UPDATE (March 16, 2026): Three weeks after the reporting requirement took effect, a federal judge in the Eastern District of Texas issued an order enjoining key portions of the mandate, effectively suspending its enforceability. Prior to that decision, judges in parallel actions in Florida and another Texas district upheld the rule’s enforceability.
The regulatory outlook is unsettled: FinCEN has signaled its intent to seek emergency relief on appeal.
As a practical matter, the rule is not currently being enforced; FinCEN has stated there is no legal obligation to file reports under the vacated provisions at this time. Because the injunction’s scope and duration remain unpredictable, entities that would qualify as “reporting persons” under the rule should continue to collect and preserve the information the rule would require.
A New Era of Transparency in Residential Real Estate
This year, a nationwide reporting regime designed to increase transparency in certain real estate transactions has been implemented.
Effective March 1, 2026, the Financial Crimes Enforcement Network (FinCEN) enacted a new real estate reporting rule under the Bank Secrecy Act. The rule applies primarily to certain non-financed transfers of residential real property to “transferee entities” and “transferee trusts”. Transfers subject to the new rule must comply with mandatory reporting of beneficial ownership information to the U.S. Department of the Treasury. FinCEN’s goal is to decrease money laundering activity by mandating high levels of transparency in specified transfers of residential real property.
Transferee
FinCEN’s definition of a transferee entity is essentially any form of recognized legal entity with one main exception: an individual. A transferee entity may be a corporation, an association, a limited liability company, or a partnership.
Transferee trusts also have an intentionally broad definition. Every legal arrangement – foreign or domestic – in which a trustee holds the assets of a grantor or settlor for any specific purpose falls under FinCEN’s definition of transferee trusts. Additionally, other legal arrangements that are similar in scope or application are subject to reporting.
Beneficial Owner
The concept of beneficial ownership is a major aspect of the reporting rule. Regarding transferee entities, FinCEN defines beneficial ownership as,
“An individual who, on the date of closing, either directly or indirectly:
- Exercises substantial control over the transferee entity, or
- Owns or controls at least 25% of the transferee entity’s ownership interests”
FinCEN defines beneficial owners of transferee trusts with equally broad coverage. Such individuals may hold any of the following roles regarding the transferee trust:
- Trustee,
- Trust Protector – or one with the authority to dispose of the trust’s assets,
- Beneficiary who is the sole permissible recipient of income and principal or who has the right to control distributions or withdrawals of substantially all of the trust’s assets,
- A grantor or settlor who has the right to revoke the trust or withdraw assets, and
- A beneficial owner of a legal entity or trust holding one of the above-described positions.
Financial Structure
FinCEN targets non-financed transfers of real property. This focus is not intended to disincentivize cash purchases of residential real estate. Rather, it is because non-financed transfers typically are not subject to the same regulations that govern financial institutions when they loan funds. In most financed transfers of residential real estate, the lending institutions are subject to anti-money laundering (AML) program requirements and Suspicious Activity Report (SAR) obligations. This lack of regulatory protection can make cash transactions an easy target for criminal activity.
Residential Real Property
“Residential Real Property” includes property containing a structure which serves primarily as occupancy for one to four families, as well as property on which the transferee intends to construct such a structure. The definition also covers individual units within a structure that are principally designed for occupancy by one to four families, along with shares in a domestic cooperative housing corporation.
Reportable Transfer
FinCEN’s definition for “Reportable Transfers” is similarly extremely broad in scope. The website provides the following general summary of the new rule:
“A reportable transfer is defined as occurring when all of these four conditions are met:
- Residential real property is transferred; and
- The transfer is non-financed; and
- The property is transferred to a transferee entity or transferee trust; and
- No exception applies”
A reportable transfer includes any sale, gift, or other conveyance of an ownership interest in residential real property or a cooperative housing corporation evidenced by a deed or other documentation of transfer.
Parties seeking further details concerning this element of the new rule are encouraged to read FinCEN’s FAQ page on their website. It contains additional helpful elaboration as well as specific exceptions to the general rule stated above. A common exception to a reportable transfer happens when a transfer for no consideration is made by an individual – alone or with a spouse – to a trust in which the individual is a settlor or grantor.
Reporting
The obligation to report the transaction does not fall on the purchasing party. Instead, it is imposed on the “reporting person,” which is typically the title insurance company, settlement agent, or attorney conducting the settlement of the transaction. The reporting person must file the report on the last day of the month following the closing month or 30 days after the closing date, whichever is later.
Disclosures
With a stated goal of determining beneficial ownership, the report requires personal information from the transferee, including IRS taxpayer identification numbers and bank account numbers associated with the purchase. Transferees are required to disclose the greatest amount of sensitive information, but the duty to report is not limited to the transferee. Transferors, reporting persons, beneficial owners of the transferee, individuals representing the transferee, and trustee entities, if applicable, must also disclose identifying information in the report.
Florida’s printed form FAR/BAR Contract, customarily utilized in residential transactions, now contains this section on FinCEN reporting information:
“Such information and documentation includes, without limitation, full legal names, dates of birth, residential street addresses, and the IRS taxpayer identification number of the beneficial owners of the parties… Each party agrees to promptly provide and consents to Closing Agent’s collection and report of said information to FinCEN.”
Navigating the Report
This reporting rule creates an entirely new regulatory system governing residential real estate. It will be interesting to follow its evolution – particularly how the marketplace will respond to the rule.
For individuals likely to encounter this new requirement, some practical tips should be considered. First, this information is not collected by FinCEN itself, but by secured online portals which are provided by the closing/settlement professionals. These links may request sensitive identification information. When the portal is received, verify with the reporting person that the portal is correct and secure. One should avoid using public Wi-Fi when completing the report. No superfluous information should be given, and only the secured portal is to be used in transmitting required information. Reports are exempt from disclosure under the Freedom of Information Act and are therefore exempt from access by the public, but as far as the U.S. Treasury is concerned, investor anonymity is eliminated.
