The Office of Foreign Assets Control (“OFAC”) is an arm of the U.S. Department of Treasury, tasked with administering and enforcing various economic and trade sanctions intended to further U.S. foreign policy and national security goals. Such sanctions are generally aimed at foreign countries, regimes and individuals connected with terrorism, drug trafficking, and proliferation of weapons of mass destruction. Among the most commonly employed tools in OFAC’s toolbox are the so called “Sanctions Lists”, which are actually a compilation of several separate lists of parties with whom U.S. based persons or companies are prohibited from exporting goods or otherwise doing business. These Sanctions Lists are maintained by OFAC and include foreign governments, individuals, and businesses. To ensure that a transaction can be consummated, transaction parties, their attorneys and title companies, must ensure that the deal participants are not on the Sanctions Lists.
Now, various states have gotten into the act to give additional state law causes of action for those who violate the OFAC-administered sanctions, or to expand the scope of prohibited transactions with foreign entities. Ohio recently enacted a new law which is to take effect on October 3, 2023. And over the summer Florida, Tennessee, and Indiana also passed versions of this regulation. This is not an exhaustive list.
In Ohio, new Revised Code Section 5301.256 will prohibit most purchases of agricultural land by any persons or entities that are on the “registry” that is to be compiled and maintained by the Secretary of State of Ohio. This would include persons determined to be foreign adversaries by the Secretary of Commerce of the USA, the Sanctions Lists maintained by OFAC, and persons or countries determined by the Secretary of State of the USA to have provided support for terrorism (also probably on the Sanctions Lists). The Ohio registry is potentially more expansive than the current Federal Sanctions Lists. If a court finds that a sale of agricultural land violates this law, it can order a judicial sale. Lenders must be wary to avoid this outcome when lending on property classified as “agricultural.”
Tennessee’s version of this law goes further to require title divestiture of any type of property in Tennessee if acquired by a person or entity on the Sanctions Lists.
Indiana’s approach is somewhat different, restricting foreign ownership by citizens or businesses within or controlled by China, Iran, North Korea, Russia (or any other country designated by the Governor of Indiana) that are within certain proximity to military bases or “critical infrastructure.” That definition in the statute is quite broad. Like Tennessee, a prohibited transaction would be subject to a State of Indiana initiated receivership and potential forfeiture to the State of Indiana.
Florida’s approach appears to be a blend of all of the above, restricting ownership of agricultural land or property within ten miles of military installations or critical infrastructure facilities, and extends to all property in the State of Florida if the foreign person is from The Peoples Republic of China. The statute provides a list of foreign countries of concern and defines those foreign persons or entities subject to the law.
Practitioners should be aware of these new restrictions, and conduct due diligence on contractual counter-parties to make sure that the transaction can be consummated without running afoul of the remedies imposed by these laws.
