Proposed Amendment to Florida Law Restricting Foreign Ownership of Real Property Passes Florida Senate Rules Committee and Heads to Senate for Final Vote | Insights

Authors:

Eric Requenez , David Kaye , John Sottile

On February 21, 2024, a proposed amendment to Sections 692.201 through 205 of the Florida Statute (“SB 264”), designated as Florida Senate Bill 814, passed through the Florida Senate Rules Committee and advanced to the Florida Senate for a final vote. Senator Clay Yarborough (R) introduced the proposed amendment to address several concerns over SB 264, which restricts the ability of a wide range of governmental bodies, persons, and entities referred to as “foreign principals”¹ from or domiciled in any “foreign country of concern”² to directly or indirectly own, have a controlling interest³ in, or acquire any interest in real property in the State of Florida.⁴

The proposed amendment intends to clarify the intent of the proscriptive impact created by SB 264 against purely passive foreign investors who were largely restricted from owning direct or indirect interests in real property. As discussed in more detail below, the proposed amendment introduces a new and narrower definition of “controlling interest” to which the SB 264 restrictions apply such that, unless the foreign principal owns or holds a “controlling interest,” the ownership of real property by such foreign principal generally is permitted. The proposed amendment also adds several new exemptions for individuals domiciled in China, which are not addressed in this Alert.

The proposed amendment amends Section 692.201 of SB 264 to include a new defined term of “controlling interest,” and amends Section 692.202 (which restricts ownership of agricultural land), 692.203 (which restricts ownership of land on or within ten miles of any military installation or critical infrastructure facility), and 692.204 (which restricts ownership of any real property by Chinese government and political parties, entities organized under the laws of or having their principal place of business in China, and certain persons domiciled in China) to replace the original ownership restrictions by the prohibited parties of any interest other than a “de minimus indirect interest” with the newly defined “controlling interest,” so that the only ownership interests that will be restricted and subject to registration by each of the sections of SB 264 will be “controlling interests.”

The proposed amendment defines a “controlling interest” as “the possession of the power to control access to or the use or management of a parcel of real property through ownership interests in or securities of a business entity or entities that own the parcel of real property, or through direct ownership interests in a parcel of real property. A business entity or person who directly or indirectly has an ownership interest of 25 percent or more of a parcel of real property is presumed to have a controlling interest. The term does not include a de minimus indirect interest.”

The proposed amendment also amends each of the individual sections of SB 264 to add an exemption for the prohibited parties to obtain “controlling interests” in the applicable real property if the ownership of such property is for the primary purpose of development and sale of residential units, and the restricted party provides an affidavit to the Department of Commerce attesting to such, and that the residential units will be offered for sale after the acquisition of the first construction permit.

If the proposed amendment passes by Florida Senate vote, the amendments summarized above would resolve many of the pressing concerns, in particular those applicable to investors in private real estate funds, surrounding the applicability of SB 264 to purely passive investors in real estate transactions in Florida by clearly defining those investors and exempting them from the restrictions and registration requirements of the law. It is unclear when such final vote in the Florida Senate will occur, but we are continuing to monitor the status and developments associated with the proposed amendment. The full text of the proposed amendment can be found here.

A “foreign principal” means:
1. The government or any official of the government of a foreign country of concern;
2. A political party or member of a political party or any subdivision of a political party in a foreign country of concern;
3. A partnership, association, corporation, organization or other combination of persons organized under the laws of or having its principal place of business in a foreign country of concern, or a subsidiary of such entity;
4. Any person who is domiciled in a foreign country of concern and is not a citizen or lawful permanent resident of the United States; or
5. Any person, entity or collection of persons or entities described in subclauses (a) through (d) 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 “foreign country of concern” includes China, Russia, Iran, North Korea, Cuba, Venezuela or Syria (including any agency or other entity with significant control of such foreign country of concern).
A “controlling interest” means “the power to direct or cause the direction of the management or policies of a company, whether through the ownership of securities, by contract, or otherwise. A person or entity that directly or indirectly has the right to vote 25 percent or more of the voting interests of the company or is entitled to 25 percent or more of its profits is presumed to have a controlling interest.”
The individual sections of SB 264 place separate restrictions on real property interests in agricultural land, land on or within ten miles of any military installation or critical infrastructure facility, and any real property interests owned by Chinese government and political parties, entities organized under the laws of or having their principal place of business in China, and certain persons domiciled in China.