FinCEN's New Residential Real Estate Reporting Rule

Lawyers Mutual Liability Insurance Company of North Carolina recently published an article discussing the Financial Crimes Enforcement Network’s (“FinCEN”) new Residential Real Estate Reporting Rule. This Rule went into effect March 1, 2026, and it significantly expands federal reporting obligations related to certain residential real estate transfers. The rule applies broadly to non-financed transfers of residential real property to legal entities (such as LLCs, corporations, or partnerships) or trusts, with no minimum dollar threshold. Covered property includes single-family homes, townhomes, condominiums, and certain vacant land intended for residential construction. Importantly, the triggering factor is the transfer of residential real property itself, not the attorney’s practice area. As a result, the rule may affect not only real estate attorneys but also estate planning and business lawyers who prepare or record deeds, transfer property into trusts, form entities that take title to residential property, or assist with intra-family or cash transfers.

Under the Rule, a Real Estate Report must be filed electronically through FinCEN’s BSA E-Filing System, generally within 30 days after the closing or transfer. The rule establishes a seven-step “reporting cascade” to determine the Reporting Person responsible for filing the report, which in many cases will be the closing or settlement agent. However, when no settlement agent is involved, the obligation may fall on the individual who prepares or records the deed, meaning attorneys handling deed-only transactions could become the Reporting Person even outside a traditional closing. Although parties may enter into written designation agreements to assign filing responsibilities among those in the cascade, the Reporting Person ultimately remains responsible for compliance. The report requires detailed information about the reporting individual, the property, the transferee entity or trust, beneficial ownership, payment details, and signing individuals.

The rule also presents important risk management considerations for attorneys. Firms that handle residential property transfers—even incidentally—should consider implementing intake procedures to determine whether a transferee is an entity or trust, confirming whether the transaction is financed, determining their position in the reporting cascade before recording a deed, tracking applicable reporting deadlines, and maintaining records for at least five years. Lawyers should also be aware that civil or criminal penalties for non-compliance are regulatory fines that are typically excluded from professional liability coverage. Ultimately, the new FinCEN rule underscores that preparing or recording a deed transferring residential property to an entity or trust in a non-financed transaction may create a federal reporting obligation, making it essential for attorneys in multiple practice areas to review their procedures and ensure compliance.

LMICK highly recommends that you read the full article from Lawyers Mutual of North Carolina to learn more about the new FinCEN Rule to determine if your practice may be impacted. We are including it here with their permission. As previously mentioned, failure to comply with the Rule may lead to fines or penalties against the lawyer. Most malpractice policies, including Lawyers Mutual’s policy, excludes coverage for fines and penalties. However, Lawyers Mutual cannot make any coverage determination until a claim is actually reported. Yet, staying informed on how the Rule operates will ultimately help avoid any potential uncovered claim.

Questions? Contact Jared Burke for more information.