What is the Residential Real Estate Rule?

FinCEN’s Residential Real Estate Rule took effect on December 1, 2025, with reporting obligations beginning March 1, 2026. The rule was designed to address money laundering risks in certain U.S. real estate transactions. It focused on non-financed residential purchases involving legal entities and trusts, particularly those structured as all-cash transactions.

To determine whether a transaction was reportable, parties were required to work through a step-by-step analysis. If certain elements were met, the transaction would have been subject to reporting. For transactions that met the reporting criteria, the rule required submission of detailed information to FinCEN, including:

• Identity of the seller and buyer
• Information about the transferee entity or trust
• Beneficial ownership details
• Individuals signing on behalf of the buyer
• Property and transaction details, including purchase price and method of payment

The rule also established a hierarchy to determine which party was responsible for filing a report. Responsibility generally fell first on closing or settlement agents, followed by other participants such as settlement statement preparers and title professionals.

What does this mean going forward?

FinCEN has acknowledged the Texas ruling and stated that reporting parties are not currently required to submit real estate reports and will not face liability for failing to do so while the ruling remains in place; however, this may change quickly. An appeal or other regulatory action could revive reporting requirements with little notice.

Businesses and advisors involved in residential real estate transactions should continue to monitor developments and remain prepared to adjust their processes if needed. In the meantime, now is a good time to revisit internal procedures and consider how reporting obligations would be implemented if reinstated.

If you have any questions regarding these changes or to seek counsel from our Real Estate & Construction group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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The Department of the Treasury announced in March that it will not enforce any penalties or fines associated with the CTA’s reporting rule and that it will propose a rule change narrowing the scope of the CTA to apply only to foreign reporting companies. While the CTA is currently subject to scrutiny, FinCEN is still looking to reduce illicit activity in the U.S. real estate market. In recent years, the market has fallen victim to exploitation by illicit actors purchasing residential real estate to launder money through non-financed (all cash) transactions. These illicit actors often purchase property through legal entities or trusts to conceal their identities and intentions from financial institutions and government agencies.

To combat money laundering and other illicit activity in the real estate market, FinCEN announced a final rule, 89 Fed. Reg. 70258, commonly called the “Residential Real Estate Rule,” in August 2024. The rule is set to take effect on December 1, 2025. Nationwide, the rule requires certain parties involved in real estate closings and settlements to report information to FinCEN about specific types of transfers of residential real estate that are considered high risks for illicit finance. With a widespread reach, it is important for individuals and professionals involved in the real estate market to familiarize themselves with the key aspects of the rule.

What Types of Transactions Need to be Reported to FinCEN? 

The goal of the Residential Real Estate Rule is to collect ownership information in non-financed transactions of residential property transferred to legal entities and trusts. However, not all transfers are considered reportable. Individuals and professionals need only report transfers that satisfy the following “reportable transfer” criteria:

1. The property is residential real property;
2. The transfer is non-financed;
3. The property is transferred to a legal entity or trust; and
4. An exemption does not apply. 

Prior to filing, the applicable party should familiarize themselves with the exempted transfers and entities to ensure that they are not unnecessarily reporting information. At a glance, exempted transfers include transfers relating to death, divorce, bankruptcy, for no consideration, where there is no reporting person, and more.

What Information is Required to be Reported to FinCEN?

Once a party has determined that they are involved in a covered transfer, the next step is to ensure that all relevant information is being reported. The rule requires that the following information is provided regarding the transfer of residential real estate: (i) identifies the reporting person; (ii) identifies the legal entity or trust receiving ownership of the property; (iii) “beneficial owners” of the transferee entity or transferee trust; (iv) individuals signing on behalf of the entity or trust during the transfer; (v) transferor; (vi) residential property that is being transferred; and (vii) total consideration of the transfer. Verifying that all this information is reported accurately is vital to ensure compliance.

Relevantly, beneficial owners of transferee entities are those that exercise “substantial control” over the transferee entity, or own/control at least 25% of the entity’s ownership interests. Moreover, the rule defines beneficial owners of transferee trusts as individuals who are trustees or otherwise have the authority to dispose of transferee trust assets.

Who is Required to Report the Information to FinCEN?

Under the rule, those responsible for closing or settlement functions in applicable transfers are typically required to report the relevant information. However, the rule specifically lays out ways to determine who is responsible for reporting. The first of these is the “reporting cascade.” The reporting cascade lists seven (7) different functions that are performed in transactions involving the transfer of residential real estate, ordered by function performed in the transaction. The person who does the function that is highest on the reporting cascade (for example, a settlement agent) is the one who has the obligation to report for that transfer.

The other manner that the reporting person may be determined is through the real estate professionals who perform the functions in the “reporting cascade” entering a written agreement designating an individual to take on the reporting obligations. This approach is more efficient because it is more straightforward and clearly defines who has the reporting obligation.

What Happens When There is Noncompliance with the Residential Real Estate Rule?

If a reporting person fails to file a report or files an inaccurate report, the final rule delegates to the Bank Secrecy Act. Within the rule, negligently failing to comply with reporting requirements under the rule can lead to civil penalties. However, knowingly noncomplying with the rule may lead to more serious criminal penalties.

Next Steps

Prior to the rule’s effective date on December 1, 2025, parties interested in transferring or purchasing residential property should consider whether they are involved in non-financed transactions that are covered under the final rule. It may be necessary to take steps to compile the required reporting information and begin to think through processes to designate individuals to report the relevant information. Unless one of the legal challenges amounts to the rule being stayed or struck down, the best course of action is to prepare as if the rule is going into effect on December 1.

The attorneys in McCarthy Lebit’s Real Estate practice group are continuing to stay apprised of developments relating to the Residential Real Estate Rule and other FinCen regulations. We are available to assist with any needed compliance for such regulations or to discuss any questions or needs that you may have.

For more information or to seek counsel from our Real Estate & Construction group, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank law clerk Douglas J. Carter for his effort in assisting with the preparation of this legal blog post for The More Report.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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As these rules are implemented, they are expected to profoundly impact how homes are bought and sold, creating new challenges and opportunities for homebuyers, sellers, and the real estate professionals who serve them.

The Traditional System: How it Used to Work

In the traditional real estate model, when a homeowner decided to sell their property, they typically engaged with a seller’s agent, who would charge commission—around 5% to 6% of the home’s sale price. This commission was then typically split between the seller’s agent and the buyer’s agent, meaning the buyer received representation without having to pay for it directly. While this system was widely accepted, it was not without its critics. Many argued that the practices of sellers paying both agents’ commissions inflated home prices, as sellers often factored these costs into their listing prices.

Moreover, the standard practice of including commission details on multiple listing services meant that there was little room for negotiation on these fees. Homebuyers and sellers were often unaware that these commissions were negotiable, leading to a lack of transparency in the process.

New NAR Rules: What’s Changing?

One of the most significant changes is that buyers may now be responsible for paying their agent’s fees. From now on, buyers will no longer benefit from representation without paying for it directly, as buyers will need to sign agreements with their agents before touring properties. These agreements clearly outline the buyer’s responsibility to pay their agent if the seller chooses not to cover the cost. This shift could have significant implications for the real estate market, as it may deter some buyers from seeking representation or lead to increased negotiation over who pays the agent’s fees.

Another major change is that multiple listing services will no longer include agent compensation details. These services have long been a cornerstone of the real estate industry, providing realtors with a centralized database of property listings to share information about homes for sale, including details about agent compensation. By removing this information, the National Association of Realtors aims to increase competition and encourage more negotiation between buyers, sellers, and their agents.

Further, the rule changes could pave the way for the growth of alternative business models, such as flat-fee or discount brokerages. These models, which offer services for a lower fixed rate or a reduced commission, may become more attractive to both buyers and sellers looking to minimize costs in an increasingly complex real estate market. Some companies are even exploring innovative approaches, such as where agents bid for home listings, allowing sellers to choose the best offer based on both service and cost.

Overall, the introduction of these new rules is expected to lead to a reduction in overall real estate commissions, with some analysts predicting that they could fall by as much as 25% to 50%.

How We Can Help Navigate These Changes

As the real estate industry adjusts to these new rules, the role of legal counsel will become more crucial. Lawyers can provide invaluable support to both buyers and sellers as they navigate the complexities introduced by these changes.

With buyers required to enter into written agreements with their agents before touring properties, the importance of thorough contract review cannot be overstated. These agreements may include unfamiliar terms or impose new obligations on buyers, such as the need to pay their agent’s fees out of pocket if the seller refuses.

The introduction of new rules often leads to confusion and uncertainty, especially in a highly regulated industry like real estate. Lawyers can assist in drafting clear, enforceable agreements and negotiate on behalf of their clients to secure more favorable terms or to clarify ambiguous language that could lead to disputes down the road to help their clients stay compliant with the new regulations, reducing the risk of legal disputes or financial penalties. A lawyer can help ensure these contracts are fair, transparent, and tailored to protect the client’s interests.

As alternative business models gain traction in response to the new rules, clients may encounter a variety of different pricing structures and offerings. Legal counsel can help clients understand the implications of these new models, ensuring that they can make informed decisions about which type of service is right for them.

As the real estate industry adapts to these changes, it is likely that some transactions will result in disputes, particularly as buyers and sellers adjust to new expectations around agent compensation. Lawyers can represent their clients in these disputes, whether through negotiation, mediation, or litigation, helping to resolve conflicts in a way that protects clients’ interests and minimizes disruption to the transaction.

Our team of attorneys can assist potential buyers or sellers in a real estate transaction by evaluating the impact of the new National Association of Realtors rules and any challenges they may face following their implementation. For more information from our Real Estate & Construction attorneys, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank Alex Friedman for his effort in assisting with the preparation of this legal blog post for The More Report. At the time of publication, Alex was a JD graduate from the University of Miami and was awaiting results from the Ohio Bar Exam. He is now a licensed Ohio attorney and a member of the firm’s transactional practice groups.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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What Was Chevron Deference?

In Chevron v. Natural Resources Defense Council (“Chevron”), the Supreme Court set forth a “two-part framework” for resolving challenges to a federal agency’s interpretation of a statute. Where Congress was ambiguous or silent on the issue, the Chevron doctrine stated that courts should defer to the agency’s interpretation. 

The rationale was that agencies were the best suited to make those policy choices that were left open because they were more experienced in their fields than courts.

Loper Bright Enters. v. Raimond

In Loper Bright Enters. v. Raimond (“Loper Bright”), fishing groups challenged the National Marine Fisheries Service’s (“NMFS”) final rule that required fishermen to pay costs of having federal compliance monitors on their ships. They argued that NMFS did not have statutory authority to mandate that they pay for observers required by a fishery management plan. Applying the Chevron doctrine, the lower courts found NMFS’s regulations permissible.

The Supreme Court granted certiorari in these cases, limited to the question of whether Chevron should be overruled or clarified. Ultimately overruling Chevron, the Court characterized the doctrine as an unworkable and misguided framework.

Chief Justice Roberts, writing for the majority, emphasized it was the courts’ traditional role to say what the law is. According to the Court, Chevron defies the command of the APA—that the reviewing court is to decide all relevant questions of law—by requiring a court to ignore that reading and defer to an agency’s interpretation.

The Court held that courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and they may not discharge this duty of interpretation to an agency just because the statute is ambiguous or silent.

However, federal agencies are not left powerless. Although a reviewing court is not bound to an agency’s interpretation when deciding legal questions, it may rely on it as guidance. Under Skidmore v. Swift (“Skidmore”), courts may consider the agency’s “power to persuade” by weighing certain factors—the thoroughness of consideration, validity of its reasoning, and consistency with earlier and later pronouncements. Meaning that an agency’s interpretation may still hold persuasive power, even though it lacks controlling power. Federal courts have long used this approach when reviewing informal, non-binding interpretations issued by agencies.

Further, where Congress expressly delegates authority to an agency in the statute, the reviewing court’s role will be limited to ensuring the agency is acting within those boundaries.

The Court noted that this decision overturned Chevron itself, not judicial decisions made using Chevron deference. It further stated that mere reliance on Chevron cannot constitute a special justification for overruling such a holding.

Looking Ahead

The impact of Loper Bright’s decision may not be immediate, leaving open a lot of uncertainty while the legal and regulatory landscapes adapt to the post-Chevron world.

Loper Bright calls for Congress to have a clear intent when enacting statutes. This may include specific directions to ensure statutes are sufficiently authorizing the desired agency action. Congress may also need to engage in looking back on previous legislation to fill existing legislative gaps or ambiguities. 

For federal agencies, the removal of deference will make it easier for new regulations to be challenged, leading to more cautious rulemaking. However, the Court noted that Skidmore is still good law, meaning it can be expected that courts may continue to adopt agency rules and interpretations that are persuasive or backed up by significant experience.

Courts may see an uptick in litigation, either from challenges to new regulations, challenges to old rulings, or both. Absent explicit delegation of interpretative authority, there will be more opportunities to challenge inconsistent or unreasonable regulations without having to overcome automatic agency deference.

Now that judges must exercise independent legal judgment when faced with statutory ambiguity, this may lead to a legal patchwork of interpretations by geographical area. As a result, regulated entities will face heightened uncertainty regarding the validity of agency regulations. Without the Chevron doctrine, it will be difficult to predict whether a reviewing court will uphold an agency’s construction of a statute.

For now, uncertainty about Loper Bright’s full impact remains. Our team of attorneys can assist regulated entities with evaluating the potential impacts on their businesses and any legal and regulatory hurdles they may face following this decision. For more information, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank law clerk Grace Warren for her effort in assisting with the preparation of this legal blog post for The More Report.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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First, you will want to review the ordinances – these can usually be found online through the municipality’s website. The ordinance should often include the procedure for zoning permit applications, as well as for appeals and variances. Second, you will want to look at the municipality’s zoning map, which should also be accessible online – if not, call your local municipality and have them provide you with the appropriate documentation.

When reviewing the ordinance and zoning map, consider which uses are permitted in your business’s proposed location. Most maps are divided between residential and commercial uses. Often times, these maps will also include mix-use zones, as well as other uses such as agricultural or historic zones. And, frequently, certain businesses are only conditionally permitted in a zoning district. That is, the business will need to satisfy certain requirements before the permit will be granted. For example, a liquor store may be permitted in a certain zone, but only if it is 1,000 feet from a school.

Then, it is time to begin filling out the permit application. While many applications are relatively straightforward, it is important to enlist the help of an attorney to review the application before submission. The details you provide in the application can make-or-break your chances of the permit being granted.

If you are seeking a variance, you may be asked to appear before your local planning commission. At the meeting, you or your attorney will give a presentation explaining your permit application. Then, you may be asked to field questions from members of the planning commission, after which they will render a decision. If they deny your permit, there is a legal process for appealing that decision.

But what if you think that the zoning code or the denial of your permit is unreasonable, unconstitutional, or otherwise improper? To better understand what a municipality can and cannot do when deciding to grant or deny your permit application, it is helpful to recap a brief history of zoning laws.

Zoning laws in America have deep ties to Northeast Ohio. In the early 20th Century, Cleveland was a booming industrial hub. The growth of the industrial sector was so precipitous, in fact, that it threatened to envelope surrounding residential communities. To combat this challenge, the Village of Euclid established a comprehensive zoning plan that regulated where certain industries and residential structures could be located. One landowner argued that the zoning plan was unconstitutional because it diminished property values by prohibiting the land from being developed for industrial purposes. This prompted a seminal case in zoning law: Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926).

The Supreme Court, in addressing the relatively new concept of zoning, held that the zoning plan was a reasonable and constitutional of the Village of Euclid’s police power. The zoning plan was not arbitrary, and it had a rational relation to the health and safety of the community.

Much has changed since the Supreme Court decided Euclid v. Ambler in 1926 – new industries; new understandings of public health and safety; and more developments in zoning law. The essence of Euclid v. Ambler, however, remains largely intact. To pass constitutional muster, a zoning ordinance cannot be unreasonable or arbitrarily enforced and must have a substantial relation to the public health, safety, morals, or general welfare of the community.

In conclusion, understanding and complying with local zoning ordinances is essential for business owners. Failure to adhere to these regulations can lead to significant consequences, including legal penalties and disruptions to business operations. By becoming familiar with local zoning codes, seeking legal guidance, and proactively addressing compliance issues, individuals can ensure a smoother process for setting up or expanding their businesses. Navigating local zoning ordinances is not just about avoiding trouble—it’s about laying the groundwork for long-term success and sustainability.

For more information or to seek counsel from our Real Estate & Construction attorneys, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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A Right of First Offer (“ROFO”) requires that the property owner (a “Seller”) give the holder of the ROFO (often the tenant) the first chance to buy the property before offering the property to a third party. The right holder has a specific amount of time to make an offer before the right expires. If the holder of the ROFO does not exercise their right to lease or purchase, the Seller can proceed in soliciting offers from third parties. The ROFO is a “first look” right often executed between the Seller and tenants, business partners, or other interested parties. However, simply holding a ROFO does not guarantee the sale of the property to the ROFO holder. The Seller is free to reject the offer and proceed with selling to a third party if an agreement cannot be made.

By contrast, the Right of First Refusal (“ROFR”) is a “last look” right that comes into play when a Seller receives an offer of purchase on its property. If the property is subject to a ROFR, the Seller must grant the holder of the ROFR the opportunity to purchase the property on the same terms and conditions offered by the third party. In this instance, the holder of the ROFR is compelled to make a purchase or leasing decision based on the terms previously negotiated by the third party. Assets with a ROFR attached can be more difficult to sell, because potential buyers may not want to go through the trouble of negotiating a deal that must be offered to another party first.

For sellers, the implications of an underlying ROFO or ROFR should be considered in advance when there is a desire or an effort to sell property. Failing to strictly comply with the terms of the ROFO and ROFR may render a seller liable for economic damages and cause other unforeseen consequences. If, for example, a Seller proceeds to enter into a purchase agreement with a third-party buyer to sell the property without strictly abiding by the ROFO or ROFR terms contained within a lease for that property, the Seller is exposing itself to liability from both its tenant and buyer. If the ROFR or ROFO holder elects to purchase the property, the Seller has now contractually agreed to sell the property to someone else and is faced with either breaching a contract or violating the ROFR/ROFO agreement. In practice, this often leads to a monetary settlement that can almost always be avoided with reasonable foresight and diligence.

On the flip side, buyers should also factor in the presence of a ROFO or ROFR in the due diligence phase of a transaction. This will not only alert a buyer to potential failures on the seller’s part to adhere to applicable ROFO or ROFR terms, allowing the buyer to then seek an appropriate remedy, but it will also put a buyer on notice of a continuing ROFO or ROFR that could be relevant in the future should said buyer ultimately assume any agreements with those provisions.

Remaining cognizant of ROFO and ROFR provisions is equally applicable in the context of commercial leasing. The implications of those provisions should not be overlooked by landlords and tenants given the similar liabilities that exist for ROFOs and ROFRs in relation to buying and selling real estate. Ultimately, it is beneficial to be proactive in approaching ROFOs and ROFRs, and whether you are a buyer, seller, landlord, or tenant, enlisting experienced legal counsel can help you avoid potential ROFO and ROFR pitfalls.

For more information or to seek counsel from our Real Estate & Construction group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

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Taxes on real property in Ohio are based on the value of owned land and any improvements constructed thereon. These taxes are paid in arrears by the individuals or other legal entities that own that property. For example, property taxes that accrued in 2021 are now due and payable in 2022 (separated into two payments for the first and second half of year).

By and large, property taxes levied in Ohio go to fund local schools. Generally, schools obtain more funding when local property valuations are higher, and so schools have a particular interest in challenging property taxes to achieve higher valuations. Until the passage of HB 126, school boards have been empowered to more broadly file original complaints to challenge existing property values in an effort to generate more property tax revenues. However, that will soon change.

The new regime for challenging property valuations, as prescribed by HB 126 and which will be set forth in an amended Chapter 5715 of the Ohio Revised Code come July 21, 2022, amends the process by which school boards and other local governing bodies can raise challenges to existing valuations. Pursuant to these changes, the legislative authority of a subdivision, the mayor of a municipal corporation, or a third-party complainant (such as a school board) cannot not file an original complaint concerning property that the complainant does not own or lease unless both of the following conditions are met:

1. The property was sold in an arm’s length transaction; and
2. The legislative authority or school board complainant first adopts a resolution authorizing the filing of the original complaint at a public meeting after mailing notice to at least one of the record owners of the disputed property.

School boards and other interested parties will be precluded from filing counter-complaints unless an original complaint from the applicable property owner states an amount of overvaluation, undervaluation, discriminatory valuation, illegal valuation, or incorrect determination of at least $17,500 in taxable value.

In addition, HB 126 prohibits school boards and other interested parties from appealing a Board of Revision decision unless it concerns their own property. Property owners, on the other hand, will maintain their right to appeal a Board of Revision decision to either a Court of Common Pleas or the Board of Tax Appeals.

All told, this is a big win for Ohio property owners.

The attorneys in McCarthy Lebit’s Real Estate Law practice group are continuing to stay apprised of the developments relating to real property taxes in Ohio. To learn more about the latest developments or for any real estate related questions, please reach out to request a consultation, visit Adam or Jack’s bio for their contact information to reach out to them directly, or call us at 216-696-1422

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Fluctuation of Material Costs and Labor Availability

Lingering Effects to the Real Estate Market

Key Takeaways Going Forward

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