On March 19, 2026, a federal court in Texas ruled that the new FinCEN residential real estate rules were unenforceable. A copy of the opinion can be found here: Flowers Title Companies, LLC v. Bessent et al, (E.D. Tex. 2026). FinCEN has indicated that reporting under the FinCEN rule for residential real estate transactions will not be required while the federal court order remains in place. For the latest information, please visit: Residential Real Estate Rule | FinCEN.gov
Community associations have spent the past several years preparing for reporting obligations under the Corporate Transparency Act. However, in March 2025, following multiple legal challenges, the Financial Crimes Enforcement Network (FinCEN) announced that it would not enforce CTA reporting requirements against domestic corporate entities, such as community associations. As a result, most condominium associations and homeowners associations in the United States are no longer required to submit beneficial ownership reports under the CTA.
Although the CTA reporting requirement has effectively been paused for domestic entities, another federal reporting rule will soon affect certain residential real estate transactions. Beginning March 1, 2026, FinCEN’s Residential Real Estate Reporting Rule under 31 C.F.R. § 1031.320 will require information about certain real estate transfers to be reported to FinCEN.
While many routine home sales will not trigger the new FinCEN real estate reporting rule, Michigan community associations should understand when it may apply. This is particularly important when a community association obtains title to residential property through foreclosure and later sells that property, or when they convey association owned property in a cash transaction.
What is a reportable transfer under the FinCEN Residential Real Estate Rule?
The FinCEN real estate reporting rule applies to certain non-financed transfers of residential real estate when the property is transferred to a legal entity or trust, and no exemption applies. The rule broadly defines residential real estate as:
- Real property located in the United States containing a structure designed principally for occupancy by one to four families.
- Land located in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families.
- A unit designed principally for occupancy by one to four families within a structure on land located in the United States.
- Shares in a cooperative housing corporation for which the underlying property is in the United States.
A reportable transfer does not include any of the following:
- Grant, transfer, or revocation of an easement.
- Transfer resulting from the death of an individual, whether pursuant to the terms of a decedent’s will or the terms of a trust, the operation of law, or by contractual provision.
- Transfer incident to divorce or dissolution of a marriage or civil union.
- Transfer to a bankruptcy estate.
- Transfer supervised by a court in the United States.
- Transfer for no consideration made by an individual, either alone or with the individual’s spouse, to a trust of which that individual, that individual’s spouse, or both of them, are the settlor(s) or grantor(s).
- Transfer to a qualified intermediary for purposes of 26 CFR 1.1031(k)-1.
- Transfer for which there is no reporting person.
Types of Residential Real Estate Transfers involving Michigan Community Associations that May Trigger FinCEN Reporting
Although the rule will not apply to most real estate transfers in community associations, certain transactions involving community associations may fall within the reporting requirement. Examples that condominium and homeowners associations should be aware of include:
- Sales of Property Acquired Through Non-Judicial Foreclosure
In Michigan, condominium associations and many homeowners associations can collect delinquent assessments through foreclosure by advertisement, a non-judicial process that allows a community association to foreclose its lien without filing a lawsuit. If a community association acquires title to a unit or lot through foreclosure, and it is a nonprofit corporation, or later sells that property in a cash transaction to an LLC, corporation, or trust, the sale may qualify as a reportable transfer under the FinCEN rule. While judicial foreclosure typically falls within an exemption for transfers supervised by law, non-judicial foreclosure and the subsequent resale of the property by a community association may trigger reporting obligations, as these transactions are not part of a court proceeding.
- Sale of Community Association Owned Property
Some community associations occasionally sell association-owned property, such as unused common land, units, or lots deeded to them in lieu of foreclosure, or common elements property in which a developer may have lost rights under MCL 559.167 of the Michigan Condominium Act. If a Michigan condominium or homeowners association sells property in a cash transaction to a legal entity or trust, the transaction could potentially fall within FinCEN’s reporting requirements.
- Transfer of Stock Certificates in Cooperative Housing
Although less common in Michigan than in some other states, residential cooperative issues or transfer shares are tied to residential units. A cash transfer of co-op shares to an entity or trust could also require reporting under the new FinCEN real estate reporting rules. If a community association is engaged in one of the above real estate transactions, it is important to consult with a community association attorney to determine if FinCEN reporting is required. A report must be filed by the last day of the month following the month in which the date of closing occurred or 30 calendar days after the date of closing, whichever is later.
What information must be reported to FinCEN under 31 C.F.R. § 1031.320?
When a transfer is reportable, the reporting person must provide detailed information about the real estate transaction to FinCEN. Required information typically includes:
- Name and contact information of the Reporting Person.
- Name, address, and IRS Taxpayer Identification of the Transferee (i.e., corporate entity or trust).
- Information regarding the beneficial owners(s) of the transferee entity, such as names, addresses, dates of birth, and IRS Taxpayer Identification Numbers.
- Information regarding the transferor, including the name, address, and taxpayer information.
- A description of the real property being transferred or the shares being transferred in the case of a Co-Op.
- The purchase price and payment details.
In many situations, title companies may handle the reporting requirement as part of the closing process. However, community associations should not assume that another party will always be responsible for filing the report.
Penalties for Failing to Comply with FinCEN Reporting Requirements
Failure to comply with the FinCEN reporting rule can lead to significant penalties under the Bank Secrecy Act. For negligent violations, civil penalties may include:
- Up to $1,430 per violation, and
• Up to $111,308 for a pattern of negligent activity.
For willful violations, civil penalties may include:
- The greater of $71,545 or the amount involved in the transaction, capped at $286,184
Criminal penalties may include:
- Up to 5 years imprisonment
• Up to $250,000 in criminal fines
The civil penalties may be adjusted based on inflation under the Bank Secrecy Act. Although community associations will rarely encounter transactions that trigger this rule, the potential penalties make it important for boards to identify when reporting may be required.
Key Takeaways for Michigan Community Associations
The Corporate Transparency Act may no longer require reporting by most condominium and homeowners associations, but the FinCEN Residential Real Estate Reporting Rule creates a separate compliance obligation that begins March 1, 2026. Michigan community associations should keep the following points in mind:
- Community associations are not automatically exempt from the FinCEN rule.
• Cash sales of residential property to LLCs, corporations, or trusts may trigger reporting requirements.
• Associations that acquire property through non-judicial foreclosure and later sell the property should carefully evaluate whether the reporting is required in either circumstance.
• Sales of community association owned property in cash transactions may also require reporting.
• Civil and criminal penalties for noncompliance can be substantial.
Before closing any real estate transaction that could fall within 31 C.F.R. § 1031.320, condominium and homeowners associations should consult with a community association to determine whether a FinCEN report must be filed. Identifying potential reporting obligations before the closing table is far easier than addressing them after the transaction has already occurred.
