Recently, Florida’s Republican-led state legislature has been very active in pushing through laws that will reshape how financial institutions do business in the state of Florida. Most of the attention has centered around an anti-ESG (Environmental, Social & Governance) bill that compelled state-chartered banks to reevaluate who they choose to do business with, eliminate any internal policy references to prohibited customer types, including, for example, manufacturers and distributors of firearms or ammunition, and subsequently implement procedures to attest to full compliance with the law’s requirements on an annual basis. But another law that has drawn comparatively little noise, SB 264, also known as the Interests of Foreign Countries bill, merits a closer look.

The law, which cleared the Florida House and Senate earlier this year, and became effective on July 1, 2023, restricts, among other things, real property ownership in Florida by foreign principals, defined as “certain individuals and entities associated with foreign countries of concern.” Those countries include China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria. The property restrictions cover agricultural land, any property within ten miles of any military installation or critical infrastructure facilities in Florida, such as airports or sea ports, and prohibits non-US citizens or permanent residents from China from purchasing or acquiring any interest in real property in Florida.

Florida is the first state to sign into law a ban on Chinese citizens buying real estate property. A similar bill proposed earlier this year in Texas was eventually voted down.

The Florida law’s framework attaches both criminal and civil penalties to infringements. Entities or individuals failing to adhere to stipulated ownership constraints may be subject to civil penalties, and governmental bodies retain the prerogative to initiate legal proceedings to ensure compliance. Penalties encompass potential forfeiture of real property or any acquired interest that violates the new law. SB 264 also requires that purchasers of real estate property provide an affidavit that states that they are not a party that is subject to the restrictions imposed by the new law. In the case of Chinese investors, it is the strictest. Weeks after the bill was signed into law, a civil suit by a group of Chinese persons and a real estate brokerage firm was filed in the Northern District of Florida, underscoring the intricate interplay of property rights, foreign policy considerations, and constitutional safeguards. The Department of Justice filed a statement of interest in support of the Florida lawsuit, known as Shen v. Simpson¹, adding that SB 264 violates the Fair Housing Act because it discriminates based on a person’s national origin, as well as the Equal Protection Clause of the 14th Amendment. However, the initial request for injunctive relief was denied by the court. The judge ruled that the plaintiffs had not shown substantial likelihood of success on the merits because they must have first established that they had suffered injuries as a result of the law. The case is currently being appealed to the 11th US Circuit Court of Appeals.

With the other foreign countries mentioned in SB 264, the law restricts real estate purchases by any members of a political party of those countries, but also a foreign person from those countries with any interest in any “partnership, association, corporation, organization, or other combination of persons organized under any laws of or having its place of business in a foreign country of concern, or a subsidiary of such entity.”

This aspect of the law may be tricky for banks in South Florida that cater its lending practices to the growing number of Venezuelan-Americans, many of whom may still have legal business ties in their home country. According to Pew Research Center, the Venezuelan-born population residing in the United States has grown substantially, from 75,000 to 490,000, in the last two decades through 2021. Nearly half of that population lives in South Florida, with the largest concentration in Miami-Dade and Broward Counties.

“Generally speaking, we have not seen an impact yet. It’s a new law and we are all trying to figure out how to navigate that,” says Calixto Garcia-Velez, President and CEO of Miami-based Banesco USA, who acknowledged that the law could affect their day-to-day lending operations over time. “It could get complicated.”

SB 264 reverberates beyond the realm of property ownership, also casting its influence on investments and immigration. Foreign nationals possessing specific visas may find themselves ineligible to procure residential property within predefined parameters. Conversely, non-immigrant individuals may encounter complexities when engaging in business operations associated with real estate transactions. As this continues to play out, stakeholders, including Florida banks, must carefully navigate the intricacies of these constraints, the implications for foreign investments, and the broader economic impact, and should remain a subject of continual monitoring and observation to minimize the risk associated with any potential loss of business.

As this continues to play out, stakeholders, including Florida banks, must carefully navigate the intricacies of these constraints, the implications for foreign investments, and the broader economic impact, and should remain a subject of continual monitoring and observation to minimize the risk associated with any potential loss of business.

¹Case 4:23-cv-00208