What Happened?

In a development that is becoming a trend in state legislatures, effective July 1, 2023, the Florida Senate passed a bill that restricts certain foreign nationals from acquiring property in the state.

Why Is It Important?

Florida Senate Bill 264 (“SB 264”), codified at Florida Statutes 692.201-204, restricts the conveyance of real property in Florida to individuals and entities associated with certain foreign countries.  Notably, subject to limited exceptions, it prohibits the sale of any real property to Chinese nationals.

SB 264, which became effective on July 1, 2023, contains three primary components prohibiting the conveyance of real property in Florida.  First, subject to limited exceptions, SB 264 prohibits individuals and entities designated as “foreign principals,” from “foreign countries of concern,” from acquiring agricultural land in Florida.  The impacted countries are the People’s Republic of China, the Russian Federation, the Islamic Republic of Iran, the Democratic People’s Republic of Korea, the Republic of Cuba, the Venezuelan regime of Nicolás Maduro, and the Syrian Arab Republic.

Second, SB 264 prohibits foreign principals from owning or acquiring any interest in real property within 10 miles of any military installation or critical infrastructure in the state.  Third, subject to limited exceptions, SB 264 prohibits Chinese entities and nationals who are not citizens or lawful permanent residents of the U.S. from purchasing or acquiring any interest in real property in the state.

Notable Exceptions

SB 264 contains notable exceptions. First, foreign principals and Chinese nationals may continue to own real property acquired before the July 1, 2023 effective date; however, they had until January 1, 2024 to register the property ownership by with the designated Florida regulatory authority.  Second, a foreign principal or Chinese national may purchase up to one residential real property not exceeding two acres, as long as the parcel is not within five miles of any military installation.

SB 264 also creates exceptions for ownership through a publicly traded company that is either: (a) less than 5% interest, or (b) is a non-controlling interest in an entity controlled by a non-foreign entity registered with the SEC as an investment adviser.  Further, the legislation permits a “foreign principal” to acquire interest by devise or descent, enforcement of security interests, or collection of debt on or after July 1, 2023; however, the party must sell the property within three years of acquisition.

Penalties

SB 264 requires the buyer of real property to sign an affidavit under penalty of perjury to his/her compliance with the law.  While a failure to obtain or maintain the affidavit does not affect the title or insurability of the title for the real property, SB 264 provides that “if any real property is owned or acquired in violation of this section, the real property may be forfeited to the state.“ Further, a foreign principal that fails to timely file a registration is subject to a civil penalty of $1,000 for each day that the registration is late.

Clarifying Regulations

SB 264 is self-implementing, but the legislation requires certain Florida regulatory agencies to adopt rules to implement certain sections of the legislation. On September 20, 2023, the Florida Department of Commerce released its initial set of proposed rules for implementing SB 264.   Shortly thereafter, the Florida Real Estate Commission followed suit with proposed rules containing the form buyer’s affidavits. Further, the Florida Department of Agriculture and Consumer Services is drafting rules related to the interests of foreign ownership of agricultural land in Florida.

What Do You Need to Know?

In May 2023, litigation challenging the constitutionality of the legislation was brought in the U.S. District Court for the Northern District of Florida.  The plaintiffs contend that SB 264 violates the Fourteenth Amendment’s Equal Protection and Due Process Clauses, the Supremacy Clause, and the Fair Housing Act.  It is unclear whether this and other possible litigation challenging the enforceability of the law will be meritorious.

In addition to Florida, nearly 20 other states (including Missouri, Pennsylvania, Tennessee, Virginia, and Wisconsin) have adopted or are considering foreign ownership restrictions which are similar but generally less onerous.

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