Colorado-Real-Estate-Journal_502936

Page 26 - January 7-20, 2026 www.crej.com Law & Accounting 303 - 298 - 1122 www.sennfortis.com 1700 Lincoln Street, Suite 2100 Denver CO 80203 Acquisition and disposition Construction Construction contracts Condominiums and master planned communities Financing and lending Industrial Joint Venture and Operating Agreements Land use Leasing Mixed-use properties Multi-family Office Real estate development Residential Retail Title Zoning Our broad depth of real estate practitioners offers industry-leading expertise and extensive experience in all aspects of transactional work, including: Managing Shareholders Jennifer Stenman and Amy Ruhl 720.975.0466 ·  reinhartlaw.com Deep Experience. Insightful Counsel. Reinhart, a nationally recognized law firm with strong ties to Denver’s development community, is dedicated to helping clients successfully navigate today’s most important commercial real estate issues. I n an effort to combat illicit financial activity and money laundering, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury has finalized a new federal rule that will significantly alter the reporting obligations for certain residential real estate transactions nationwide, including those transactions con- ducted in Colorado. Beginning in 2026, real estate professionals will be required to report specific infor- mation to FinCEN to increase trans- parency in non-financed residential real estate transfers involving legal entities or trusts. n Overview of FinCEN’s feder- al reporting obligation. FinCEN’s new residential real estate report- ing requirement will become effec- tive on March 1, 2026, following a delay from its original effective date of Dec. 1, 2025. The updated rule builds upon FinCEN’s long-stand- ing Residential Real Estate Geo- graphic Targeting Orders, which requires title insurance companies to report beneficial owners of legal entities that make non-financed purchases of residential real estate nationwide. The main premise of FinCEN’s new rule is to increase transparency and to deter illicit use of the residential real estate market. n Key requirements. Beginning March 1, 2026, a reporting person (e.g., an insurance agent, escrow agent, or an attorney) is required to collect, and report to the Treasury certain information about a buyer or seller in a sale of real property or transfer. Generally, transfers are reportable when they meet all of the following criteria: i) The prop- erty is resi- dential real p r o p e r t y , which includes single-family homes, town- houses, condo- miniums and cooperatives ( i n c l u d i n g units within large multiunit buildings), buildings designed for occupancy by one to four families, and certain types of land on which a residence is not yet built; ii) The transfer is nonfinanced, meaning the buyer is making an “all-cash” purchase; iii) The property is transferred to a legal entity or trust, not an indi- vidual; and iv) An exemption does not apply (e.g., a transfer of an easement; a transfer of a bankruptcy estate; a transfer incident to a divorce or dissolution of a marriage or civil union; or a transfer resulting from the death of an individual, whether pursuant to the terms of a dece- dent’s will of the terms of a trust, the operation of law, or by contrac- tual provision). Furthermore, FinCEN states that the reporting person can be deter- mined by either a cascading prior- ity list of transaction roles, or by way of a written designation agree- ment. The “reporting cascade” con- sists of a list of seven different func- tions that a real estate professional may perform in a reportable transfer of resi- dential prop- erty, which would in essence make that profes- sional the des- ignated report- ing person. The report- ing person is, in order of pri- ority: (i) The person listed as the closing or settlement agent on the closing or settlement statement; (ii) If none, the person that pre- pares the closing or settlement statement; (iii) If none, the person that files with the recordation office the deed or other instrument that transfers ownership of the residential real property; (iv) If none, the person that underwrites an owner’s title insur- ance policy for the transferee with respect to the transferred property; (v) If none, the person that dis- burses in any form, including an escrow account, trust account, or lawyer’s trust account, the great- est amount of funds in connection with the property; (vi) If none, the person that pro- vides an evaluation of the status of title; or (vii) If none, the person that pre- pares the deed, or if no deed is involved, any other legal instru- ment that transfers ownership of the residential real property. How- ever, if the designated reporting person would like to reduce the overall burden of the reporting requirement, the election of a des- ignation agreement is an option, in which the possible reporting per- sons decide amongst themselves who is responsible for filing the report. Moreover, the required infor- mation to gather and submit to FinCEN is: (i) the reporting per- son’s identifying information; (ii) the residential real property being transferred; (iii) the transferor; (iv) the beneficial owners of the trans- feree entity or transferee trust; (v) the individuals signing documents on behalf of the transferee entity or transferee trust in the transfer; (vi) the legal entity or trust receiving ownership of the property; and (vii) the total consideration and certain other information about any pay- ments made. Additionally, after the reporting person gathers the information to the best of their knowledge (reason- able reliance standard), they must adhere to the deadlines required by FinCEN, which is, that the report must be filed by the latter of: (i) the final day of the following month after which the closing occurred, or (ii) 30 calendar days after the date of closing. Furthermore, the report- ing person is not required to retain a copy of the report. To add, the reporting person must keep a copy of any certifications signed by the transferee or representative, certify- ing that the transferee’s beneficial ownership information, as well as any designation agreement entered into, for a period of five years. n Practical implications. Real estate professionals involved in covered transactions may face addi- tional procedural steps and poten- tial delays in residential real estate closings as a result of FinCEN’s new reporting requirements. Finally, real estate professionals should also be mindful of poten- tial penalties for noncompliance. Although FinCEN has not yet begun enforcing penalties under the new rule, it retains authority to impose civil and criminal pen- alties for failure to file a required report or for submitting incomplete or inaccurate information. Early preparation and implementation of robust compliance practices will be essential to mitigating risk. n Conclusion. FinCEN’s nation- wide real estate reporting frame- work will improve compliance obligations on real estate profes- sionals designated as the reporting person in the covered transactions. Although the rule expands report- ing responsibilities, FinCEN’s requirements are a natural exten- sion of the longstanding effort to promote transparency in high-risk real estate transactions. Therefore, through proactive education, and integration of compliance proce- dures into existing practices, attor- neys and other real estate profes- sionals can meet FinCEN’s report- ing obligations while continuing to service their clients. s rnolan@spencerfane.com mbrandyburg@spencerfane.com FinCEN issues new residential real estate reporting rule Mariah Brandyburg Attorney, Spencer Fane Robin L. Nolan Attorney, Spencer Fane