Transforming the Sunshine State: Exploring the Impact of Senate Bill 264 on Foreign Ownership in Florida’s Real Estate
On May 8, 2023, Florida Governor Ron DeSantis signed Senate Bill 264 (SB 264) into law, which limits select persons from the People’s Republic of China (PRC) from owning, having a “controlling interest” in, or acquiring additional real property in Florida on and after July 1, 2023. In addition, the law limits select persons from other “foreign countries of concern” from owning, having a controlling interest in, or acquiring additional agricultural land as well as land near military installations and critical infrastructure facilities.
The law aims to limit the sale and purchase of real estate by foreign principals from foreign countries of concern. “Foreign countries of concern” include the PRC, Russian Federation, Islamic Republic of Iran, Democratic People’s Republic of Korea, Republic of Cuba, Syrian Arab Republic, and the Venezuelan regime of Nicolás Maduro.
The law defines a “foreign principal,” as (1) a government, government official, or member of a political party from any foreign country of concern; (2) a corporate entity or subsidiary organized or having a principal place of business in any foreign country of concern; (3) a person domiciled in a foreign country of concern, and who is not a citizen or lawful permanent resident of the United States; or (4) any person or party described in this paragraph that has a “controlling interest” in an entity or subsidiary formed for the purpose of owning real estate in Florida.
There is an exception for foreign principals, who are natural persons, to purchase one residential property up to two acres in size if:
- The property is not located on or within five miles of any military installation;
- The person has a United States visa that is not limited to tourism or has official documentation confirming that the person has been granted an asylum in the United States; and
- The purchase is in the name of the person who holds the Visa or official documentation.
The law also permits a de minimis indirect interest if ownership is derived from equities in publicly traded companies owning the land. Additionally, Section 204 of the bill takes a more stringent stance on the PRC, generally preventing all Chinese investors from purchasing real estate based on specific definitions related to China’s government, political parties, partnerships, corporations, or domiciled individuals.
Many questions have arisen since the law’s enactment. Here are a few that we are considering:
- How will this bill impact Florida real estate prices and the state’s economy?
- How will this bill impact the Florida’s perception among foreign investors and international business communities? It may be seen as a signal of protectionism or reduced openness to foreign investment, potentially influencing decisions by international companies to establish operations within the state.
- How will developers and construction companies be impacted? A decrease in foreign investment could lead to a slowdown in the real estate market, which would impact developers and construction companies that often depend on significant international investment and capital.
- What could be the trickle-down effect of this law? If foreign investment in real estate significantly decreases, local economies might experience a decline in related industries such as property management, rental services, and supporting businesses.
The passing of Senate Bill 264 may mark a turning point for Florida’s real estate market and the state as a whole. As time progresses, the effects of this bill will become clearer, potentially leading to a transformative shift in Florida’s real estate landscape.
Thanks to Alina Mizerniuc, Kate Rypina, and Jake Lisowski for writing this blog post!
Source: Florida Senate Bill 264
Courtney is a Tax Principal in CLA's Real Estate industry group and has more than 17 years of experience providing accounting, tax and consulting services to real estate owners, operators and developers. She also consults with high net-worth individuals and owners of closely-held businesses on all aspects of tax planning.
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