In May 2023, Florida became among the first states to limit select persons from "foreign countries of concern" from directly or indirectly owning, having a controlling interest in or acquiring an interest in Florida real property, subject to certain exceptions. Sellers who knowingly sell Florida real property in violation of the law may also commit a crime. On Aug. 7, 2024, the Florida Department of Commerce (DOC) proposed the last set of rules interpreting the law. They are generally consistent with prior rules, open a new registration window for affected foreigners and trigger an avenue for affected persons to exercise administrative procedural rights.
Background
Florida enacted Senate Bill (SB) 264 in May 2023, creating Part III of Chapter 692, Florida Statutes, regulating purchases of three categories of real property: 1) agricultural land, 2) property near military installations and critical infrastructure facilities and 3) other property. Prohibited persons from the People's Republic of China (PRC) may not buy the last category of property, whereas prohibited persons from the PRC, Russian Federation, Islamic Republic of Iran, Democratic People's Republic of Korea, Republic of Cuba, Venezuelan regime of Nicolás Maduro and Syrian Arab Republic may not buy the first two categories of property.
The prohibited persons include government officials, party members, entities organized or with their principal place of business in these countries, subsidiaries of these entities and persons domiciled there and not a citizen or lawful permanent resident of the U.S. They may not own a direct or an indirect interest in an entity that has equitable or legal title to the property.1 In addition, they may not have a controlling interest, meaning 25 percent or more of the voting interests or profits of the entity, or the power to direct or cause the direction of the management or policies of an entity.2
Penalties for violating Part III of Chapter 692, Florida Statutes, can be severe. DOC may initiate a civil action in circuit court to cause the forfeiture to the state of any real property owned or acquired in violation of the law. A prohibited person who purchases or acquires real property or any interest therein commits a crime, as does a seller who knowingly sells real property in violation of the law. At the time of purchase, a buyer must provide an affidavit averring that it is not a prohibited person, subject to false attestation penalties.
New Rules
On Aug. 7, 2024, DOC proposed rules interpreting regulation of the third category of real property.3 These newest proposed rules are generally consistent with the first set of rules that DOC proposed on Sept. 20, 2023, and that became final on Jan. 4, 20244; however, they differ from the final regulations of the Florida Department of Agricultural and Consumer Services (DACS) concerning agricultural land proposed on Oct. 27, 2023, and that became final on April 4, 2024.5 The Florida Administrative Procedure Act enables certain persons to become involved in the rulemaking process. Some of the available administrative avenues must be exercised without delay.
The new DOC rules recognize exemptions to the ban on prohibited persons owning real property. For example, an exception is available to prohibited persons with a passive interest in real property,6 enabling prohibited persons to foreclose on security interests in property and to retain the property for three years,7 and for prohibited persons who contracted to purchase or purchased real property before July 1, 2023 – the effective date of the law.8 The passive ownership exception prevents the prohibited person from having the power to direct or cause the direction of the management or policies of the entity with respect to the interest in property.9
Prohibited persons must register with DOC in certain circumstances, such as if they have a grandfathered interest in property or foreclose on property.10 The registration deadline for property acquired before the effective date of the rule will be 30 days thereafter.11 The new DOC rules indicate that any prohibited persons who registered an interest in real property near military installations and critical infrastructure facilities are not required to register again under the new rules.12
Legal Challenges to the Law
Meanwhile, the U.S. Court of Appeals for the Eleventh Circuit has not yet ruled in Shen v. Simpson on the merits of a challenge to the constitutionality of Part III of Chapter 692. In addition, a second challenge, styled National Fair Housing Alliance, Inc. v. Secretary of Commerce, has been filed in the U.S. District Court for the Southern District of Florida.
Notes
1 Proposed R. 73C-61.001(8), Fla. Admin. Code.
2 Proposed R. 73C-61.001(2), Fla. Admin. Code (citing § 287.138(1)(a), Fla. Stat.).
3 Proposed R. 73C-61.001 et seq., Fla. Admin. Code.
4 R. 73C-60.001, et seq., Fla. Admin. Code.
5 R. 5J-27.001, et seq., Fla. Admin. Code.
6 Proposed R. 73C-61.001(4)(b), Fla. Admin. Code.
7 § 692.204(5), Fla. Stat.
8 Proposed R. 73C-61.002, Fla. Admin. Code.
9 Proposed R. 73C-61.001(4)(b), Fla. Admin. Code.
10 § 692.204(4)(a), Fla. Stat.; Proposed R. 73C-61.003(3)(a), Fla. Admin. Code.
11 Proposed R. 73C-61.003(3)(a), (4)(b), (5)(b), Fla. Admin. Code.
12 Proposed R. 73C-61.003(2), Fla. Admin. Code.
