Realtors, bankers, and closing agents, have you updated your closing requirements to include this affidavit? As of July 1, 2023, “foreign principals” from the designated “foreign countries of concern” may not directly or indirectly own, have a controlling interest in, or acquire by purchase, grant, devise, or descent agricultural land or real property on or within ten miles of either a military installation or a critical infrastructure facility. Sections 692.201-.205 of the Florida Statutes detail these prohibitions and further define the types of property that apply.
A “foreign principal” is defined as either: (1) a person whose permanent residence is in a foreign country of concern and is not a U.S. citizen or a lawful permanent resident of the U.S; (2) political parties from the foreign country of concern and their members; (3) a business entity that is organized and principally located in the foreign county of concern; or (4) any such person with a controlling interest in a legal entity formed for the purpose of owning real property in the State. The following countries are designated as a foreign country of concern:
(A) People’s Republic of China;
(B) the Russian Federation;
(C) the Islamic Republic of Iran;
(D) the Democratic People’s Republic of Korea;
(E) the Republic of Cuba;
(F) the Venezuelan regime of Nicolás Maduro; and
(G) the Syrian Arab Republic
Foreign principals from China are unlike the other foreign principals because they may not own, have a controlling interest in, or acquire any property in the State of Florida. This difference is currently being challenged through a lawsuit that was filed in the United States District Court for the Northern District of Florida. There are other key takeaways from this law. For example, the law sets out an exemption for foreign principals who own a de minimus interest. Foreign principals who owned property prior to July 1, 2023, must register with the State. However, the registration process has not been finalized. Violating this new law can result in criminal penalties and the State would have the right to pursue forfeiture against any property owned in violation of the law.
Buyers must provide an affidavit at the time of purchase that states that the Buyer is either (1) not a foreign principal and in compliance with the law; or (2) not a foreign principal from a foreign country of concern. Because the law has not made clear who is expected to draft this form, local realtors and closing agents have faced uncertainty regarding the path forward.
One other area of uncertainty involves how to determine when a property is within a ten-mile radius of critical infrastructure or a military installation. There are no maps to turn to that clearly depict the boundaries of critical infrastructure or military installations. In particular, for Okaloosa County and its surrounding area, it could be presumed that the affidavit will be required, as it is likely that most property is within a ten-mile radius of a military installation.
But who should prepare the affidavit? If the affidavit is provided to the Buyer by the realtor after the contract is signed, all parties will be able to ensure that the sale complies with the law prior to reaching the closing table. If realtors assist in providing this affidavit at that time, they can help safeguard against any possible liability either they or their clients might face when selling property. Thus, prudent realtors, bankers, and closing agents should make it a part of their closing procedure to ensure that the required affidavit is executed, that the newly updated Florida Realtors/Florida Bar contract is used. It will also be important to stay updated on this law, as there will likely be new developments over the next few months.
If you would like more information regarding how the affidavit should be formatted, the Florida Real Estate Commission will be holding a workshop on creating the affidavit on September 12, 2023, at 1:00 PM EST via LiveStream. Our office also has these forms available.
DISCLAIMER: This article is intended to be a brief overview of the statute and is not intended as and does not constitute legal advice or solicitation of a prospective client. You should consult the statute for more precise language.