2025 Florida Condominium Budget Reform: New Reserve Funding and Vote Rules [Video]
Varnum Viewpoints
Condominium associations required to obtain a SIRS, should update it if they plan to use the newly authorized reserve funding vehicles.
If a budget includes discretionary increases, the board is now required to proactively propose an alternative budget, and the membership must vote before the board can adopt the higher budget.
The 2025 legislative session brought many changes to Chapter 718, which governs Florida condominium associations. Two of those changes are impacting the drafting and approval of 2026 budgets for many Florida condominiums.
New Reserve Funding Options
Condominium associations with three or more habitable stories that are required to obtain a structural integrity reserve study (SIRS) may now use loans, lines of credit, and special assessments as a source of reserve funding. If a majority of all unit owners authorize the board to obtain or use one of these financial vehicles. In that case, the association can budget for reserve funding based on anticipated funds, even if they have not yet been deposited into the bank account. This could result in lower annual reserve contributions for structural items.
Florida Statutes section 718.112, however, still provides that “the reserve amount for [structural] items must be based on the findings and recommendations of the association’s most recent structural integrity reserve study.” Because most SIRS were completed in 2023 and 2024, before this legislation, the operational concern is that the budget will not comply with Chapter 718 unless it matches the reserve funding with the most recent SIRS. Associations wishing to take advantage of loans, lines of credit, or special assessments to contribute to reserve funding must also update their SIRS to reflect these new assumptions and anticipated revenue sources.
Changes to Budget Approval Procedures
Historically, Chapter 718 has placed guardrails on a condominium association’s ability to increase its budget. Until this year, the unit owners had the right to petition and force a vote of the membership on an alternative (and usually lower) budget when the budget increased by more than 15% from the prior year’s budget. The general idea was that the board had jurisdiction over the budget, except that the membership could mobilize if the budget increased too much.
The new legislation requires the board of directors to proactively schedule and hold a vote of the membership before it can adopt a budget that increases by more than 15% compared to the prior year’s budget. This switch now requires the board to seek permission before adopting significant budgetary increases. In contrast, the statute previously authorized the membership to request an alternative budget after the fact if the membership objected.
Step 1: Determining if a Membership Vote is Required
Procedurally, two things must occur. First, the Board must determine whether the budget forces a membership vote. The statute now excludes certain expenses from the calculation, including required reserves, non-recurring maintenance, repair, and replacement expenses for structural reserve components, and insurance premiums. If these factors drive the increase, the budget may not require a special vote. Boards, however, cannot use decreases in insurance premiums to offset increases.
Step 2: Creating a Substitute Budget
If the budget triggers a vote, the board must create a “substitute budget that does not include any discretionary expenditures that are not required to be in the budget” and schedule a membership meeting before adopting the 2026 budget. The law does not define “discretionary expenditures”, which may make it difficult to determine which items must be included.
The substitute budget is approved if a majority of all voting interests vote in favor. If the membership vote fails, the board may adopt the budget with the proposed increases.
By updating structural integrity reserve studies and carefully reviewing budgets with discretionary increases, boards can leverage new funding options while ensuring compliance and transparency.
The Texas Supreme Court Holds That Shareholders of a Real Estate Investment Trust Did Not Have Standing to Assert Individual Claims Against the Trust’s Manager
In In re Umth Gen. Servs., L.P., United Development Fund IV (“Trust”) was a Maryland real estate investment trust with over 12,000 shareholders. No. 24-0024, 2025 Tex. LEXIS 1029 (Tex. November 14, 2025). The Trust’s declaration of trust governed shareholder rights and designated Maryland as the exclusive forum for derivative actions. The Trust’s board of trustees delegated management authority to UMTH General Services, L.P. (the Advisor) through an advisory agreement. The agreement stated the Advisor is in a fiduciary relationship to the Trust and its shareholders, but individual shareholders were not parties to the agreement.
A shareholder sued the Advisor and its affiliates, alleging corporate waste and mismanagement, and claimed the Advisor owed individual duties to each shareholder under the advisory agreement. In various motions, the Advisor argued that the claims were derivative and belonged to the Trust, so the shareholders lacked standing and capacity to sue directly. The trial court denied the Advisor’s motions, and the Advisor sought mandamus relief.
The Texas Supreme Court held that the shareholders had constitutional standing to assert claims, however, they did not have the capacity to do so in this case because they were not alleging individual harm, but harm to the Trust. The court held that the advisory agreement did not create a duty to individual shareholders distinct from obligations to the entity. The court also noted that the agreement’s reference to fiduciary duties to “the Trust and its Shareholders” referred to shareholders collectively, not individually. The Court stated:
We conclude that the phrase “and its Shareholders” refers to the Trust’s shareholders collectively. The Trust executed the agreement, acting on behalf of its shareholders. No shareholder separately signed the agreement, much less in an individual capacity. Absent an express undertaking to an individual shareholder, fiduciary duties generally flow to the corporation and its shareholders collectively, not to any particular shareholder. The principle of shareholder collectivity overcomes the “incompatible” nature of simultaneous duties owed to a corporation and duties owed to a particular shareholder, whose interests may not align with the corporate entity as a whole. In recognition of this tension, we have held that “a director cannot simultaneously owe these two potentially conflicting duties.” Although a party might agree to undertake a duty to both a corporate entity and one or more of its shareholders-as may be the case for mutual shareholder agreements in closely held corporations-such an agreement should not be inferred without an express recognition of the shareholder as a party to the contract in its individual capacity. Absent indicia of mutual assent to undertake a duty to an individual, we read the relationship created by the Trust and the third party as intended to benefit the Trust’s shareholders collectively through the Trust itself.
Id.
The court held that the shareholders must pursue claims for injury to the entity via a derivative action because absent a personal cause of action and individual injury, shareholders lack capacity to bring claims owned by the corporate entity. The court held that the derivative claims must be brought in Maryland, as required by the Trust’s governing documents, and that individual shareholders cannot bypass statutory safeguards by bringing derivative claims directly. The court held that the trial court erred in denying dismissal and granted mandamus relief, directing the trial court to dismiss the case with prejudice.
DFPI Orders Mortgage Lender to Pay $100,000 for Alleged Per Diem Interest and Recordkeeping Violations
On October 30, the California DFPI entered a consent order with a residential mortgage lender and servicer following a regulatory examination and a directed self-audit. The DFPI alleged violations of the California Residential Mortgage Lending Act and California Civil Code provisions governing when per diem interest may begin to accrue.
The DFPI alleged that the lender collected per diem interest for more than one day prior to escrow disbursement in files reviewed during the exam, and that a self-audit identified 10 of 74 additional loans with per diem overcharges. The DFPI also alleges failures to maintain required business records for thirty six months and broader books-and-records deficiencies beyond the thirty six month maintenance requirement.
Under the consent order, the lender must discontinue the cited practices and pay a $100,000 civil penalty in monthly installments through October 1, 2026. The company also affirmed refunds totaling $1,554.93, including interest at ten percent per annum. The order includes an acceleration clause for noncompliance and reserves DFPI’s ability to pursue future remedies.
Putting It Into Practice: The DFPI continues to be very active in enforcement (previously discussed here, here, and here). California-licensed mortgage lenders and servicers should confirm that interest does not begin before escrow disbursement, align loan documents with the correct interest start dates, and validate refund protocols for any overcharges.
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Real Smart – The Smart Approach to Environmental, Health, and Sustainability in Real Estate [Podcast]
In this episode, Loren Witkin, CEO of Citadel EHS, explains how his company adds value and drives strategy by identifying environmental, health, and sustainability risks early in the real estate development process. He goes on to explain why it’s so difficult to build in California, how to work successfully with state and local governments, and the importance of everyone trying to solve project challenges together. An acknowledged leader in his industry, Loren explains how he makes people “feel seen,” and why that is the key to building productive and happy teams.
The Rules of 1031 “Like Kind” Exchanges
A 1031 exchange is a tax-deferred exchange where a taxpayer sells one or more real estate assets held for productive use in a trade or business or for investment (referred to as the “relinquished property”) and, subject to the 45 day identification and 180 day closing timing rules (as discussed below), re-invests all of the sales proceeds into new real estate assets of a “like kind” (referred to as the “replacement property”).
It is worth noting that a 1031 exchange is a tax-deferral technique, not a tax-avoidance technique, because any gain in the sale of the relinquished properties are “locked in” at the time of the 1031 exchange and will carry over to the assets that are purchased as replacements.
Since the 1031 exchange rules generally provide for a carry-over basis regime, the taxpayer takes the same basis in the replacement property that it had in the relinquished property (i.e., the gain is preserved by a carry-over in basis).
When coupled with estate planning considerations, a taxpayer could effectively eliminate deferred gains by undergoing multiple 1031 exchanges throughout his or her lifetime, leaving such assets to his or her heirs who will receive a step-up in basis based on the fair market value of the assets at the time of passing.
Taxpayers may structure a 1031 exchange in one of three ways:
A simultaneous exchange between two parties where the parties simultaneously swap properties;
A deferred exchange where the taxpayer sells the relinquished property and purchases the replacement property at a later time; or,
A reverse exchange where the taxpayer purchases the replacement property and sells the relinquished property at a later time.
The vast majority of 1031 exchanges are structured as deferred exchanges or reverse exchanges based on the practical difficulties of structuring a simultaneous exchange that complies with the 1031 exchange rules described below. Additionally, deferred exchanges and reverse exchanges require the use of a qualified third party intermediary to complete the transaction (i.e., an unrelated third party to document and manage the 1031 exchange and who must be in place prior to the first sale or purchase of any property).
It’s worth noting that a qualified third party intermediary must be truly an “unrelated” third party (i.e., generally speaking, your attorneys, CPAs, real estate brokers, and spouses/family members where a business/agency or family relationship exists do not qualify as a third party intermediary).
The Basic Rules
The “Like Kind” Rule: You can use a 1031 exchange to exchange real estate assets that are deemed to be of “like kind” to one another. While a taxpayer previously was able to engage in a 1031 exchange with respect to personal property (i.e, vehicles, aircraft, or equipment), you no longer can engage in a 1031 exchange involving personal property. Fortunately for taxpayers, the 1031 exchange rules provide very broad rules regarding what types of real estate will qualify as “like kind” property under the 1031 exchange tax rules. In fact, the “like kind” rules are so broad that most real estate assets will qualify as “like kind” to one another.
For example, a 1031 exchange could involve a taxpayer using a reverse exchange to sell a vacant lot held for investment and then purchase a commercial building. While a “like kind” exchange may be applied broadly to real estate, it is worth noting that an exchange of interest in a partnership or limited liability company for an interest in another partnership or limited liability company is not a permitted exchange under the 1031 exchange tax rules.
The Equal to or Greater Than Rule: In order to structure a fully-deferred 1031 exchange, the taxpayer must both (1) purchase replacement property with a fair market value that is equal to or greater than the fair market value of the relinquished property, and (2) re-invest all of the cash that is received from the sale of the relinquished property in the replacement property. Some taxpayers may choose to undergo a partial exchange in an effort to extract cash out of the relinquished property.
While this is an option, it is worth noting that in the event a replacement property is purchased for less than the fair market value of the relinquished property, doing so creates a taxable event subjecting the resulting cash not reinvested in the 1031 exchange to be subject to capital gains tax. As a result, the 1031 exchange will not be considered fully-deferred. As an alternative approach, if a taxpayer is in need of cash from the relinquished property, this can generally be accomplished by undergoing a post-1031 exchange refinance of the replacement property.
The “Same Taxpayer” Rule: Commonly referred to as the “same taxpayer” rule, a 1031 exchange requires the same taxpayer (be it an individual or entity) to be both the seller of the relinquished property and the buyer of the replacement property. However, there are exceptions to this rule. For instance, multiple owners of the same asset (for example, joint owners of a hotel property) can engage in their own, separate 1031 exchanges with respect to the sale of their respective undivided interests in the relinquished property, with each taxpayer being free to purchase different replacement properties so long as the “like kind” rule is satisfied.
Additionally, for those taxpayers who may have been selling a relinquished property that was owned individually or via a single member limited liability company, a taxpayer can use a different single member limited liability company to implement a 1031 exchange even though the new entity was not the seller of the relinquished property. Use of a single member limited liability company for such circumstances does not violate the 1031 exchanges rules since they are considered “disregarded entities” for tax purposes.
The Related Party Rule: The 1031 exchange related party rule seeks to prevent “basis swapping” transactions between related parties that otherwise could be used by the related parties to avoid tax. While there are exceptions, the 1031 exchange related party rule generally provide that (1) if there is a 1031 exchange between related parties, each party must hold the replacement property for a minimum of two years after the exchange, and (2) a taxpayer should not acquire its replacement property from a related party.
The “Qualified Use” Rule: In addition to other requirements, a taxpayer must hold both the relinquished property and the replacement property “in a trade or business” or “for investment purposes,” which commonly is referred to as the “qualified use” requirement. The purpose of this rule is to ensure that taxpayers cannot use a 1031 exchange to defer taxable gain with respect to personal assets (such as a personal residence) or inventory/dealer items.
While there is very little guidance from the courts or the Internal Revenue Service regarding the boundaries of the “qualified use” requirement, tax practitioners generally look at the length of time the taxpayer held the relinquished property before the 1031 exchange and the length of time the taxpayer held the replacement property after the 1031 exchange, as well as the marketing/sale-related activities related to the relinquished property and the replacement property, such as listing the property for sale or entering into a purchase contract for the purchase or sale of the property.
The Holding Period Rule: While there is no bright-line rule regarding how long a taxpayer should hold property to satisfy the “qualified use” requirement, tax practitioners generally refer to a “risk spectrum” based on how long the taxpayer has owned the relinquished property or the replacement property, as the case may be, with ownership of six months or less considered very risky, ownership of one year to one and one-half years considered more reasonable, and ownership of two years or more considered the conservative and safe approach.
Marketing Activities Rule: Marketing activities relevant to a particular 1031 exchange will vary based on the nature of the asset, but tax practitioners generally analyze whether the property was actually used for a business/investment purpose prior to the taxpayer engaging in marketing activities related to the sale of the property. If the property is rental property, the question becomes whether the property was in fact rented, or, if not rented, the extent and reasonableness of the taxpayer’s efforts to rent the property.
Alternatively, if the subject property is a raw and undeveloped piece of real estate that is held for investment appreciation, the analysis is fairly straightforward. Thus, one can acknowledge how a determination of marketing activities can quickly become complicated depending on the type of asset in question.
45 Day Identification Period Rule: Within 45 days after the closing of the first leg of the 1031 exchange (i.e., the sale of the relinquished property in a deferred exchange or the purchase of the replacement property in a reverse exchange), the taxpayer must identify the property or properties that may be used in the second leg of the 1031 exchange. The taxpayer does not have to acquire all of the properties identified during the 45 day identification period, but it generally cannot acquire any properties other than those identified during the 45 day identification period as part of the 1031 exchange.
It should be noted that the 1031 exchange identification rules provide taxpayers with flexibility if they need to identify many low value properties or just a few high value properties. Proper planning and analysis of the market well in advance of the first leg with the assistance of commercial real estate professionals is recommended to properly identify replacement properties that meet a taxpayer’s investment goals and risk tolerances.
180 Day Closing Period Rule: Within 180 days after the closing of the first leg of the 1031 exchange (which includes the 45 day identification period), the second leg of the 1031 exchange must be closed. Therefore, the sooner a replacement property or properties can be identified and placed under contract, the better likelihood that the 180 day timeframe to close will be achieved.
However, given the current market trends with limited real estate inventory, taxpayers may face increasing difficulty in satisfying the timing requirements of a 1031 exchange. This fact makes it even more important for a taxpayer to collaborate with its tax advisors and commercial real estate brokers well in advance of a proposed 1031 exchange.
Identification of Replacement Properties Rule: Coinciding with the 45 day identification period, Treasury Regulations establish a number of checks and balances to prevent a taxpayer from simply listing numerous properties (e.g., providing a list of forty properties as replacements) as potential replacement properties in an effort to maximize options and limit the risk of not satisfying the 180 day closing period rule. For instance, so long as a taxpayer identifies three or fewer properties as potential replacements, there is no restriction on the value of such properties.
Conversely, if a taxpayer lists more than three properties, such replacements must be valued in the aggregate no more than 200% of the value of the relinquished property, unless the taxpayer acquires at least 95% of the value of all properties identified (i.e., the taxpayer essentially purchases all properties identified on his or her list). Any violation of the foregoing identification rules would result in disqualification from a 1031 exchange.
FinCEN’S New Real Estate Reporting Rule- Historical Context, Compliance Requirements, Legal Challenges and What ACMA Members Need to Know
In August 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) published a sweeping new rule aimed at increasing transparency in residential real estate transactions—marking a significant evolution in America’s decades-long effort to combat money laundering and other financial crimes. FinCEN’s Residential Real Estate Rule (RRE Rule) requires certain industry professionals to report information to FinCEN about non-financed transfers of residential real estate to a legal entity or trust.The RRE Rule is scheduled to take effect on December 1, 2025. The rule will have profound implications for ACMA members, as title companies, settlement agents, and other real estate industry professionals are now on the frontlines of the federal government’s fight against real estate-based money laundering. Industry leaders have criticized the RRE Rule as an onerous and costly administrative burden that will yield few results. Despite a recent federal lawsuit challenging the rule, companies must be prepared to comply.
The Evolution of Anti-Money Laundering Laws and Geographic Targeting Orders in America
To appreciate the significance of the RRE Rule, it is essential to understand the history and evolution of anti-money laundering (AML) laws in the United States. The Bank Secrecy Act (BSA),2 enacted in 1970 and strengthened by subsequent laws like the USA PATRIOT Act,3 established the foundation for financial transparency and reporting obligations to detect and deter money laundering. Over the decades, these laws have expanded in scope to cover a wider range of financial institutions and transactions. The RRE Rule is the latest development in a 55-year evolution of AML laws in the United States and represents a natural progression in this historical trajectory.
So, let’s begin with a brief history.
The Bank Secrecy Act – The Cornerstone of American AML Legislation
In the late 1960s, Congress held a series of hearings into organized crime in the United States. Led by Arkansas Senator John McClellan, the hearings served as the inspiration for Francis Ford Coppola’s fictional account in The Godfather Part II when crime boss Michael Corleone, played by Al Pacino, testifies before Congress. The hearings exposed the extent to which organized crime exploited anonymous financial transactions to conceal illicit profits and ultimately led to the passage of the BSA to improve financial transparency and aid law enforcement.The BSA was the first comprehensive framework for combating money laundering in the United States. It required financial institutions to assist government agencies in detecting and preventing financial crimes. Its key provisions included mandatory recordkeeping and reporting requirements for certain types of transactions, most notably the Currency Transaction Report (CTR), which requires banks to file reports for any cash transaction exceeding $10,000. The BSA also required banks to maintain records of customers’ identities and transactions that could be useful in criminal, tax, or regulatory investigations. By imposing these obligations, the BSA aimed to create a paper trail that law enforcement could use to uncover patterns of illicit activity, disrupt organized crime networks, and enhance the federal government’s ability to track the movement of funds through the U.S. financial system.
AML’s Legal Maturation: 1986 through September 10, 2001
The BSA sat largely dormant for 15 years until 1985 when First National Bank of Boston pleaded guilty to willfully failing to comply with the BSA by not reporting more than $1 billion in reportable cash transactions. The case exposed the weaknesses of existing financial regulations and spurred Congress to enact stronger anti-money laundering legislation.In 1986, Congress passed the Money Laundering Control Act (MLCA),4 which established money laundering as a federal crime and the concept of a BSA/AML “program” by directing banks to maintain policies and procedures to monitor BSA compliance. The MLCA also prohibited structuring (engaging in cash transactions just below the $10,000 limit to avoid and evade CTR filings) and introduced civil and criminal forfeiture for BSA violations.Despite the passage of the MLCA, Congress remained concerned about banks’ permissive approach to money laundering prevention. The threat was particularly acute in the late 1980s and early 1990s with the rise of transnational drug cartels. The clearest example of this threat was embodied by the Bank of Credit and Commerce International (BCCI). BCCI, a global bank with U.S. operations, allegedly banked Iraqi dictator Saddam Hussein, Panamanian dictator Manuel Noriega, and the Medellín Cartel, among other criminals. BCCI was the subject of a salacious U.S. Senate Foreign Relations Committee report detailing the bank’s involvement in money laundering, bribery of foreign officials, arms trafficking, and even the sale of nuclear technologies. The bank was liquidated in 1991 after criminal investigations shed light on the full extent of its fraud, manipulation, and money laundering.In the wake of the BCCI scandal, Congress passed the Annunzio-Wylie Anti-Money Laundering Act of 1992,5 which required banks to file Suspicious Activity Reports (SARs) and enabled regulators to terminate federal deposit insurance and revoke charters of banks convicted of criminal money laundering. While modest AML advancements continued through the 1990s, in 2000 bank regulators and industry discussed rollbacks to BSA/AML requirements. Those reforms would be forever tabled in September 2001.
The USA PATRIOT Act to the Present
The terrorist attacks of September 11, 2001, prompted Congress to enact the USA PATRIOT Act, which dramatically expanded the scope and rigor of American AML laws. Specifically, Title III of the Act, the International Money Laundering Abatement and Financial Anti-Terrorism Act introduced some of the most significant and far-reaching changes to the AML and counter-terrorist financing framework since the enactment of the BSA. Specifically, the USA PATRIOT Act criminalized terrorism financing, strengthened customer identification procedures, prohibited financial institutions from dealing with foreign shell banks, and required enhanced due diligence for certain accounts. Before the USA PATRIOT Act, the BSA focused on money laundering from crimes like drug trafficking or fraud. The Act made counter-terrorist financing a central goal, requiring institutions to identify and disrupt the movement of funds tied to terrorist organizations and monitor foreign and domestic transactions more rigorously.The most significant overhaul of the BSA/AML regime since the USA PATRIOT Act came with the Anti-Money Laundering Act of 2020 (AMLA 2020).6 AMLA 2020’s central theme was security through transparency. It introduced the Corporate Transparency Act (CTA), requiring corporations, limited liability companies, and similar entities to report beneficial ownership information to FinCEN. While the CTA’s implementation has been subject to delays and litigation, its intent is clear: to pierce the veil of anonymity that shields illicit actors in the financial system.
The Role of FinCEN
In April 1990, between the passage of the MLCA and the Annunzio-Wylie Anti-Money Laundering Act, the Treasury Department established FinCEN to safeguard the financial system from illicit use, combat money laundering, and promote national security. FinCEN’s role and responsibilities have expanded over time. The Secretary of the Treasury delegated administration of the BSA to FinCEN, which is now an official Bureau of the Treasury Department.7FinCEN’s remit is vast. The bureau is responsible for collecting and analyzing financial data, such as SARs and CTRs from financial institutions, and maintains the world’s largest financial crime intelligence database. Along with other regulators like the Office of the Comptroller of the Currency (OCC), FinCEN regulates and enforces the BSA to ensure financial institutions comply with AML laws. The bureau also serves as the United States’ Financial Intelligence Unit (FIU), collaborating with domestic and international agencies.
The Rise of Geographic Targeting Orders
The statutory history is important context, but the RRE Rule’s true origin rests in the history of FinCEN’s geo-graphic targeting orders (GTO). GTOs are temporary orders that impose additional reporting requirements on financial institutions. They usually last 180 days and are subject to renewal. FinCEN issued its first GTO in 1996 subjecting money remitter agents in New York City to report remittances of cash to Colombia of $750 or more.8 This was a significant expansion of BSA enforcement to the non-bank financial sector and set a precedent for real estate GTOs. At the time of the first GTO, the then-FinCEN Director, Stanley Morris, stated “[b]ased on the success of the GTO, and the analysis that FinCEN is conducting in cooperation with other law enforcement agencies, it is clear that we need to consider other applications of geographical targeting orders, as well as broader, more permanent regulatory steps to address vulnerabilities in the money remitter industry.”9In January 2016, FinCEN began using GTOs to target all-cash luxury real estate purchases in New York and Miami.10 The 2016 GTO followed a multi-series exposé by the New York Times entitled the “Towers of Secrecy,” which documented how criminals, kleptocrats, and corrupt officials were buying millions in U.S. real estate anonymously. FinCEN has repeatedly renewed and expanded real estate GTOs to include certain counties and major metropolitan areas across 14 states and a purchase price threshold of $300,000. FinCEN most recently renewed the GTO on April 14, 2025, effective through October 9, 2025.11 This expansion of GTO authorities brings us to the present day and the enactment of the RRE Rule.
The New Residential Real Estate Reporting Rule – What ACMA Fellows Must Know
The RRE Rule seeks to increase transparency in all-cash real estate transactions by requiring certain professionals to report information, including the identities of beneficial owners behind purchases, in the hopes of preventing money laundering through anonymous property deals. The following is a brief overview of the new RRE Rule.
Covered Transactions
The RRE Rule applies to all non-financed (i.e., all-cash, or financing from lenders without AML program requirements and SAR reporting obligations) transfers of residential real property to legal entities (e.g., LLCs, corporations) or trusts, subject to certain exceptions.12 The rule requires that the “reporting person” (typically the settlement or closing agent, but determined by a cascading hierarchy) file a “Real Estate Report” with FinCEN, disclosing among other information,(1) the identities and details of the transferor and transferee, (2) beneficial ownership information for the transferee, (3) information on individuals signing on behalf of the transferee, (4) property details, and (5) transaction details, such as the purchase price, payment method, and account informa-tion.13 Notably, at the time of writing, FinCEN has not yet published the Real Estate Report template, however, on June 5, 2025, it did issue a 30-day request for comment in the Federal Register.14 This request for comment summarizes the 111 distinct data points that may need to be reported under the RRE Rule. While not every transaction will require the reporting of all those data points, there is still a much greater burden on the industry than under the current GTOs.The RRE Rule envisions four categories of residential property subject to the rule. First, real property located in the United States that includes a structure designed principally for occupancy by one to four families. Second, land in the United States on which the transferee intends to build a structure designed principally for occupancy by one to four families. Third, a unit designed principally for occupancy by one to four families within a structure on land located in the United States. Fourth, and finally, a share in a cooperative housing corporation for which the underlying property is located on land within the United States.
Rule Carve Outs and ‘Reporting Persons’
The RRE Rule is not a panacea. It is designed, in theory, to ensure that AML efforts are focused where risk is highest—without imposing unnecessary burdens on low-risk buyers, sellers, or industries. As such, the rule carves out several categories of low-risk or routine transactions, including: (1) grants, transfers, or revocations of easements, (2) transfers resulting from life events, such as inheritance or divorce, (3) court-supervised transfers, (4) 1031 exchanges, and (5) no consideration transfers of property to a trust.15 According to FinCEN, the carve outs are strategic exclusions aimed at ensuring the rule targets high-risk activity, especially anonymous, cash-based transactions, avoids duplicating efforts where other AML safeguards already exist, and minimizes disruption to the broader real estate market.The carve outs notwithstanding, the RRE Rule impacts several categories of real estate professions responsible for reporting in-scope transactions. The requirement to file a Real Estate Report rests with the “reporting person,” one of a small number of persons who play specified roles in the reportable transfer. Only one business is designated to be the reporting person. The reporting person can be identified in one of two ways: (1) by way of the reporting cascading hierarchy described below, or (2) by way of a written “designation agreement” between the real estate businesses in the hierarchy.The cascading hierarchy16 is as follows:1. The Closing or Settlement Agent: The agent has primary responsibility for filing the Real Estate Report due to their direct involvement in the transaction.2. The Settlement Statement Preparer: If no agent is designated, the individual preparing the settlement statement assumes responsibility.3. The Deed Filer: In the absence of the above, the person responsible for filing the deed must file the Real Estate Report.4. Title Insurance Underwriter: While admittedly unlikely in most transactions, the underwriter assumes responsibility if the previous roles are unfilled in the covered transaction.5. Largest Fund Disburser: The fifth responsible party is the entity disbursing the most funds in the transaction.6. Title Evaluator: The penultimate responsibility lies with the person assessing the title’s validity.7. Deed or Legal Instrument Preparer: Finally, if none of the above roles apply, the person responsible for drafting the transfer documents will file the report.
Designation Agreements
Critically, the default reporting person in the cascading hierarchy above may shift the responsibility to another, subject to a “designation agreement.”17 In effect, parties can contract to shift the filing requirements. Designation agreements allow parties to designate a specific individual or entity as the reporting person. This aspect of the RRE Rule is designed to enable customization based on the particulars of a given transaction and ensure clarity in reporting obligations.Designation agreements are designed to reduce the over-all burden on reporting persons by enabling flexibility and choice, but a separate designation agreement is required for each reportable transfer. All parties to a designation agreement must retain a copy of the agreement for a period of five years. However, the reporting person is not required to file the designation agreement as part of the Real Estate Report.While there is no required format for the designation agreement, it must meet certain minimal criteria: the agreement must identify (1) the date of the agreement, (2) the name and address of the transferor, (3) the name and address of the transferee entity or trust, (4) the property, (5) the name and address of the designated reporting person, and (6) the name and address of all parties to the designation agreement.
FinCEN’s Reasonable Reliance Standard
Despite the RRE Rule’s complexity and onerous reporting requirements, the rule does permit reporting persons to rely in good faith on information provided by others—such as the purchaser or their representative—for general information about the transaction and when identifying the beneficial owner(s) of legal entities or trusts involved in the trans-action.18 When relying on information about the identity of the beneficial owner(s) in particular, the RRE Rule includes an additional step and requires the person providing the information to certify the accuracy of the information in writing and to the best of the person’s knowledge. This rea-sonable reliance standard allows reporting persons to rely on details obtained from involved parties without independent verification, unless there are red flags or inconsistencies that suggest the information might be inaccurate. For example, if a title insurance company is required to file a report under the new rule and the trustee of a revocable trust provides a certification stating the names of the beneficial owners, the company may rely on that certification without investigating, unless something about the certification raises suspicion.
Industry Criticism & Legal Challenges
Real estate industry professionals and trade groups lobbied against several aspects of the RRE Rule during the rulemaking process. While acknowledging the importance of combating money laundering in real estate, the industry raised concerns about the scope, burdens, and implications of the proposed rule. More than 150 organizations filed public comments, including the American Land Title Association and the National Association of Realtors.Critics argued that the rule’s nationwide application, in comparison to prior GTOs, was too expansive and would encompass many low-risk transactions and instead advocated for a more targeted, risk-based approach. Industry groups also emphasized the cost and operational burden of collecting and verifying beneficial ownership information, particularly for small businesses and independent title agents. While others highlighted privacy and confidentiality concerns about the sensitive nature of trust ownership structures and the potential for unintended legal liabilities.FinCEN acknowledged industry concerns and amended the final RRE Rule accordingly, perhaps most notably with the inclusion of the reasonable reliance standard discussed above. However, with only a few months before implementation, companies are challenging the rule in federal court.
Fidelity National Financial Files Suit
On May 21, one of the industry’s biggest players—Fidelity National Financial (FNF)— filed a lawsuit in the Middle District of Florida to block the RRE Rule.19 United States District Judge Wendy Berger, a Trump appointee, will now consider whether FinCEN has exceeded its statutory authority.In its suit, FNF contends the RRE Rule should be vacated pursuant to the Administrative Procedure Act because it exceeds FinCEN’s statutory authority under the BSA, which limits reporting obligations to “suspicious transactions relevant to a possible violation of law or regulation.” FNF argues that the rule’s blanket requirement for reporting all non-financed transfers to legal entities and trusts, without specific indicia of suspicious activity, violates this statutory limitation. Plaintiff notes that FinCEN has never claimed that all, or even most, of the estimated 850,000 transactions that will be reported annually are likely connected with illegal activity, and that the rule will result in millions of lawful transactions being “swept into FinCEN’s dragnet.”While FNF’s anchor argument focuses on FinCEN’s lack of statutory authority, it also raises constitutional concerns, including that: (1) the rule violates the Fourth Amendment’s prohibition of unreasonable searches by mandating the col-lection of private information without articulable suspicion or connection to illegal activity; (2) the rule infringes on the First Amendment’s prohibition on compelled speech by requiring the disclosure of extensive personal and financial information for all covered transactions, regardless of any criminal nexus; and (3) Congress did not delegate authority to the Treasury Department to regulate such transactions under the Commerce Clause or other Article I powers.Of course, FNF leans heavily on the RRE Rule’s financial and compliance burden. Using FinCEN’s own compliance cost estimates of between $428.4 million and $690.4 million in the first year, FNF argues the rule is arbitrary and capricious due to FinCEN’s failure to conduct a proper cost-benefit analysis. Plaintiff argues that in the face of staggering costs, FinCEN has made no serious effort to estimate the economic benefits or estimate the anticipated reduction in illicit activity.It is too early to predict the outcome of the FNF suit, but the issue illustrates the tension between two Trump administration priorities. On the one hand, the administration has generally advocated for a deregulatory, pro-industry agenda. On the other hand, the administration remains focused on anti-money laundering and financial crime, particularly as it relates to foreign adversaries and drug cartels who are most likely to exploit the residential real estate market to launder illicit gains. Affected businesses should be preparing to comply with the RRE Rule to ensure they are not caught off guard should legal challenges fail.
So– What Do We Do? A Practical Guide for ACMA Fellows
The evolution of FinCEN’s regulation of residential real estate transactions—from the BSA through the GTOs and now to a comprehensive nationwide reporting rule—reflects a growing recognition of the sector’s vulnerability to money laundering and the need for greater transparency. The new rule represents a paradigm shift for real estate professionals, who must now play a central role in the fight against illicit finance.With the new rule set to take effect on December 1, 2025, industry professionals—including settlement agents, title insurers, attorneys, and others involved in real estate closings—must prepare for significant changes in compliance obligations. Waiting and hoping Judge Berger strikes down the rule is not the prudent course of action. So, what can companies and professionals do to prepare?1. Assess Applicability and Identify Covered Transactions. Businesses need to determine if they are involved in non-financed transactions of residential real estate to entities or trusts and familiarize themselves with the exceptions to avoid unnecessary reporting.2. Establish Internal Policies and Procedures. Organizations should assign responsibility for compliance and document processes for identifying reportable transactions, collecting required information, and filing reports.3. Securely Collect and Verify Information. Businesses need to develop protocols for obtaining and retaining beneficial ownership information, including ensuring secure IT systems are in place to retain and transmit the requirement transaction, payment, and personal information.4. Leverage Designation Agreements. Where appropriate, organizations should use written designation agreements to assign and clarify reporting duties, particularly in complex transactions.5. Prepare for Regulatory Scrutiny. Businesses need maintain thorough records of compliance activities, including training and internal audits, as well as maintaining copies of all designation agreements and beneficial ownership certifications for at least five (5) years. Noncompliance with the RRE Rule can result in significant civil and criminal penalties.
Conclusion
As the December 1, 2025, enforcement date approaches, industry professionals must act swiftly to align their practices with FinCEN’s new RRE Rule. Real estate professionals, title insurers, closing agents, and anyone who may qualify as a reporting person should prioritize understanding the rule’s reporting obligations, evaluating beneficial ownership disclosure requirements, and updating compliance programs accordingly. Proactive preparation now will not only ensure regulatory compliance but also position firms as responsible gatekeepers in the fight against money laundering and financial crime in the U.S. housing market.
Data Centers in the Mid-Atlantic Face a New Legal Frontier: “Bring Your Own Generation”
Key Takeaways
Governors from Pennsylvania, New Jersey, Maryland and Virginia have proposed a “Bring Your Own Generation” (BYOG) model to fast-track data center approvals and ease pressure on the grid. The proposal calls for developers to supply their own generation in exchange for accelerated interconnection and facility permitting.
While BYOG could meaningfully shorten time-to-power, it cannot function under current law without significant changes to PJM’s tariff, FERC oversight, and state utility and permitting regimes.
Data center and generation developers should begin aligning contracts, procurement strategies and regulatory engagement to prepare for this shift. Transitional risk is real, and early movers with flexible deal structures will be best positioned.
In a recent eight-page proposal to PJM, the regional grid operator for much of the Mid-Atlantic, governors in Pennsylvania, New Jersey, Maryland and Virginia have called for a fundamental change to how large data centers connect to the grid. Their message is straightforward: to protect the grid, data center developers should be permitted to “bring your own generation” (BYOG) in exchange for fast-track approval of both their facilities and the generation they build.
Can Data Centers Use BYOG to Accelerate Power Delivery?
Supporters of BYOG have argued that it will shorten time-to-power by removing pressure from public grid planning and shifting responsibility to data center developers. That outcome is possible — but only if the policy is coupled with additional legal reforms.
Even a well-financed data center cannot accelerate power delivery if transmission upgrades, queue studies and local permitting remain the pacing items. Without PJM tariff changes and statutory fast-track permitting authority, BYOG risks becoming a burden, not a new pathway.
Where this model becomes attractive for developers is if PJM and the states pair it with:
priority queue treatment for projects with committed generation;
conditional energization rights tied to financial security;
state regulated fast-track siting approvals for associated generation resources; and
clear transitional relief for projects already in progress.
Under that combined structure, developers who secure generation early could legitimately shorten their timeline to power. BYOG could evolve from a reliability safeguard into a competitive advantage.
Why the Current Legal Framework Must Change
Current law does not permit BYOG without several structural reforms.
First, PJM’s tariff and interconnection rules — overseen by the Federal Energy Regulatory Commission (FERC) — do not allow PJM to prioritize or condition load connections on whether the customer has acquired generation. PJM would need to amend its interconnection procedures to permit queue preference, milestone structures and performance obligations tied to generation procurement, which requires stakeholder approval and FERC authorization.
Second, state utility law would need to be updated or interpreted to give regulators the authority to condition interconnection and accelerated service on demonstration of adequate generation resources by the data center customer. While state commissions have opened inquiries into data center impacts, neither has explicit tariff or statutory language enabling utilities to require BYOG commitments as a prerequisite for service. Questions also remain regarding how self-supplied generation affects retail service and participation in competition markets in completely deregulated states like Pennsylvania, New Jersey and Maryland. Even when generation is self-supplied, most data centers will rely on the grid for backup, balancing and transitional power. Regulators must therefore either develop or direct utilities to propose tariffs that credit customer-supplied generation while ensuring fair system cost recovery and alignment with capacity markets and supplier-of-last-resort obligations.
Third, states must establish streamlined permitting pathways for generation resources directly tied to a data center’s load. Accelerating siting and permitting requires more than policy intent — it demands statutory and regulatory reforms. In most mid-Atlantic states, separate and sequential permitting across multiple agencies and local jurisdictions creates significant delays. To address this, states need unified or concurrent review processes, lead permitting agencies, firm decision timelines, coordinated environmental and land-use review, and aligned local zoning and state-level energy siting. Pennsylvania’s proposed Reliable Energy Siting and Electric Transition (RESET) Board (HB502) — creating a fast-track consortium — exemplifies these reforms, proposing a central authority to consider and approve applications for large generating facilities. Without such reforms, BYOG risks delay at state and local levels, even if PJM and FERC expedite interconnection.
In short, the governors’ policy vision can only materialize if PJM, FERC and state regulators and legislatures act together.
What This Means for Projects Already Underway
Developers with land assembled, site plans approved, construction underway or interconnection applications pending face a distinct challenge. If the legal framework changes to permit BYOG in exchange for fast-track approval, it remains uncertain how those new obligations would apply to projects already in the queue. Courts and regulators are generally reluctant to retroactively impose major new obligations on projects that relied on existing rules, but as policymakers focus on the surge in grid demand, transitional compliance risk is real.
Projects now in the queue could be asked to demonstrate generation coverage, post additional security or accept revised milestones before energization. Those possibilities call for proactive contract strategies. Construction contracts, power-procurement agreements, site leases and financing documents should be reviewed now to ensure they contain robust change-in-law protections, rights to adjust delivery milestones, and the flexibility to procure, assign or substitute firm capacity commitments if required by regulators.
Similarly, developers should open dialogue with lenders early. Traditional capital stacks assume grid availability. If generation must be co-developed for accelerated approval, financing instruments may need to reflect that new reality.
How Data Center and Generation Developers Can Position Themselves Now
For data center developers pursuing sites in Pennsylvania, New Jersey, Virginia or Maryland, four actions are prudent immediately:
Audit existing project documents for regulatory-change and timing-flexibility provisions. Ensure your agreements give you the ability to adjust if state or PJM rules shift.
Begin sourcing potential generation or firm-capacity solutions early, even on a contingent basis. This does not mean committing capital today. It does mean lining up options that can be activated quickly if rules change.
Engage in the regulatory process. Submitting comments to PJM and the state public utility commissions not only helps shape the rules but can support arguments later for transitional treatment.
Engage in the legislative process. Renewable energy and battery storage can be deployed the fastest of all the sources of new generation. Traditionally, energy projects such as wind, solar and battery storage are permitted at the county level and there are an ever-increasing number of counties that are blocking these projects. All the advantages of BYOG are lost if the generation cannot be permitted, and it will require legislation to permit new independent power generation at the state level.
For developers of generation, the BYOG structure represents a significant opportunity to partner with data center offtakers and potentially fast-track projects. Similar to their potential data center partners, developers of generation should audit their existing project documents and engage in the regulatory and legislative process. The BYOG structure will set off a race for data centers to find dance partners that understand the new rules, can deliver generation projects quickly and that can be flexible on commercial terms.
The Bottom Line
The governors’ BYOG proposal signals a break with decades of centralized grid-planning philosophy. It has the potential to reshape data center development economics, accelerate timelines for proactive builders and introduce risk for those who ignore it.
The details will be determined in PJM stakeholder filings, state utility dockets and legislative sessions in 2025 and beyond. Developers who align their legal strategy, contractual rights and power-procurement planning with this emerging model now will be best positioned to navigate and benefit from the coming transition.
Structuring Data Centers for Flexibility- Using the Condominium Form of Ownership
As the demand for data centers continues to accelerate—driven by artificial intelligence, cloud computing, and energy-intensive digital infrastructure—developers are increasingly searching for flexible, efficient structures to plan, finance, and operate these complex facilities. Traditional regulatory platting can impose rigid boundaries, delay financing, and limit adaptability as the project evolves.
A growing number of developers are finding a more nimble alternative in the condominium form of ownership.
Beyond Residential: A Commercial Tool for Project Flexibility
Although commonly associated with residential projects, the condominium framework is fundamentally a method of dividing property into separately owned and financeable units. Under the Texas Uniform Condominium Act and similar statutes nationwide, a “unit” may include not only a portion of a building but also a discrete land area within a larger site.
This flexibility allows a developer to structure a single project into multiple, separately financeable components—each capable of distinct ownership, leasing, and maintenance arrangements—without the time and complexity of a formal subdivision process.
Accelerating Development Through Easier Project Segmentation
In the data center context, this flexibility can be decisive. Large-scale data campuses often include multiple buildings of varying size, configuration, and use, along with specialized infrastructure for power, cooling, and connectivity. When projects are divided using a traditional plat, later adjustments to building footprints or shared systems may require time-consuming regulatory replats or overlapping easements.
By contrast, using a condominium declaration to define site-based units enables the developer to align ownership boundaries precisely with the operational layout. This can dramatically reduce the time required to create financeable parcels—often measured in weeks rather than months—and allows modifications to be made through simple amendments rather than new plats.
Facilitating Separate Financing and Ownership Structures
One of the most powerful advantages of the condominium form is its ability to support separate financing or investment in different project components. Each unit can be encumbered by its own mortgage, leased to a separate operator, or sold to a strategic partner—while the shared infrastructure (roads, utilities, and power) remains under the control of the condominium association.
This structure not only broadens financing opportunities but also reduces interdependence among investors and lenders, which can be critical in projects with phased construction or diverse ownership.
Addressing Shared Power and Operations
Most data centers depend on complex power delivery systems, often combining shared generation or distribution facilities with dedicated equipment for each building. The condominium regime accommodates this seamlessly. Shared infrastructure can be designated as common elements, with operating costs allocated proportionally through the association; alternatively, a limited common element or “power unit” can be established to handle utility management, billing, and maintenance for multiple users.
This approach avoids the patchwork of easements and operating agreements often required in non-condominium settings, simplifying both documentation and long-term administration.
Streamlining Administration for Commercial Projects
Most condominium statutes allow certain statutory simplifications for commercial-only projects, such as the ability to waive association-provided property insurance for individual units. Each owner or tenant may instead insure its own component, aligning with how data center assets are typically managed and insured.
In addition, the governing documents can be tailored to assign operational responsibility, allocate costs, and provide dispute resolution procedures that reflect the commercial realities of multi-tenant or multi-owner campuses.
A Practical Tool for Complex Infrastructure Projects
For developers managing projects with multiple buildings, shared on-site power, diverse investors, or staggered development timelines, the condominium structure offers a practical, legally sound framework. The condominium structure can often provide greater flexibility than traditional platting, accelerate financing, and simplify governance across ownership lines—all while maintaining the integrity and coherence of the overall development.
Appeal Bonds- A Strategic Tool in Appeals of Class Action Settlements
When a class action settlement is objected to and subsequently approved by the court, objectors sometimes appeal, which can substantially delay the settlement process including distribution of settlement funds to class members. To mitigate the risks and costs of such delays, parties to the settlement can ask the court to require objectors to post an appeal bond. This was successful in a recent case decided by the U.S. Court of Appeals for the Sixth Circuit.
In re East Palestine Train Derailment, – F.4th –, 2025 WL 3089606 (6th Cir. Nov. 5, 2025), involved a train derailment in Ohio resulting in the release of toxic chemicals. Property owners in the area brought a class action, and the railroad agreed to pay $600 million for a class settlement. Five class members objected, raising concerns about the notice and adequacy of evidence used to evaluate the settlement, and appealed the order approving the settlement. The settling parties requested, and the district court imposed, an appeal bond of $850,000 to cover anticipated administrative costs due to the delay caused by the appeal, along with taxable expenses.
The objectors failed to timely post any portion of the bond. Instead, they filed a motion in the Court of Appeals seeking to reduce or eliminate the bond, but without filing a motion for a stay or a timely notice of appeal from the order requiring the bond. The Sixth Circuit explained that the objectors would not have prevailed on a motion for stay because they were not likely to succeed on the merits and did not face irreparable harm where they could have appealed the bond order. The objectors also failed to file a timely motion in the district court to extend the time to appeal the bond order (they filed a motion that was late by one day). Neither the district court nor the Sixth Circuit could extend the time to appeal the bond order because the 30-day period had run.
The Sixth Circuit further concluded that it was appropriate to dismiss the objectors’ appeal from the settlement (which was timely) because the objectors failed to timely post the required bond. Dismissal of the appeal was appropriate because: (1) the delay in disbursement of the settlement funds substantially prejudiced the class; (2) the objectors had no valid justification for failing to pay at least a portion of the required amount even if they were unable to pay the entire bond; and (3) the objectors were unlikely to succeed on the merits of their appeal from the settlement because the settlement notice was adequate and the terms appeared to be reasonable.
Seeking an appeal bond may be a practical and effective strategy for parties to a class action settlement. It protects the interests of the class and settling defendant(s), deters meritless appeals, and ensures that objectors are serious and prepared to bear the costs of delay
NYC Charter Amendments Fast-Track Affordable Housing—What Developers Need to Know Now
New York City voters ushered in sweeping changes to land use policy in the November mayoral election, approving four major City Charter amendments recommended by the Charter Revision Commission convened by Mayor Eric Adams in December 2024.
These newly adopted amendments focus on advancing affordable housing and streamlining the approval process for new housing developments citywide. The approved amendments are expected to reduce administrative burdens and shorten approval periods for land use applications. The four approved amendments, known as proposals 2 through 4 on this year’s general election ballot, are as follows:
1. Fast Tracking Affordable Housing
Two of the amendments aim to accelerate the development of affordable housing:
(i) Fast Track Zoning Action at the Board of Standards and Appeals (“BSA”)
The BSA “fast track” action will streamline the public review process for modifying use, bulk, or parking requirements for publicly financed affordable housing projects developed by Housing Development Fund Companies (“HDFC”) in zoning districts where residential uses are already permitted, reducing the review process to 120 days.
The BSA fast track will also alter the criteria applied by the BSA when reviewing an application. Unlike a variance, applicants will not need to demonstrate a “unique physical condition” inherent in the property or seek the “minimum variance necessary.” Instead, the BSA will grant approvals based on two findings: (1) necessity, determined in consultation with the Department of Housing Preservation and Development (“HPD”), confirming that the development cannot proceed without the requested modification; and (2) assurance that the proposed building will not alter the essential character of the neighborhood. The BSA may still impose other conditions or restrictions on the development as appropriate.
(ii) Fast Track Zoning Action at the City Planning Commission (“CPC”)
Beginning in October 2026, and every five years thereafter, the Department of City Planning (“DCP”) and HPD will issue a report on affordable housing production for each of the 59 Community Districts. The 12 Community Districts with the lowest relative growth of affordable housing will be able to access the new CPC fast track program. The CPC fast track program will allow rezoning applications for affordable housing projects subject to the Uniform Land Use Public Review Procedure (“ULURP”), to consolidate the Community Board and Borough President review and recommendation and eliminate the City Council public review and vote. This will significantly shorten the ULURP public review period and provide more certainty to the outcome of these applications.
2. Simplified Review of Modest Housing and Infrastructure Projects
The Expedited Land Use Review Procedure (“ELURP”) will create a shortened public review process to replace ULURP for modest projects by consolidating the Community Board and Borough President review and recommendation, shortening the City Planning Commission’s review period from 60 days to 30 days and eliminate the City Council’s review unless it is required by state law. ELURP reduces the public review timeline from approximately seven months to 90 days.
Eligible projects will include land use applications proposing modest changes, such as: (i) housing proposals that increase residential capacity in R6 – R12 zoning districts (medium and high density zoning districts) by no more than 30%; (ii) zoning map changes in R1 – R5 zoning districts (low density districts) that increase residential capacity up to that of another low density district, (with a height limit of 45 feet and a maximum FAR equal to or less than 2.0 FAR); (iii) dispositions of City-owned property to HDFCs; (iv) acquisitions by HPD, restricted to affordable housing; (v) dispositions of City-owned property to adjacent owners in certain instances; (vi) City map changes for government-sponsored affordable housing and (vii) certain resiliency and climate change infrastructure projects.
ELURP will not be available for any project requiring an Environmental Impact Statement.
3. Affordable Housing Appeals Board
The Affordable Housing Appeals Board will replace the mayoral veto with a new three-person body, that includes the applicable Borough President, the Speaker of the City Council and the Mayor (or their designees), to ensure land use decisions reflect Citywide needs and priorities for actions that involve the creation of affordable housing. Specifically, the Appeals Board will only be available when an affordable housing land use application, located within a single borough, is disapproved by the City Council during the ULURP process. The Affordable Housing Appeals Board can then reverse the City Council’s land use decision by a majority (2/3) of the members agreeing to overturn the City Council decision.
4. Modernize the City Map
The proposed Digital City Map will consolidate the official City Map, which currently exists as over 8,000 paper maps held across five separate borough offices. The proposal is a response to testimony from practitioners and former Borough President staff pointing to the current mapping system imposing significant costs and time on infrastructure, housing and other projects. The proposal envisions a three-year consolidation and digitization by January 1, 2029, with staff from the Borough President Topographical Bureaus providing technical expertise, and DCP ensuring consistency and accuracy with City Map changes over time.
For more information on the New York City Charter Revision Commission and their 2025 Charter Revision ballots, please visit https://www.nyc.gov/site/charter/index.page.
Texas Site (“Land”) Condominiums
As Texas markets continue to evolve, so too do the legal and structural tools available to developers. One such tool—the site condominium—has gained traction as a creative alternative to traditional subdivision platting. While the concept has existed since the adoption of the Texas Uniform Condominium Act (TUCA) in 1994, site condominiums have become especially popular as a way to obtain project approvals, increase flexibility, and accommodate modern residential and mixed-use designs.
What Is a Site Condominium?
Unlike traditional condominiums that define ownership within a building (typically by walls, floors, and ceilings), a site condominium defines a unit as a discrete area of land—essentially functioning as a platted lot but created through a condominium declaration and condominium plans rather than through traditional subdivision platting. Each unit can include both the land and any improvements located on it, and there are no shared walls or vertically stacked units.
Because of TUCA’s flexibility, a developer may configure units to fit the project’s layout, market needs, or site conditions—without conforming to the rigid rectilinear boundaries of a standard subdivision plat. This allows developers to preserve trees, optimize views, and allocate impervious cover more efficiently, all while maintaining fee-simple ownership for purchasers.
The 2019 Legislative Change
House Bill 2569, enacted in 2019, clarified that a site condominium unit does not require upper or lower (horizontal) boundaries unless the project design necessitates them. This change, which I authored, removed a long-standing technical uncertainty in Chapter 82 and aligned Texas law with Federal Housing Administration (FHA) requirements for site condominium eligibility.
Why Developers Use Site Condominiums
Developers increasingly turn to the site condominium model for both residential and commercial projects because it offers:
Regulatory efficiency: In many jurisdictions, a site plan can be approved faster than a subdivision plat.
Design flexibility: Units can be irregularly shaped to respond to topography or aesthetic considerations.
Market versatility: The structure accommodates detached, attached, and mixed-use products.
Consumer familiarity: Purchasers hold title to their own land area and improvements—similar to lot ownership—but within a legally cohesive framework that can assign shared maintenance or architectural controls.
For attached townhome developments, the site condominium structure also mitigates construction-defect risk by allowing the exterior building envelope to be included within the unit itself, thereby narrowing the association’s repair and claim responsibilities.
The Subdivision Question
A recurring issue for developers is whether creating multiple land-based condominium units constitutes a “subdivision” that triggers local platting requirements. While the Texas Uniform Condominium Act allows a condominium declaration and plat to be recorded without prior approval, counties and cities retain the right to apply subdivision and development regulations under Section 82.051(e) of the Property Code.
In a 2004 Attorney General opinion (GA-0223), the State clarified that counties have authority to treat certain condominium developments—especially those dividing land into distinct sites—as subdivisions for regulatory purposes. The opinion emphasized that how property is owned (for example, by condominium form rather than fee simple) does not, by itself, exempt a project from county oversight. Counties may still require platting under Local Government Code Chapter 232 when they determine that a condominium layout effectively divides land for separate ownership or occupancy.
That said, the opinion also reaffirmed that Chapter 82 prohibits local governments from discriminating against condominiums or imposing more burdensome requirements than would apply to a physically identical subdivision. The balance struck by the statute and the opinion is practical: while a county may regulate a site condominium as a subdivision, it must do so on equal terms.
Texas has 254 counties, and each applies these principles differently. Some treat site condominiums as a distinct category and simply review them as site plans; others require full subdivision approval. For developers, the takeaway is simple— a brief jurisdictional check early in the process can save weeks of delay later. Site condominiums remain a flexible, legally sound option throughout Texas, but local practice still matters.
While this balance was intended to provide counties with reasonable discretion, the result has been a patchwork of inconsistent treatment across the state. With 254 counties interpreting the same statutory framework differently, developers face significant uncertainty as to whether a proposed site condominium will be processed as a subdivision, a site plan, or something in between. In some jurisdictions, this inconsistency has become outcome-determinative—effectively prohibiting site condominiums altogether by requiring that the land be platted into individual lots. This approach undermines the purpose of the Texas Uniform Condominium Act, which was designed to offer an alternative ownership structure expressly recognized under state law. Greater consistency in local interpretation would help ensure that developers and property owners can rely on the condominium form as the Legislature intended, without unnecessary procedural barriers or duplicative regulation.
The site condominium form has become a valuable option in Texas development, allowing projects to achieve flexibility, density, and efficiency while preserving consumer protections under TUCA. Whether used for small infill tracts, townhome clusters, or commercial enclaves, the model offers a sophisticated balance between traditional subdivision principles and modern ownership structures.
New York Court of Appeals Narrows Landlord Protections Under “Good Guy” Guaranties
Decision: 1995 CAM LLC v. West Side Advisors, LLC, No. 72 (Oct. 21, 2025)
The New York Court of Appeals issued a major decision reshaping how commercial “good guy” guaranties are interpreted. In 1995 CAM LLC v. West Side Advisors, LLC, the Court held that a personal guarantor’s liability ends when the tenant vacates and surrenders possession of the premises—even if the landlord never formally accepts that surrender in writing.
For landlords, the decision represents a shift in risk allocation. It underscores the need for more precise drafting and careful attention to how guaranty terms interact with standard lease language, particularly when the Real Estate Board of New York (REBNY) lease form is used.
Background: A Dispute Over Surrender and Liability
West Side Advisors (WSA) leased office space at 1995 Broadway in Manhattan from landlord 1995 CAM LLC. The lease incorporated the standard REBNY form and was later amended to include a limited personal guaranty by WSA’s officer, Gary Lieberman. Under that guaranty, Lieberman promised to pay the tenant’s obligations “to the date that [the tenant] shall have completely vacated and surrendered the demised premises … pursuant to the terms of the lease.” The guaranty also required 30 days’ notice before vacating.
In 2020, WSA fell behind on rent and notified the landlord it would vacate on November 30. It did so, conducting a walkthrough and returning the keys to the building superintendent. The landlord did not sign any written acceptance of the surrender and later sued both WSA and Lieberman for unpaid rent and post-vacatur damages.
Both the trial court and the Appellate Division sided with the landlord, ruling that because the REBNY lease requires written acceptance to effect a valid surrender, the guaranty remained in force. But the Court of Appeals reversed, finding that the guarantor’s obligation ended when the tenant vacated and relinquished control of the premises.
The Court’s Reasoning
The Court of Appeals concluded that the guaranty in this case was a classic “good guy” guaranty—a limited promise designed to encourage tenants to leave voluntarily when they can no longer pay rent. The court emphasized that the guaranty’s language focused on the tenant’s actions, not the landlord’s consent.
Requiring written acceptance by the landlord, the court said, would make key parts of the guaranty meaningless—such as the 30-day notice and “completely vacated” clauses. Those provisions only make sense if the guaranty can terminate before the lease ends. The court also pointed to language in the guaranty stating that, in the event of a conflict, the guaranty’s terms would control over the lease.
By vacating the premises, giving notice, and handing over the keys, WSA satisfied the conditions for surrender under the guaranty, even if it did not formally terminate the lease. As a result, Lieberman’s personal liability ended as of the date of vacatur.
What This Means for Landlords
The 1995 CAM decision is a wake-up call for New York commercial landlords who rely on “good guy” guaranties to secure performance. The ruling limits a New York landlord’s ability to hold guarantors responsible beyond the tenant’s physical departure, unless the guaranty language clearly extends that liability.
Key takeaways include:
Simplify – The Court of Appeals made it clear that this entire case could have been avoided, if the guarantee was simpler and clearer. Moving forward, commercial landlords should consider cutting back on legalese and cross-references to the lease to cut back on litigation risks. Guaranties should be stand-alone documents with clear, self-contained surrender and liability terms that do not depend on the lease for interpretation.
Review and Redraft Guaranties – Standard leases and off-the-shelf guaranty forms—especially those from REBNY—may no longer provide the protection landlords expect. To preserve leverage, landlords should include explicit language stating that the guarantor’s liability continues, until the landlord accepts the tenant’s surrender in writing—or until a replacement tenant begins paying rent.
Avoid Incorporation Ambiguity – The guaranty in 1995 CAM incorporated “the terms of the lease,” but also said the guaranty would control in case of conflict. That inconsistency gave the Court of Appeals room to interpret the guaranty as limited. Landlords should make clear that the guarantor’s obligations continue to exist contemporaneously with the tenants.
Tighten Notice and Delivery Requirements – A major issue in this case was that the guarantee provided for termination under terms that differed from the tenant’s obligations under the lease. Landlord’s should ensure that language in the guarantee does not provided for termination, unless it is identical to the termination of the lease. In this case, that would have required acceptance by the landlord in writing.
Expect More Tenant Leverage in Disputes – Guarantors may be more confident walking away once a tenant vacates a property. Landlords should take more proactive steps asserting whether they consider the lease terminated and documenting ongoing efforts to mitigate damages.
Looking Ahead
The decision underscores the Court of Appeals’ continued focus on the plain language of contracts and refusal to render contract language superfluous. Moreover, it highlights a public policy point that contracts can, and should, be simpler.
Moving forward, the best way to ensure that a guarantor remains liable under the same terms as the tenant the guarantee should simply contain language saying so.