Florida Senate Bill No. 264 (the Act) will take effect on July 1, 2023. Most notably for Florida's expansive real estate industry, the Act creates Part III of Chapter 692, Florida Statutes, which provides that certain persons and entities from China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria "may not directly or indirectly own, have a controlling interest in, or acquire by purchase, grant, devise, or descent" (collectively for purposes of this writing, "Ownership") a sweeping range of real property in Florida. Moreover, the new portions of Chapter 692 will create mandates for Florida real estate transactions and legal risks for buyers and sellers of Florida real estate who are not mindful of the new provisions.
Prohibitions Against Foreign Ownership of Florida Real Estate
Upon effect, Chapter 692 will most broadly prohibit Ownership of Florida real estate by China, certain persons domiciled in China, and Chinese affiliated governmental and business entities, barring narrow exceptions. Chapter 692 will also prohibit Ownership of Florida agricultural land or land near military installations or critical infrastructure facilities, such as refineries, power plants, and airports, by foreign principals (i.e., certain governments, persons, and entities from Russia, Iran, North Korea, Cuba, Venezuela, and Syria).
Penalties and Requirements
Chapter 692 has "teeth" in the form of a range of civil and criminal penalties that may apply to buyers and sellers. For example, the state may seek forfeiture of real property owned or acquired in violation of Chapter 692. Further, buyers may be criminally liable for violating Chapter 692 and sellers may be criminally liable if they knowingly sell to a buyer who violates it.
Prohibited persons and entities that acquire Florida real estate before July 1, 2023, may continue to own or hold such property. However, such owners must register such ownership with the state by December 31, 2023 (January 1, 2024, in the case of agricultural land), or risk a $1,000 per day civil penalty for each day the registration is late under the statute. Each late penalty provision in Chapter 692 also provides that these penalties can become a lien on the unregistered property.
In addition to posing legal risks for buyers and sellers, Chapter 692 will require additional documentation for the sale of Florida real estate. All buyers of real estate in Florida will be required to complete at least one affidavit under penalty of perjury pursuant to chapter 692. The new law calls for the Florida Real Estate Commission to promulgate rules establishing the form for such affidavits. Additionally, the Florida Real Estate Commission, Department of Agriculture and Consumer Services, and Department of Economic Opportunity will be responsible for promulgating administrative rules to implement the new law, including rules for registering ownership of land acquired before July 1, 2023, and permitted acquisitions after July 1, 2023.
Exceptions
Chapter 692 will allow certain exceptions to its prohibitions. For example, prohibited persons or entities will be allowed to own or purchase a de minimis indirect interest in Florida real property through ownership of registered equities in a publicly traded company if such ownership in the company is either (a) less than five percent of any class of registered equities or less than five percent in the aggregate of multiple classes of registered equities or (b) a noncontrolling interest in an entity controlled by a company that is both registered with the United States Securities and Exchange Commission as an investment advisor and is not a foreign entity. However, chapter 692 does not define noncontrolling or controlling interests leaving the scope of this exception unclear.
Additionally, certain natural persons with specified United States visas may purchase one residential real property up to two acres in size and more than five miles from military installations in Florida; provided, however, that any such acquisition must be registered with the state within 30 days. With some exceptions, after July 1, 2023, prohibited persons or entities may acquire real property governed by the terms of chapter 692 by devise or descent, through the enforcement of security interests, or through the collection of debts, provided that such ownership is divested within three years of the acquisition.
Court Challenges
The new law has not gone unchallenged. Four citizens of China living in Florida and a real estate brokerage primarily serving Chinese and Chinese American customers filed a federal lawsuit in the U.S. District Court for the Northern District of Florida against the Florida Commissioner of Agriculture, Acting Florida Secretary of Economic Opportunity, and Chair of the Florida Real Estate Commission challenging the law as discriminatory and unconstitutional. The plaintiffs in the lawsuit have also filed a motion for a preliminary injunction that awaits the court's ruling as of the date of this writing.
Looking Ahead
Every prospective buyer or seller of Florida real estate should be aware of this new law and consider how it may affect their real estate contracts and transactions. Buchanan's real estate attorneys are prepared to assist clients in navigating the various mandates posed by Chapter 692.
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