WBK Industry News - State Regulatory Developments

11th Circuit Preliminarily Enjoins Florida Law Prohibiting Certain Property Sales to Foreigners

The Eleventh Circuit Court of Appeals issued a preliminary injunction against a Florida law which prohibits almost all real estate purchases in the state by Chinese foreign nationals and entities, and restricts persons and entities from certain other countries from purchasing real property near military installations and critical infrastructure within the state.

The Florida legislature enacted SB 264 in May 2023.  Among other things, this law prohibits foreign nationals domiciled in China, as well as businesses and governmental entities from China, from purchasing any real property within the state.  It also prohibits foreign nationals domiciled abroad, businesses, and governmental entities from Russia, Iran, North Korea, Cuba, Syria, and Venezuela from directly or indirectly purchasing or owning agricultural land within the state, as well as real property located within 10 miles of a military installation or a critical infrastructure facility in the state.  Critical infrastructure includes things like chemical plants, power plants, water treatment facilities, refineries, telecommunication hubs, liquid natural gas facilities, airports, and sea ports.  Foreign principals who owned properties covered by the statute prior to July 1, 2023 may keep them, but may not purchase additional property, and are required to register their existing ownership with the state.  Properties purchased in violation of the law are subject to seizure and forced sale by the state, and buyers and sellers who violate the law are subject to criminal penalties.

A group of Chinese nationals who wanted to purchase property in Florida, along with a Florida real estate agency, filed a lawsuit in federal district court in Florida alleging that the statute violated the Equal Protection and Due Process Clauses of the 14th Amendment to the U.S. Constitution, as well as various other federal statutes.  The district court denied their motion for a preliminary injunction, and the Plaintiffs appealed.

The Eleventh Circuit reversed, finding that the plaintiffs had shown a substantial likelihood of success on their claim that the law is preempted by the federal Foreign Investment Risk Review Modernization Act, which governs real property purchases by foreign persons and entities which may implicate national security concerns.  However, in light of the fact that a preliminary injunction is considered an extraordinary remedy, the court gave a very narrow scope to its preliminary injunction.  Specifically, the injunction only applied with respect to two of the five plaintiffs who had actual, pending real estate transactions which were being held up by the law.  Accordingly, the preliminary injunction does not have a statewide effect or apply to transactions for persons or entities beyond the two named plaintiffs.