Florida Legislation to Block Foreign Investors

On May 8th, Florida passed legislation prohibiting Chinese investors from acquiring specific interests in real property throughout Florida. This law will take effect on July 1, and Chinese investors with existing ties to Florida real estate must register those interests with the state government by January 2024. The law will impede companies from China seeking to grow their geographic footprint in Florida. Still, it will also introduce significant legal uncertainty and consequences for US companies with Chinese shareholders and the private equity industry.

This law is part of a more significant trend of state legislative proposals across the country that seek to impose restrictions on China's acquisition of real estate in response to mounting national security concerns with land ownership. At present, at least 20 states have enacted laws that prohibit or restrict foreign ownership and investments in certain types of real property within the state, with at least 12 other states considering such bills. In 2023 alone, the states of Arkansas, Florida, Idaho, Mississippi, Montana, North Dakota, Utah, Virginia, and South Dakota signed varying restrictions on foreign ownership of real property into law.

The constitutionality of these proposals is still being determined, as foreign investment restrictions such as these could be viewed as an area of the law preempted by federal statute, given the analogous role already vested in the Committee on Foreign Investment in the United States. At the federal level, the Biden administration has also recently proposed new rules to expand the scope of the committee's real estate jurisdiction to include military sites in North Dakota, South Dakota, California, Iowa, and Texas. Proposed legislation such as the Foreign Adversary Risk Management Act, or FARM Act, and the Security and Oversight of International Landholdings Act also seek to address these concerns. Considering these new rules in context with current and future investments, investors should be knowledgeable of these foreign ownership restrictions.

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