A new reporting rule effective March 1, 2026, imposes a reporting obligation for the non-financed purchase of residential real estate by a trust or a legal entity such as an LLC, partnership or corporation, or the transfer of non-financed residential real estate into such an entity. Under the Residential Real Estate Rule (RRER), the US Treasury’s Financial Crimes Enforcement Network (FinCEN) now requires a reporting person involved in the closing to share information about the transaction including a disclosure of the beneficiary owners of transferee trusts or entities.
While such transfers or purchases are legal, FinCEN has found through earlier geographic reporting tests in New York, Miami, Los Angeles and San Francisco, that some criminals are circumventing anti-laundering scrutiny from banks and other financial institutions that provide mortgage funding for real estate purchases, by relying, instead, on cash or private funding. Such individuals have historically attempted to benefit by holding illicit cash in certain real estate assets held by trusts, LLCs and other entities to protect their personal identities.
Under the RRER, that will no longer be the case. Beneficial owner information is now required for residential real estate purchases throughout the United States including in several territories such as Puerto Rico. The RRER introduces new reporting requirements that may impact real estate purchasing decisions made through legal entities, and Windham Brannon is helping clients understand how to prepare and comply.
Which Properties Need to be Reported Under the RRER?
Residential property required for reporting under RRER includes single-family homes, condos, co-ops, multiple units intended to house up to four families, some timeshares and vacant land upon which a qualifying property is planned for development. While RRER’s intent is to deter financial crimes by increasing transparency, a few “low risk” reporting exceptions exist for qualifying properties including:
- Easement transfers
- Transfers that result from the death of an individual
- Divorce or dissolution transfers
- Bankruptcy estate transfers
- Court-supervised transfers
- No-consideration transfers by an individual to a trust for which that individual (or a spouse) is the settler or grantor.
- Transfers for which no reporting person exists
Who is Responsible for Reporting Under the RRER?
FinCEN has determined that reporting persons will be selected through a “reporting cascade”, meaning if the first professional required to file a report about the real estate transaction is not involved in a closing, the requirement will cascade to the next level of professional who was involved. The beneficiary owners of the trust or entity receiving the property do not report to FinCEN.
Settlement agents are the first designated reporting persons in a seven-level priority list for qualifying transactions. When no agent is involved, responsibility cascades to the following real estate professional, in this designated order:
- Preparer of settlement statement
- Deed/instrument filer
- Title insurance underwriter
- Funds dispenser
- Title evaluation provider
- Deed/instrument preparer
One professional in the cascade may also assume responsibility for serving as the reporting person from someone higher in the cascade through mutual agreement.
What Needs to Be Reported Under the RRER?
Under the RRER, the following details need to be reported:
- Transaction details including property address, sale price and payment method
- Close date
- The identity of the seller (or transferor)
- Buyer details including the name of the entity or trust receiving the property and the individual signing for the entity
- The name(s) and personal details of the beneficial owner(s) who owns or controls the transferee entity, including taxpayer identification number
When Does the Transaction Under the RRER Rule Need to be Reported?
The reporting person must file a report about the purchase or transfer through FinCEN’s electronic filing system by either of the following deadlines, depending on which is later:
- Within 30 calendar days of the closing, or
- By the last day of the month following the month of the closing
Additionally, reporting individuals must retain records about the transaction and reporting requirements for five years following the report filing date.
What Are the Penalties for Non-compliance with the RRER?
FinCEN’s new rule is enforced under the Bank Secrecy Act, which is responsible for applying civil and criminal penalties for non-compliance. Civil penalties vary depending on whether a violation is deemed negligent or willful. Negligent violations may result in a civil penalty of up to $1,430 for each violation, plus an additional civil money penalty of up to $111,308 for a pattern of negligent activity. Willful violations may result in a civil penalty of up to the greater of the amount involved in the transaction (not to exceed $286,184) or $71,545. Criminal penalties for willful violations may include imprisonment for up to five years and/or a criminal fine of up to $250,000.
Violations may include failure to file a required Real Estate Report, late filings, filings with incomplete (or false) information such as missing details about beneficial owners or failing to maintain records for the required five-year period.
Windham Brannon is available to help navigate the RRER. Because penalties can be significant, we are committed to protecting clients from non-compliance by detailing requirements for owner disclosures of trusts and other legal entities, assisting with the collection of required beneficial ownership information, monitoring deadlines and coordinating between beneficial owners, attorneys, settlement and title agents and other reporting persons during qualifying transactions.
Only a few years following the passage of the Corporate Transparency Act, FinCEN continues to pursue greater transparency in financial transactions to deter crimes and, in this case, to prevent illicit actors from taking advantage of money laundering loopholes. The new law does not affect how trusts or legal entities operate during the purchase or transfer of residential real estate; it does, however, prevent beneficial owners from remaining anonymous.
For more information or assistance, please contact Gary Gruner or your Windham Brannon Advisor.
