When the Deed Is Done

The federal Financial Crimes Enforcement Network (FinCEN) has recently finalized its new rule requiring professionals (e.g., title companies and attorneys) facilitating the transfer of residential real estate not financed through commercial lenders to report the transfer to FinCEN.

The reporting requirement kicks in whenever the transferee is a legal entity (think partnership, limited liability company, or trust) even if the transfer is a gift. The information to be reported includes details of the transaction and personal information about the parties involved.

The rule is intended to combat the long-standing illicit use of the residential real estate market to launder money. Originally slated to go into effect in December 2025, the rule will now affect transactions closing after February 28, 2026. The penalties for noncompliance can be severe, but there are exemptions from the reporting requirement – including many transfers commonly used in estate planning and transfers due to death, divorce, or bankruptcy.

The rule is currently facing legal challenges from multiple players in the real estate industry. The challengers are claiming, among other things, that the rule:

• Exceeds FinCEN’s statutory authority.
• Violates First Amendment protections against compelled speech.
• Violates Fourth Amendment protections against unreasonable searches and seizures.
• Turns private parties into government surveillance agents without a warrant.
• Is overly broad in that it requires the reporting of all transactions, not just suspicious ones.
• Violates the Commerce Clause by regulating local transactions.
• Is arbitrary and capricious in that it imposes an onerous reporting and record keeping burden that is not supported by a proper cost-benefit analysis.

It’s not possible to predict the outcome of the legal challenges, or whether Congress might intervene to nullify or narrow the rule. (Legislation nullifying the rule has been introduced in both chambers.) If you have questions while we await the outcome, you can reach us at 248.477.6300.