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The Importance of Knowing Your Buyer

July 26, 2023 Real Estate Real Estate Blog

On May 8, 2023, Governor Ron DeSantis signed into law Florida Senate Bill 264, which prohibits the acquisition of certain types of Florida real estate by persons from so-called “Foreign Countries of Concern” (China, Russia, Iran, North Korea, Cuba, Venezuela, and Syria). The types of restricted property include agricultural land, and land located within ten (10) miles of military installations or critical infrastructure facilities (ex: airport, electrical power plant, etc.).

For those domiciled in China, the law is even more restrictive: it prohibits their ownership of any type of Florida real estate.  This law does not apply to U.S. citizens or lawful permanent residents.

The consequences for violations are steep. A “foreign principal” who purchases Florida real estate in violation of the law faces criminal liability, and the property is subject to forfeiture to the State.  Sellers and closing agents face potential liability if they knowingly participate in a prohibited transaction.   

Real estate agents are often the first individuals with whom a potential buyer interacts when embarking on the buying process. As such, agents have the opportunity to take the lead in helping prevent unwitting foreign buyers from running afoul of this new law.

An open conversation at the outset about a potential buyer’s country of residence can avert a crisis later.  If the client is from a Foreign Country of Concern, the agent should recommend they immediately seek counsel, and certainly before entering into a purchase agreement of any sort. 

Sometimes, however, deals come together so quickly there is not much time to become fully acquainted, much less comfortable that the potential purchase is legal. In this instance, consider adding language to the purchase agreement that should it be determined the purchase violates the law, the contract shall automatically terminate, and the buyer receive a refund of all earnest money deposits.   

Williams Parker has adopted a comprehensive set of procedures to comply with SB 264, including informing buyers of its requirements at the outset of their transactions, and making compulsory inquiries about – and subsequently documenting – buyers’ lawful permanent residency.  While cash purchasers now face the need to provide affidavits about their citizenship, we offer multiple alternatives to help make this as hassle-free as possible.  

SB 264 is a prime example of the unending pressure for agents to know, understand and do more and more in their practices.  At Williams Parker, we understand how to navigate the landmines an unsuspecting agent can encounter when faced with new and potentially threatening issues like these.  Staying ahead of the curve has never been more important, and with nearly 100 years of marketplace experience, Williams Parker is the obvious choice for counsel when looking ahead to a long and successful future.

NOTE: As this article was composed SB 264 had been challenged as unconstitutional.  The Plaintiffs in the lawsuit brought a motion for preliminary injunction which, if granted, would provide temporary relief until the case is resolved.  A hearing on the motion took place July 18, 2023, with a ruling to be made sometime later. 

UPDATE: On August 17, 2023, United States District Court Judge Winsor issued an Order Denying Preliminary Injunction Motion in the Shen v. Simpson case. The Court declined to prohibit enforcement of the law while the case is being tried, finding that the Plaintiffs did not have a substantial likelihood of prevailing on the merits.