Many lawyers in New Hampshire may sense a nagging echo with the rollout of FinCEN’s new Residential Real Estate Reporting Rule (the “Rule”). Just as they were beginning to regain their footing after the whirlwind changes tied to the Corporate Transparency Act—changes that required constant shifts advising clients—another federal reporting requirement went into effect on March 1 and is again accompanied by significant uncertainty.
Within weeks of the Rule’s release, two federal district courts reached opposite conclusions on its validity. The Middle District of Florida upheld the Rule in Fidelity National Financial, Inc. v. Bessent, while the Eastern District of Texas vacated it in Flowers Title Companies, LLC v. Bessent. Both decisions are now on appeal. As a result, closing attorneys and transactional counsel across the country—including here in New Hampshire—find themselves advising clients while the governing framework remains unsettled.
What the Rule Requires
The Rule imposes a federal reporting obligation on certain residential real estate transfers that do not involve institutional financing. FinCEN’s stated goal is to close perceived gaps in anti-money laundering enforcement, particularly in all‑cash transactions involving entities or trusts.
In general, the Rule applies to:
- Non‑financed transfers of 1–4 family residential property
- Transfers to an entity or trust, including LLCs, corporations, and many common estate‑planning structures
A “reporting person” must be identified through a cascading hierarchy that includes:
- Settlement or closing agents
- Title companies or underwriters
- Attorneys involved in closing, document preparation, or fund disbursement
The reporting person must collect and submit detailed information regarding:
- The transferee entity or trust
- Its beneficial owners
- Individuals participating in the transaction
Some transactions are excluded, such as transfers upon death or those incident to a divorce. Certain trust-related transactions are also exempt.
For New Hampshire practitioners, particularly closing attorneys, the Rule adds additional reporting requirements and potential liability for failure to comply. Entity‑based purchases of residential property—often used for privacy, investment, or liability‑protection—are common in the state’s real estate market. The Rule adds an unwelcome spotlight on the ultimate beneficial owners in those transactions.
Competing Views of FinCEN’s Authority
The two district court decisions reflect sharply contrasting views of FinCEN’s authority under the Bank Secrecy Act. In Fidelity National Financial, the Florida court adopted a broad view of the BSA, treating it as a comprehensive anti-money laundering framework that authorizes FinCEN to impose categorical reporting requirements. The court reasoned that the statute permits reporting for entire classes of potentially suspicious transactions, not just individualized determinations, and emphasized that several provisions—§ 5318(g)(1), § 5318(g)(5), and § 5318(a)(2)—operate together as sources of authority. It also rejected the argument that FinCEN’s past reliance on geographically limited targeting orders limited its ability to issue nationwide rules. The court’s analysis effectively accepts that Congress authorized FinCEN to identify classes of transactions as inherently presenting heightened money laundering risk, even where many individual transactions within that class may be entirely legitimate.
By contrast, the Texas court in Flowers Title analyzed the ordinary meaning of “suspicious” and concluded that the term imposes a meaningful limit on FinCEN’s authority. The court rejected the notion that all‑cash entity purchases can be deemed suspicious as a category. It further distinguished between procedural and substantive authority, holding that § 5318(a)(2) authorizes only compliance systems—not new reporting mandates—and viewed Congress’s use of geographically limited targeting orders as evidence that nationwide categorical reporting was not intended without clearer statutory direction.
Viewed together, the decisions highlight a fundamental split. One court focused on the purpose of the law and the flexibility it affords regulators, while the other insisted on a narrower interpretation of the statutory text and required clearer congressional authorization for the blanket application of the Rule to non-financed transactions.
Practical Guidance for New Hampshire Practitioners
During this period of uncertainty, it is best to be prepared and flexible. The first step is to identify potentially covered transactions as early as possible—particularly non‑financed purchases by entities or trusts. Even though the Texas court vacated the Rule, attorneys should proceed as though it may ultimately be reinstated, recognizing that compliance obligations could attach quickly and could apply to transactions closing during the pendency of the appeals, depending on how the Rule is ultimately enforced.
A conservative and practical strategy is to collect beneficial ownership and transaction information at or before closing and retain it in the file, even if no report is submitted immediately. In practice, this “collect now, decide later” approach minimizes disruption if reporting obligations are later enforced. It also avoids the far more difficult task of gathering information from parties after closing, particularly given the Rule’s relatively short filing deadlines and associated penalties for noncompliance.
Attorneys should consider addressing FinCEN‑related responsibilities directly in transaction documents by including cooperation and compliance provisions in the purchase and sale agreement, allocating compliance costs, and clarifying post‑closing obligations should reporting become necessary. They should also consider whether their engagement letters appropriately define the scope of representation, particularly where counsel is not acting as the closing or settlement agent. At the client‑counseling stage, attorneys should prepare buyers—especially those using LLCs or trusts—for the possibility of federal reporting requirements and the need to provide beneficial‑ownership information. For many buyers seeking privacy, this is a frustrating rule, and attorneys may be challenged by buyers refusing to provide the required information.
Conclusion
The conflicting decisions in Fidelity National Financial and Flowers Title highlight a judicial divide over agency authority—one that will ultimately be resolved on appeal. For now, the prudent approach is neither to disregard the Rule nor to assume its permanence, but rather to prepare for either outcome.