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Foreign Ownership Laws Generating Questions and Concerns for Real Estate Settlement Industry

Thursday, January 25, 2024 8:33 PM | Anonymous

Foreign Ownership Laws Generating Questions and Concerns for Real Estate Settlement Industry

In the ever-evolving landscape of real estate, several states are considering taking action to limit foreign ownership of properties. Here in California, the introduction of Assembly Bill 475 (AB-475) in California and Senate Bill 264 (SB-264) in 2023 stirred discussions on national security, individual rights, and the potential impact on the real estate industry.

AB-475, a California bill introduced in 2023, proposes restricting foreign acquisitions of real estate within a 50-mile radius of military bases. The aim is to safeguard areas surrounding the California National Guard and U.S. military installations. Similarly, SB-224 targets agricultural land, signaling the move to shield its farmland from foreign control. Though neither of these bills made it out of the legislature in 2023, it is reasonable to believe that these or similar bills will be up for consideration in California in 2024.

Should these bills pass, real estate companies involved in property transactions, such as title and escrow firms, will likely be put in a position of vetting owners to determine whether ownership is barred by laws like these. Thus, compliance with these new regulations must be added to the long list of rules and regulations the settlement industry must navigate to complete a transaction.

On the other side of the country, Florida considered and passed a similar law, namely Senate Bill 264 (SB-264) in May of 2023. Florida’s law prohibits individuals from certain countries, including Russia, China, North Korea, Iran, Venezuela, Syria, and Cuba, from owning property in proximity to military installations. The enactment of SB-264 places an additional responsibility on property sales companies to verify their clients’ national origins when dealing with properties in these restricted zones.

Aside from the operational and practical issues created by these types of laws, there are concerns about discrimination engendered too. Critics argue that laws like this infringe upon Constitutional rights and the as it relates to residential property, the Fair Housing Act. The focal point of this debate is the delicate balance between safeguarding national security and upholding individual rights, with the big question being whether Florida is overstepping federal boundaries with this legislation.

A pivotal case to watch will be Shen v. Simpson, where Chinese residents in Florida are challenging the constitutionality of SB-264. Their contention revolves around the perceived unfairness and specific targeting of individuals based on their nationality. Notably, major legal entities and even the U.S. Department of Justice are aligning with this challenge, asserting that the law is overly broad and discriminatory.

As California and other states grapple with the challenge of regulating ownership of vital lands around military bases and farmlands, the repercussions extend beyond the legal realm. The intersection of national security imperatives and individual liberties creates a complex tapestry that is redefining the dynamics of the real estate sector. As these laws and legal battles continue to unfold, the real estate industry finds itself at the forefront of a transformative period, necessitating a vigilant eye on the horizon for any substantial changes.

Jennifer Felten, Esq.


2535 Townsgate Road, Suite 207

Westlake Village, CA 91361

Telephone: (805) 265-1031

Facsimile: (805) 265-1032

E-mail: jennifer@relawapc.com

Website: www.relawapc.com

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