By Heather Lobermann and Emily Smoot
The Residential Real Estate Rule
The Residential Real Estate Rule is a regulation under the Corporate Transparency Act (CTA) which is designed to combat money laundering, illegal financing, and hidden ownership of real property. Although much of the CTA has been suspended, as of the date of this publication, the Residential Real Estate Rule (the “Rule”) is set to take effect on March 1, 2026. While the Financial Crimes Enforcement Network (FinCEN) has signaled this effective date, the regulatory landscape remains unsettled. Real estate professionals should be prepared to comply with the Rule as well as potential postponements and possible changes to the reporting requirements.
Reportable Transfers Under the Residential Real Estate Rule
Reportable Transfers Under the Rule are (1) non-financed transfers of an ownership interest in (2) residential real property to (3) a transferee entity or transferee trust.
1. Non-Financed Transfer
For a transfer to be Non-Financed, it must not involve a loan to all transferees that is both (1) secured by the transferred property and (2) extended by a financial institution subject to an Anti-Money Laundering (AML) program and Suspicious Activity Report (SAR) obligations. Transfers financed by a private, non-bank lender or other institution without an obligation to maintain an AML program and file SARs will be treated as Non-Financed transfers under the Rule.
2. Residential Real Property
Reportable Residential Real Property includes single-family houses, townhomes, condominiums, and cooperatives. Additionally, large buildings containing many units, such as condominium or cooperative complexes and apartment buildings, qualify as Residential Real Property for purposes of the Rule. Transfers of land which are intended for future construction of structures designed for occupancy by one to four families are also reportable under the Rule. Mixed-use properties may also be reportable.
3. Transferee Entity or Transferee Trust
If the party receiving the Residential Real Property is not an individual or trust, it may qualify as a “Transferee Entity” for purposes of the Rule. Transferee Entities can be corporations, limited liability companies, partnerships, estates, or associations. Certain regulated entities, however, are exempt from reporting requirements.
If the party receiving the Residential Real Property is a trust, it may qualify as a “Transferee Trust” under the Rule. A Transferee Trust is created when a grantor or settlor places assets under the control of a trustee for the benefit of one or more beneficiaries or for a specified purpose. Regardless of whether the Residential Real Property is titled in the name of the trustee or in the name of the trust itself, the trust is still considered a Transferee Trust under the Rule.
Exemptions of the Residential Real Estate Rule
It is important to note that several exemptions exist for certain common, lower-risk transactions. Non-reportable transfers, such as those resulting from death or divorce, transfers to a bankruptcy estate, transfers supervised by a court in the US, transfers for estate planning purposes to one’s own trust in which they are the beneficiary, and other exemptions, do not require special reporting. This list is not exhaustive. It is best to consult with an attorney if you are unsure whether the Rule applies to your transaction.
Reporting Person
The obligation to file reports under the Rule will generally fall on settlement agents, title insurance agents, escrow agents, and attorneys. Each reportable transfer has one person responsible for reporting. The Reporting Person can be determined by a Designation Agreement, or the “Reporting Cascade” which outlines individuals who act in the closing in order of priority.
Federal Litigation Challenging the Residential Real Estate Reporting Rule
As of the date of this publication, at least two federal court cases are challenging the constitutionality of the Rule. In Fidelity National Financial, Inc. v. Bessent, pending in the U.S. District Court for the Middle District of Florida, oral arguments on the parties’ cross-motions for summary judgment were held on November 18, 2025. Although the magistrate judge issued a report and recommendation that would allow the Rule to move forward, the district judge has not yet ruled and will decide whether that recommendation is adopted. In Flowers Title Companies, LLC v. Bessent, pending in the U.S. District Court for the Eastern District of Texas, oral arguments on the parties’ summary judgment motions were held on January 13, 2026. As of the date of this publication, no order has been issued. KDDK will continue to monitor the status of the Rule and will circulate information on substantive updates.
Where To Find Additional Information?
Additional information is available on the FinCEN website. You may also contact KDDK for help. Contact attorneys Kent A. “KAB” Brasseale, II, Heather Lobermann, or Emily Smoot, by email or phone at (812) 423-3183. Please note that in order for KDDK to assist with a CTA filing, our services must be separately and specifically engaged through our CTA assistance engagement form.
