The Florida Legislature recently passed Senate Bill 264 (SB 264), which Governor Ron DeSantis signed into law on May 8, 2023. SB 264 notably presents several new restrictions on persons or entities from certain foreign countries of concern, which are defined as 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 or the Syrian Arab Republic.
SB 264 particularly (1) prohibits governmental entities in Florida from contracting with any foreign country of concern, (2) prohibits governmental entities in Florida from entering into any contract or agreement granting economic incentives to a foreign country of concern, (3) prohibits the ownership of agricultural land and certain asset classes (such as real property located near a military installation or critical infrastructure) by foreign principals of any foreign country of concern, and (4) largely restricts most ownership by foreign principals from the People’s Republic of China.
There are only minimal carve-outs to these restrictions; as such, the implications of SB 264 will be widely felt by the Florida real estate industry.
RESTRICTIONS ON OWNERSHIP OF AGRICULTURAL LAND
SB 264 creates §§ 692.202-204. Newly enacted § 692.202 provides that a foreign principal may not directly or indirectly own, have a controlling interest in, or acquire agricultural land or any interest therein other than a de minimus indirect interest. “Agricultural land” is defined as land classified as agricultural under Florida Statute § 193.461. Florida Statute § 193.461(b) states that “[s]ubject to the restrictions specified in this section, only lands that are used primarily for bona fide agricultural purposes shall be classified agricultural. The term ‘bona fide agricultural purposes’ means good faith commercial agricultural use of the land.”
A foreign principal has a de minimus indirect interest if any ownership is the result of the foreign principal’s ownership of registered equities in a publicly traded company owning the land and if the foreign principal’s ownership interest in the company is either (a) less than 5% of any class of registered equities or less than 5% in the aggregate in multiple classes of registered equities; or (b) a 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.
Section 692.202(1) carves out agricultural land owned before July 1, 2023, but creates a registration requirement for foreign principals who continue to own agricultural land after such date. Failure to timely register will subject the foreign principal to a $1,000 civil penalty for each day that the registration is late and could result in the Florida Department of Agriculture and Consumer Services (Department of Agriculture) placing a lien against the unregistered agricultural land for the unpaid balance of any late penalties. Section 692.202(5)(a) also mandates that, at the time of purchase, a buyer of agricultural land must provide an affidavit under penalty of perjury attesting that the buyer is not a foreign principal and is in compliance with § 692.202 requirements. It is worth noting that failure to comply with this statutory requirement does not affect the title or insurability of the land.
Additionally, § 692.202(6) contains numerous consequences for ownership of agricultural land in violation of the section, including (1) forfeiture to the state, (2) a civil action by the Department of Agriculture for forfeiture, (3) the recording of a lis pendens, (4) a final judgment of forfeiture vesting title to the land in the state, (5) sale of the land previously subject to forfeiture, and (6) an ex parte order of seizure in cases of clear and present danger to the state. Moreover, knowingly violating the statute is a misdemeanor of the second degree.
RESTRICTIONS ON OWNERSHIP OF REAL PROPERTY NEAR MILITARY INSTALLATIONS AND CRITICAL INFRASTRUCTURE FACILITIES
SB 264 also creates § 692.203, which prohibits the purchase of real property around military installations and critical infrastructure facilities by foreign principals. Under this provision, a foreign principal may not directly or indirectly own, have a controlling interest in, or acquire by purchase, grant, devise, or descent any interest (except a de minimus indirect interest) in real property on or within 10 miles of any military installation or critical infrastructure facility in Florida.
Despite the restrictions in § 692.203(1), SB 264 also includes an exception—similar to that in § 692.202(2)—permitting a foreign principal to continue holding an interest in such property if they directly or indirectly owned the property before July 1, 2023. Likewise, § 692.203 includes registration requirements (albeit with the Florida Department of Economic Opportunity, not the Department of Agriculture) and imposes civil and criminal penalties similar to those in § 692.202.
RESTRICTION ON OWNERSHIP OF REAL PROPERTY BY THE PEOPLE’S REPUBLIC OF CHINA
SB 264 § 692.204 prohibits the purchase or acquisition of real property by the People’s Republic of China and certain other enumerated persons and entities as set forth below. Specifically, the following persons or entities may not directly or indirectly own, have a controlling interest in, or acquire by purchase, grant, devise, or descent any interest (except a de minimus indirect interest) in real property in Florida:
The People’s Republic of China, the Chinese Communist Party or any official or member of either group.
Any other political party or member of a political party or a subdivision of a political party in the People’s Republic of China.
A partnership, association, corporation, organization or any other combination of persons organized under the laws of or having its principal place of business in the People’s Republic of China or a subsidiary of such entity.
Any person who is domiciled in the People’s Republic of China and is not a citizen or lawful permanent resident of the United States.
Any person, entity or collection of persons or entities described in subparagraphs 1 through 4 as having a controlling interest in a partnership, association, corporation, organization, trust or any other legal entity or subsidiary formed for the purpose of owning real property in Florida.
A “de minimus indirect interest” is defined similarly to the above SB 264 statutory provisions. Unlike the other newly created statutes in SB 264, however, it seems that § 692.204(1)(a)5. expands SB 264’s reach by including applicability to a “collection of persons or entities . . . having a controlling interest,” as described in § 692.204(1)(a). This language implies that the de minimus interests collectively could not have a controlling interest in any such legal entity that owns real property in Florida.
Notwithstanding the above property ownership restrictions, SB 264 § 692.204(2) permits a natural person described in (1)(a) to purchase one residential real property that is up to two acres in size if (1) the parcel is not on or within five miles of any military installation in this state; (2) the person has a current verified US visa authorizing them to be legally present within this state; and (3) the purchase is in the name of the person who holds the visa or official documentation.
Additionally, as with § 692.202(3)(a) and § 692.203(3)(a), § 692.204 creates a registration requirement with the Department of Economic Opportunity. Likewise, § 692.204 mandates that the buyer of real property submit an affidavit under penalty of perjury attesting to the fact that the buyer is not a person or entity listed in (1)(a) and is in compliance with the requirements of this section. Failure to comply with this statutory requirement does not affect the title or insurability of the land. Section 692.204 also imposes civil and criminal penalties for violations of this provision, although the criminal penalties are different from those mentioned above. § 692.204(8) particularly states that a violation of this section constitutes a felony of the third degree while § 692.204(9) states that a person who knowingly sells real property or any interest therein in violation of this section commits a misdemeanor of the first degree.
SB 264 presents many challenges for foreign nationals and entities who wish to own (or already own) real property in Florida. McDermott Will & Emery has already begun to advise clients on navigating the complexities of SB 264 and encourages anyone who believes they may be impacted by the bill to immediately review their organizational structure and ownership, as well as the location of every real estate project in Florida. For assistance with this review, please contact the authors of this article.