BOI Real Estate Requirements, Do You Need to File?

requirements for BOI Real Estate requirements
Table of Contents

If you’re a real estate professional, understanding BOI real estate requirements and its implications for the industry is essential. Learn how this new regulation could impact your business.

Key Points:

  • Real estate businesses must disclose ownership details under the (CTA) to comply with regulations and avoid penalties.
  • The CTA impacts various entities within the real estate industry. This includes brokers, agents, developers, and property managers, aiming to enhance transparency and combat illicit activities.
  • Compliance with BOI real estate requirements is crucial for to meet regulatory standards and ensure transparency in their operations.

The legislation is known as the Corporate Transparency Act (CTA). Essentially, it requires certain real estate businesses, such as LLCs or corporations, to disclose who owns them. These businesses fall under the category of reporting companies. It’s important to note that the CTA can impose a substantial compliance burden on the real estate sector. It’s important to understand how you can be affected.  

BOI real estate requirements

FincenFetch understands that the real estate industry often uses complex structures composed of numerous legal entities. These entities often own and operate real property across many asset classes. Real estate LLCs and corporations, such as brokers, agents, developers, or property managers, must comply with the new BOI requirements under the CTA. Whether managing an investment group or a private brokerage, adherence to these regulations is necessary.

If your business fits into these categories and qualifies as a reporting company, you’ll need to report its beneficial ownership. Most important, failure to comply could lead to hefty fines or even legal trouble.

This article aims to address common questions real estate professionals may have about reporting their company’s ownership status.

Understanding BOI Real Estate Requirements

The Corporate Transparency Act (CTA) combats money laundering, terrorist financing, and other illicit activities by enhancing transparency in corporate structures.

Real estate businesses, including LLCs and corporations, must navigate its requirements to ensure compliance and maintain transparency in their operations. Essentially, real estate beneficial ownership reporting reveals property ownership beneficiaries.

BOI real estate requirements disclose control and beneficiaries of property ownership. These can be entities such as shareholders, partners, or trustees. BOI reporting requires accountability and prevents the misuse of real estate transactions for illegal purposes.

Reporting Company: Real Estate Entities and Beneficial Ownership Information Reporting

Real estate entities meeting specific criteria are classified as reporting companies under the CTA. These companies must disclose beneficial owner information to FinCEN at the U.S. Treasury.

For real estate professionals, understanding whether their business falls under this classification is crucial to fulfilling reporting obligations.

Impact of BOI Reporting on Homeowners Associations (HOAs)

In addition to its effects on real estate businesses, beneficial ownership reporting also holds significance for Homeowners Associations (HOAs). HOAs are entities responsible for managing common areas and amenities in planned communities, condominiums, or housing developments. Additionally, while HOAs aren’t usually in commercial real estate, they’re vital in residential property management. This aligns with BOI reporting in real estate.

real estate compliance software

BOI reporting requirements may indirectly impact HOAs in several ways:

  1. Property Ownership Transparency: HOAs, often legal entities like LLCs or corporations in larger developments, may need to disclose ownership under the CTA.
  2. Financial Transactions: HOAs engage in financial transactions for the collection of dues, maintenance expenses, and capital improvements. These transactions may involve interactions with reporting companies in the real estate sector, such as property management firms or developers. Understanding the beneficial ownership of these entities could become pertinent for HOAs to ensure transparency and accountability in financial dealings.
  3. Compliance Considerations: Although HOAs don’t engage in traditional real estate transactions, they frequently work with industry professionals. As stakeholders, they must navigate BOI reporting requirements for smooth operations and legal risk mitigation.
  4. Community Governance: Ownership transparency affects HOA decision-making, influencing vendor selection, contracts, and long-term planning.
  5. Educational Outreach: HOAs should educate members, including homeowners and board members, on BOI reporting’s impact. Sharing compliance details and rationale fosters stakeholder understanding and cooperation.

Overall, while HOAs aren’t primary targets of BOI reporting, they’re vital in residential real estate. They must stay aware of regulatory shifts, including BOI reporting, affecting their operations and governance. For further insights into the intersection of HOA management and BOI reporting, you can refer to our previous article.

Understanding BOI Real Estate Requirements for Real Estate Businesses

Beneficial ownership involves individuals who own or control at least 25% of a reporting company or exert significant control. Again, in the real estate sector, identifying beneficial owners is essential for ensuring transparency and accountability in business dealings.

Reporting companies must provide details such as:

  • Full legal name of each beneficial owner
  • Date of birth of each beneficial owner
  • Residential or business address of each beneficial owner
  • Unique identifying number from an acceptable identification document (e.g., driver’s license or passport) for each beneficial owner

Company Applicants: Real Estate Entities Responsible for Filing

Real estate entities, such as corporations, LLCs, and similar entities, are responsible for filing beneficial ownership information with FinCEN as company applicants under the CTA. Furthermore, understanding the BOI real estate filing requirements and procedures is vital for real estate professionals to meet compliance standards.

  • Submit beneficial ownership information electronically through the dashboard.
  • Include beneficial owners’ full legal names, dates of birth, addresses, and a unique identification number from an acceptable document (e.g., driver’s license or passport).
  • Ensure accuracy and completeness of the information provided to avoid potential penalties or legal consequences.
  • Stay informed about any updates or changes to filing procedures and Boi real estate requirements issued by FinCEN to maintain compliance with the Corporate Transparency Act (CTA).
  • Consider seeking professional assistance, such as legal counsel or financial advisors, to navigate the filing process and ensure adherence to regulatory standards.

BOI Real Estate Requirements: Mandates for Real Estate Companies

Under the CTA, real estate entities are subject to the same filing requirements and procedures as other reporting companies. Yet, real estate transactions require careful interpretation of CTA provisions for compliance.

The common practice in real estate transactions is to form special purpose entities (SPEs). These entities acquire, develop, lease, and finance real property. Oftentimes, an SPE will hold the property to limit liability. To create a preference for debt and certain equity holders, additional SPEs may insert into the structure.

BOI real estate requirements

To comply with the CTA, each SPE formed needs separate analysis to determine exemptions or Reporting Company status. The “large operating company” exemption may apply to many real estate firms, requiring: (a) a physical office presence in the US, (b) over 20 full-time US employees, and (c) more than $5 million in US gross receipts or sales, demonstrated by the previous year’s federal income tax or information return.

Verify BOI Exemption Eligibility

Remember, ownership percentages can change substantially over the life cycle of a real estate asset. For example, during the development, the developer may be the sole owner of the real estate; However, upon completion of the project, introducing limited partners captures operational returns. Thus, continuous monitoring of changes in the ownership structure is necessary to account for shifts in beneficial ownership and ownership percentages, ensuring compliance.

Additionally, real estate professionals should stay updated on any industry-specific guidance or regulations issued by regulatory authorities to address the implications of beneficial ownership reporting in the real estate sector.

CTA Exemptions: Real Estate Entities Eligible for Exemption

While the CTA imposes reporting obligations on certain entities, exemptions are available for specific cases. However, though exemptions generally apply to companies with heightened reporting obligations, such as publicly traded companies and most financial services institutions, any entity that satisfies all of the following criteria will also qualify for an exemption:

Exemption CriteriaDescription
Employee CountMore than 20 full-time employees
Annual RevenueMore than US$5 million in annual revenue to the IRS
Operating LocationOffice physically in the U.S.
Subsidiaries100% owned by exempt entity
Real Estate EntitiesUnlikely exemptions for real estate companies
Application ExampleUpstream parent (e.g., REIT) may qualify, but lower-tiered subsidiary not 100% owned may not qualify if not directly employing workers

Some qualifications for BOI reporting exemptions in the real estate industry may include:

  • Real estate businesses involved in transactions falling below a specified monetary threshold may exempt from BOI real estate requirements outlined by the CTA.
  • Government entities or charitable organizations: Real estate transactions involving government entities or charitable organizations may be exempt from reporting obligations under the CTA.
  • Properties in designated areas: Transactions related to properties located in designated areas, such as certain development zones or designated regions, may qualify for exemption from beneficial ownership reporting.
  • Comprehensive AML and KYC verifications: Real estate transactions that have already undergone comprehensive anti-money laundering (AML) and know your customer (KYC) verifications may be exempt from additional reporting obligations under the CTA.

BOI Storage and Access: Security and Confidentiality Measures

FinCEN securely stores beneficial ownership information collected under the CTA in databases. Additionally, authorized personnel within FinCEN, law enforcement agencies, and other relevant authorities have restricted access to this information.

Moreover, ensuring the confidentiality and integrity of this data is paramount for maintaining trust and compliance in the real estate industry.

Impact on Real Estate Entities: Implications of Beneficial Ownership Reporting

Real estate entities play a significant role in the economy, making them a target for illicit activities such as money laundering and terrorist financing. 

What’s more, adhering to BOI real estate requirements, these entities contribute to the broader goal of promoting transparency and integrity in the real estate market.

  • Mitigating risks: Heightened diligence requires conducting more extensive checks to verify ownership, thereby lowering legal and financial risks.
  • Confidentiality impact: Certain entities, like SPEs, may face compromised confidentiality, affecting operations.
  • Cost implications: Compliance expenses rise for gathering and submitting ownership data.Transaction delays: Additional due diligence may prolong deal timelines, affecting closures and financing.

Additionally, leveraging tools like FinCENFetch can streamline data collection and submission processes, alleviating the compliance burden for real estate professionals.

Effect on Real Estate Transactions: Beneficial Ownership Reporting in Dealings

Beneficial ownership reporting has far-reaching implications for real estate transactions. From due diligence processes to transaction timelines, real estate professionals must adapt to the new regulatory landscape to ensure smooth and compliant transactions.

BOI real estate requirements

Your Questions Answered: Exploring Common Concerns for Boi Real Estate Requirements

Real estate professionals have several questions about the impact of beneficial ownership reporting. We have answered some common queries to provide clarity and guidance in navigating this regulatory environment.

What Real Estate Entities Are Expected to Be Most Impacted by the Implementation of the CTA, and Why?

We anticipate that real estate developers, property management firms, real estate investment trusts (REITs), and real estate agents/brokers will bear the brunt of the CTA’s enforcement. Again, this is due to the CTA’s imposition of stricter regulations and reporting standards on financial transactions, including those in real estate, aimed at thwarting money laundering and terrorist financing. These entities handle substantial sums of money and assets, rendering them vulnerable to exploitation by criminals seeking to launder money or fund illicit activities.

What Exemptions Might Be Available Under the CTA?

Certain exemptions may apply under the CTA, such as for transactions falling below a specified monetary threshold, transactions involving government entities or charitable organizations, or transactions related to properties in designated areas. Furthermore, transactions that have already undergone comprehensive anti-money laundering (AML) and know your customer (KYC) verifications may be exempt from additional reporting obligations.

Special Purpose Entities (SPEs) and Pooled Investment Vehicles: How Will Boi Real Estate Requirements Impact Them?

Real estate entities commonly use SPEs for various purposes such as financing or asset segregation. The CTA may require disclosure of beneficial ownership information for these entities, potentially impacting their confidentiality and ease of formation. Similarly, real estate investment vehicles, including REITs and private equity funds, may be subject to additional boi reporting requirements under the CTA, affecting their operational and compliance costs.

Impact on Real Estate Transactions: How Does Beneficial Ownership Reporting Affect Compliance and Due Diligence?

When it comes to real estate transactions, understanding how BOI reporting requirements impacts us is crucial. With the new Corporate Transparency Act (CTA), we’re seeing changes in how we handle deals. 
It means more checks and balances to prevent money laundering and ensure everyone involved is playing by the rules. Consequently, being aware of these changes helps us navigate transactions smoothly and protect our clients’ interests.

How Will the BOI real estate requirements Impact Transactions for Lenders and Investors/Buyers?

The CTA’s reporting obligations are likely to heighten the burden of due diligence and compliance for lenders, investors, and buyers participating in real estate transactions. Consequently, they may necessitate the collection and validation of more extensive information about transaction parties, including beneficial ownership details.

Additionally, certain transactions may need to be reported to regulatory bodies, potentially prolonging transaction timelines and escalating administrative expenses.

Where and How Will Beneficial Ownership Information (BOI) Be Stored, and Who Will Have Access to It?

Beneficial ownership information (BOI) gathered under the CTA’s reporting mandates is expected to be securely stored in databases managed by regulatory authorities or designated governmental bodies tasked with supervising anti-money laundering endeavors. 

Access to this information is likely to be confined to authorized personnel within these agencies, as well as law enforcement bodies and other pertinent authorities entrusted with investigating and deterring financial crimes.

boi real estate requirements

Lenders’ AML Protocols and Due Diligence for Investors/Buyers: Adapting to Regulatory Changes

Lenders involved in real estate transactions may need to enhance their anti-money laundering (AML) protocols to account for the additional information required by the CTA, potentially increasing transaction timelines and costs. 

Similarly, investors and buyers in real estate transactions may need to conduct more extensive due diligence to verify the beneficial ownership of entities involved, ensuring compliance with the CTA and mitigating legal and financial risks.

Helping You Get and Stay Compliant

FincenFetch began building solutions for the Corporate Transparency Act in the middle of 2022 after discovering this regulation would impact nearly 40 million U.S. companies. Nearly two years later, our team of over two dozen stands ready to help your organization manage this new compliance requirement for the real estate market. Get a demo to discover why businesses and industries across the U.S. are choosing FincenFetch.

Schedule Your Demo Today, clickable button
Picture of Tessa Wismer

Tessa Wismer

Meet Tessa Wismer, an expert in beneficial ownership reporting with a background in business and marketing. She simplifies financial rules and enhances business strategies. Join her on FincenFetch Insights for valuable perspectives, practical tips, and a professional approach to compliance mastery.