Florida's New "Interests of Foreign Countries" Law - SB 264

Florida recently enacted Senate Bill 264, also known as the "Interests of Foreign Countries" law. The legislation passed the House by a 95-17 vote and passed the Senate with only eight lawmakers opposing its passage. This new state law limits certain foreign persons or entities from purchasing real property within the State of Florida, if the subject property meets certain conditions specified in the new law. The bill also prevents foreign principals from buying agricultural land or having more than a minimal indirect interest in such land, as well as certain real estate in Florida. However, it allows foreign principals to continue owning or retaining such land or property under specified conditions. 'Persons or entities from certain foreign countries of concern', are defined by the legislation as one originating in either the Russian Federation, the People’s Republic of China, the Democratic People’s Republic of Korea, the Islamic Republic of Iran, the Republic of Cuba, the Syrian Arab Republic or the Venezuelan regime of Nicolás Maduro. The bill takes effect on July 1, 2023.

Prohibited Ownership and Acquisition

Under Chapter 2023-33, select individuals from the PRC are prohibited from directly or indirectly owning, having a controlling interest in, or acquiring any additional real property in Florida after July 1, 2023. Similarly, foreign principals from other countries of concern are restricted from acquiring additional agricultural land or real property within 10 miles of military installations or certain critical infrastructure facilities. The designated military installations must be at least 10 contiguous acres, while critical infrastructure facilities include various types such as chemical manufacturing, power plants, seaports, and airports.

Controlling Interest and Definitions

The legislation not only limits ownership but also includes restrictions on having a "controlling interest" in any real property in Florida. Controlling interest is defined as having the power to direct or influence the management or policies of a company. This definition applies to individuals or entities with the right to vote 25 percent or more of the company's voting interests or entitled to 25 percent or more of its profits.

Exceptions to the Law

The law includes certain exceptions to the above listed restrictions. For instance, individuals may possess a "de minimis indirect interest" in land. This exception applies when the ownership interest is a result of owning less than 5 percent of any class of registered equities in a publicly traded company that owns the land, or less than 5 percent in the aggregate across multiple classes of registered equities. Additionally, a non-controlling interest in an entity controlled by a U.S. Securities and Exchange Commission (SEC)-registered investment adviser that is not a foreign entity is also permitted. Other exceptions allow foreign principals to acquire additional real property through inheritance, security interest enforcement, or debt collection. However, they must sell, transfer, or divest themselves of the acquired real property within three years. Furthermore, individuals holding valid non-tourism visas or official documents confirming asylum in the U.S., which authorize legal presence in Florida, are allowed to acquire up to 2 acres of real property not located on or within 5 miles of any military installation, although agricultural land remains restricted.

Grandfather Clause

The legislation includes a grandfather clause for properties acquired before July 1, 2023. Foreign principals who owned or acquired an interest greater than a de minimis interest in real property before this date are permitted to continue owning or holding the property. However, they are prohibited from purchasing or acquiring any additional real property in Florida. Individuals utilizing this exception or any other must register with the Florida Department of Economic Opportunity (FDEO).

Penalties for Violations

The law imposes both criminal and civil penalties for violations. Failure to timely file a registration with the FDEO incurs a civil penalty of $1,000 per day. Additionally, the FDEO or the Florida Department of Agriculture and Consumer Services (FDACS) may initiate a civil action in circuit court to forfeit the real property or any interest acquired in violation of the act. Engaging in a transaction that leads to a violation of the act, such as a foreign principal purchasing or someone knowingly selling real property, may result in a misdemeanor charge. However, violating the section that prohibits select individuals from the PRC from acquiring additional real property can be classified as a felony. Closing agents who possess knowledge of a transaction resulting in a violation may also face penalties.

Legal Challenges to the Law

On May 22, 2023, a lawsuit was filed in the U.S. District Court for the Northern District of Florida by a group of Chinese citizens residing in Florida and a real estate brokerage firm seeking an immediate injunction against implementation of SB 264, claiming that the law violates the Equal Protection Clause, Due Process Clause and Supremacy Clause of the U.S. Constitution and the Fair Housing Act. The plaintiffs suing the state are Zhiming Xu, Yifan Shen, Yongxin Liu, and Xinxi Wang, all Chinese citizens who are lawfully residing in the state. They are joined in the lawsuit by Multi-Choice Realty, LLC, a real estate firm that primarily serves Chinese clients in Florida. The plaintiffs are being represented by the ACLU, the ACLU of Florida, the Asian American Legal Defense Fund, and DeHeng Law Offices PC in coordination with the Chinese American Legal Defense Alliance. The defendants named in the lawsuit are the acting Secretary of the Department of Economic Opportunity Meredith Ivey, the Commissioner of Agriculture Wilton Simpson, and Florida Real Estate Commission chair Patricia Fitzgerald.