory trusts
Transferee Trust refers to any legal arrangement in which a person places assets under the control of a trustee for the benefit of one or more beneficiaries for a specified purpose.
Exceptions to Reporting
Certain transactions are exempt from reporting requirements, including transfers, generally described as follows:
- Involving the grant, transfer, or revocation of an easement
- Resulting from the death of an individual
- Incident to divorce or dissolution of a marriage
- Made to a bankruptcy estate
- Supervised by a United States court
- For no consideration made by an individual (either alone or with their spouse) to a trust where that individual or their spouse is the settlor or grantor – this exception is particularly relevant for revocable living trusts commonly used in estate planning
- To a qualified intermediary for purposes of a like-kind exchange
- For which there is no reporting person
Reporting Responsibilities
The obligation to file a report follows a hierarchy based on the roles involved in the transaction. The responsible party is determined in the following order of priority:
- The closing or settlement agent listed on the closing statement;
- The person who prepares the closing or settlement statement;
- The person who files the deed or other transfer instrument with the recording office;
- The person who underwrites an owner's title insurance policy for the transferee;
- The person who disburses the greatest amount of funds in connection with the transfer;
- The person providing a title status evaluation; and
- The person who prepares the deed or other legal instrument transferring ownership
Only one person in the above hierarchy is the party responsible for filing the report. The responsible party is the first person in the hierarchy who meets the applicable criteria for the specific transaction.
Information Required in Reports
The report must include sufficient information to identify:
- The reporting person
- The residential real property being transferred
- The transferee entity or trust
- The beneficial owners of the transferee entity or trust (which generally follow the CTA rules)
- Certain individuals representing the transferee in the transaction
- Any trustee that is an entity (if the transferee is a trust)
- The transferor
Filing Deadlines
Reports must be filed by the later of: (i) the last day of the month following the month in which closing occurred, or (ii) 30 calendar days after the date of closing. For example, if a transaction closes on March 15, the report would be due by the later of April 30 or April 14, making April 30 the applicable deadline.
Penalties for Non-Compliance
Failure to comply with these reporting requirements may result in significant penalties to the party responsible for making the filing.
For Negligent Violations:
- Civil penalty of up to $1,430 per violation.
- Additional civil penalty of up to $111,308 for a pattern of negligent activity.
For Willful Violations:
- Civil penalty of the greater of the amount involved in the transaction (capped at $286,184) or $71,545.
- Criminal penalties may include imprisonment for up to five years, a fine of up to $250,000, or both.
Additional Resources
This E-Brief has outlined the major areas of consideration but is not meant to provide comprehensive guidance on the new FinCEN residential real estate reporting rules.
Please contact any of the attorneys in the Real Estate Practice Group at Woods Aitken if you have any questions regarding the new FinCEN residential real estate reporting rules. We encourage you to subscribe to our E-Briefs for the latest news, tips, and updates.