On July 1, 2023, Florida SB 264 took effect in Florida. SB 264 restricts foreign ownership of real property throughout the State of Florida. The purpose of the law is purported to protect American agricultural land and other sensitive areas of national interest from hostile foreign powers. The law may face constitutional challenges in Federal Court. However, the law has taken effect and has wide-reaching impacts. Notably, people or entities from the People’s Republic of China are entirely restricted from purchasing real property in Florida, with very limited exceptions – including de minimus indirect interests of less than 5% of any class of registered equities or 5% in the aggregate in multiple classes of registered equities; or (b) noncontrolling interest in an entity controlled by a company that is both registered with the US Securities and Exchange Commission as an investment adviser under the Investment Advisers Act of 1940, as amended and is not a foreign entity. Moreover, JV, LLC, or LP investors from China are also restricted from purchasing real property in Florida, unless they have a non-controlling interest in the investment vehicle entity. Notably, if the lender is a Chinese bank or entity, the law applies to the lender’s interest in the real property as well.
The new law also applies to individuals and entities from other "foreign countries of concern" - namely, Russia, Iran, North Korea, Cuba, Venezuela, and Syria. Individuals or entities from these countries are prohibited from purchasing (1) agricultural land or (2) real property within 10 miles of any military installation or "critical infrastructure facility" in the state. "Critical Infrastructure Facility" means any of the following, if it employs measures such as fences, barriers, or guard posts that are designed to exclude unauthorized persons, including (1) chemical manufacturing facilities; (2) refineries; (3) electrical power plants; (4) water treatment facilities; (5) liquid natural gas terminals; (6) telecommunications central switching offices; (7) gas processing plants; (8) seaports; (9) spaceports; and (10) airports.
Real property owned or acquired in violation of the new law may be forfeited to the State of Florida. Sellers and buyers both can face fines for violations, and knowing and willful violations are considered a felony.
Most importantly for real estate developers, lenders, and investors, the new law mandates that each purchaser of real property in Florida must provide an affidavit confirming that the purchaser (1) is not a person or entity prohibited by this new law from purchasing real property in Florida and (2) is in full compliance with the requirements of the new law. The Florida Real Estate Commission (FREC) is responsible for establishing the required affidavit form, but the FERC has not published its form yet. However, Title Companies have published their own affidavit forms, and some are requiring these forms to be submitted as a condition of issuing a title policy. The affidavit will apparently be submitted by Title to the FERC, the Florida Department of Economic Opportunity, and/or the Florida Department of Agriculture, respectively, after closing. However, from the statute itself, it’s not entirely clear where the affidavit will be submitted. I expect that the FERC will publish more rules on the affidavit’s submission upon publishing the affidavit form. Failure to comply with the affidavit requirement should not affect the title or insurability of the land itself; however, there are serious civil and criminal penalties for violations of this provision.
Morris Manning & Martin LLP's Real Estate Group has been researching this new law and is happy to assist developers, investors, and lenders navigate compliance.
