In July of this year, Florida joined the ranks of states implementing legislation aimed at restricting foreign entities and individuals from owning real property. SB 264, officially titled "Interests of Foreign Countries," marks the 15th state-level bill enacted in 2023 with a focus on such regulations, as an additional 20 states consider similar proposals. Unlike familiar FIRPTA certifications that real estate professionals have traditionally handled concerning tax withholdings for "non-foreign sellers," SB 264 and its counterparts across the nation take a more direct approach by limiting the right to property ownership itself.
The introduction of these bills has sparked a series of constitutional questions, including concerns related to federal preemption, equal protection, and due process. In a notable case, SB 264 is currently under legal scrutiny in the federal court of the Northern District of Florida, raising crucial issues that will undoubtedly shape the understanding and application of this legislation as it progresses through the judicial system.
SB 264 provides a comprehensive definition of "Foreign Principals," encompassing various entities and individuals associated with foreign governments, political parties, corporations, and non-citizens. The legislation designates specific "Foreign Countries of Concern," including 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.
You may also like: Corporate Transparency Act: FAQs
Foreign principals, as defined by SB 264, face specific restrictions on property ownership. Notably, agricultural land in Florida is off-limits to foreign principals, and similar prohibitions extend to real estate within 10 miles of military installations or critical infrastructure facilities. The legislation introduces exceptions for "de minimus" ownership interests, primarily applied to publicly traded companies with specific criteria.
SB 264 imposes additional restrictions specific to China, preventing entities and individuals associated with the People’s Republic of China, the Chinese Communist Party, and related foreign principals from acquiring real property in Florida.
The legislation includes exemptions, such as allowing a "natural person" with specific documentation to purchase a limited residential property. Acquisitions through devise, descent, security interests enforcement, or debt collection have a time limit for property transfer. Existing foreign principal property owners must disclose their interests by specific deadlines.
The full impact of SB 264 remains uncertain, but it introduces stringent penalties for non-compliance. Monetary penalties, potential civil forfeiture of property to the state, and criminal consequences for certain violations are outlined. Clear guidance from the Florida Real Estate Commission is awaited, and practical questions regarding leasehold interests, ownership in private real estate funds, and compliance for existing investments remain unanswered.
The implications of SB 264 pose practical challenges for investors and practitioners. Clear guidance is needed for leasehold interests, private real estate funds, and joint ventures involving investors from foreign countries of concern. Sellers are advised to incorporate SB 264-related requirements into their transactions, including affidavits from buyers, representations and warranties, and thorough due diligence processes.
As these laws continue to evolve, both buyers and sellers are urged to stay informed and seek legal counsel to navigate the complexities of real estate transactions within the framework of SB 264 and similar legislation across the United States.
Run your business more efficiently with SAP Business One
Expand Your Reach In Latin America With LATAM Desk Services
