New FinCEN Rules for Reporting Non-Financed Residential Real Estate Transactions - Applicable to Community Associations?

New FinCEN Rules for Reporting Non-Financed Residential Real Estate Transactions – Applicable to Community Associations?

Effective March 1, 2026, certain residential real estate transactions involving non-financed transfers to legal entities or trusts will require reporting to the Financial Crimes Enforcement Network (“FinCEN”) under the new federal Residential Real Estate Rule. Homeowners’ associations, condominium associations and cooperatives in some limited circumstances could be considered “reporting persons” under the new reporting requirements, which are summarized below.

While the purposes of this new rulemaking are to enhance transparency in real estate transactions and to combat money laundering, it is important for community associations to understand their role and their potential obligations under the new reporting requirements.

The new reporting rules apply to “non-financed transfers” transferring title in residential real estate to legal entities or trusts. For purposes of this rule, this can apply, for instance, to certain transfers of single-family houses, townhouses, condominiums and cooperatives (including condominiums and cooperatives in large buildings containing many such units, as well as entire buildings designed for occupancy by one to four families). Covered “non-financed transfers” typically involve transactions (i) that do not involve a lending institution (i.e., the transactions are not subject to a loan or mortgage) and (ii) the new owners are LLCs, corporations, or other legal entities other than natural persons. The concept of “non-financed transfers” can include other situations, and if interested, we suggest reviewing FinCEN’s FAQs at https://www.fincen.gov/rre-faqs#C_1.

Under the new rules, a community association could conceivably be a "reporting person," but only if its role in the non-financed real estate transaction falls into one of the following categories (and only if there wasn't another entity or person higher up in this "reporting cascade" who would qualify as the "reporting person"):

1. The person listed as the closing or settlement agent on the closing or settlement statement;

2. If no person described above is involved, the person that prepares the closing or settlement statement for the transfer;

3. If no person described above is involved, the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property;

4. If no person described above is involved, the person that underwrites an owner’s title insurance policy for the transferee with respect to the transferred residential real property, such as a title insurance company;

5. If no person described above is involved, the person that disburses in any form, including from an escrow account, trust account, or lawyers’ trust account, the greatest amount of funds in connection with the residential real property transfer;

6. If no person described above is involved, the person that provides an evaluation of the status of the title; or

7. If no person described above is involved, the person that prepares the deed or, if no deed is involved, any other legal instrument that transfers ownership of the residential real property, including, with respect to shares in a cooperative housing corporation, the person who prepares the stock certificate.

If none of the above functions are performed for a given reportable transfer of residential real property, then a report is not required to be filed.

While it is unlikely that the new federal regulations will apply to most community associations, it is important to understand that an association could potentially be considered a “reporting person” under the new FinCEN rules and subject to the reporting requirements. If there is any question as to whether your association’s involvement in the transfer of title to residential real estate triggers a duty to report real estate transactions to FinCEN, we encourage you to contact your friendly community association attorneys at Chadwick Washington.