Texas Enacts Landmark Restrictions on Foreign Land Ownership Under SB 17

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On June 20, 2025, Texas Governor Greg Abbott signed Texas Senate Bill 17 (SB 17) into law, reshaping the landscape for global investment in Texas real estate. When the new statute takes effect on September 1, 2025, it will impose expansive state-level restrictions on property ownership through sweeping prohibitions aimed at limiting land acquisition by certain foreign governments, companies and individuals.

For foreign companies, particularly those headquartered in or controlled by individuals from countries identified by the U.S. or the Texas governor as national security threats, SB 17 creates major obstacles to real estate investment, financing and development.

Scope and Intent
SB 17 is an effort by the State of Texas to limit foreign ownership of real property as a matter of public policy. Senator Lois Kolkhorst, who proposed and co-authored the bill, framed it around concerns related to national security, land use and economic sovereignty. The law prohibits certain individuals and entities associated with certain foreign countries from acquiring any interest in land or buildings in Texas. Specifically, the law applies to individuals and entities linked to “designated countries” (currently, China, Russia, Iran and North Korea) as identified by the U.S. Director of National Intelligence or the Texas governor as posing a particular risk to the security of the United States. SB 17 restricts not only governmental entities and state-owned enterprises, but also private companies headquartered in or controlled by individuals from those countries, as well as individuals who are citizens of or domiciled in those jurisdictions.

SB 17 is sweeping in its applicability to different real estate asset classes, including:

  • Agricultural land and improvements on agricultural land;
  • Commercial buildings;
  • Industrial property;
  • Residential homes;
  • Leaseholds exceeding one year; and
  • Water rights, mineral rights and standing timber.

SB 17 accordingly makes it nearly impossible for people and companies from designated countries from entering the Texas real estate market. The bill reflects a strong legislative intent to draw bright lines and close perceived gaps in oversight. Rather than targeting only transactions that present a specific risk, the law imposes a broad, categorical ban, reflecting a policy judgment that certain forms of foreign ownership are inherently incompatible with the State’s interests.

Who and What Is Covered
The restrictions are broad. Entities and individuals prohibited from acquiring any interest in real property include:

  • Governments and governmental agencies of designated countries, and entities owned or controlled by such governments;
  • Entities headquartered in a designated country;
  • Individuals who are citizens of or domiciled in a designated country (meaning they have established that country as their true, fixed and permanent home), even if they have ties to or dual citizenship in a non-designated country, unless an exception applies;
  • Companies majority-owned by citizens or domiciliaries of a designated country, or controlled by a prohibited entity or organization; and
  • Members of a designated country’s ruling political party.

The legislation applies to the acquisition of any “interest” in real property, but does not clearly specify what constitutes an “interest,” which creates uncertainty about exactly what types of ownership or site control are actually covered. While fee ownership and long-term leases are clearly intended targets of the law, the term “interest” could include things like easement rights, liens and other security interests in real property. The risk that SB 17 might apply to security interests in real property in particular is likely to have a chilling effect on banks and other financial institutions or lenders that are headquartered in designated countries and their willingness to provide loans secured by Texas real estate assets since their ability to foreclose on their collateral is materially impacted (if not entirely prohibited). Similarly, property owners looking to sell or lease their property, and domestic financial institutions looking to make loans secured by Texas real estate, are likely to require new and enhanced representations, warranties and covenants from their commercial counterparties, which may lengthen negotiation timelines and increase transaction costs for borrowers/land owners.

Despite the bill’s broad and in some cases ambiguous applicability, it does contain a few important exemptions. The following are explicitly exempted under SB 17, even if they would otherwise fall into one of the covered categories:

  • U.S. citizens and lawful permanent residents;
  • A company or organization that is wholly owned or controlled by U.S. citizens or lawful permanent residents; and
  • Acquisitions of property in the form of leasehold interests of less than one year.

SB 17 does not explicitly exempt foreign nationals from designated countries who have naturalized in a third country unless they are also a U.S. citizen or lawful permanent resident; it applies to citizens of designated countries whether or not they are domiciled there. The bill does however include a narrow exception for individuals domiciled in designated countries but lawfully present in the U.S., for acquisitions of residential real property that the person intends to use as a primary residence.

How SB 17 Differs from CFIUS
SB 17 is distinct from the Committee on Foreign Investment in the United States (CFIUS), a federal committee that regulates foreign investment in the United States. While both CFIUS and SB 17 aim to limit foreign influence over U.S. real estate, infrastructure and property, they differ in significant ways.

First, there is a difference in scope. CFIUS applies to foreign investments in U.S. businesses and certain real estate transactions, particularly those near sensitive sites like military bases or ports, whereas SB 17 applies to the acquisition of any real property in Texas by individuals or entities from certain designated countries, without regard to location or use.

Second, CFIUS provides for a federal review mechanism that evaluates transactions on a case-by-case basis. This review process is flexible and allows transactions to proceed with some negotiated alterations such as mitigation agreements or restructuring. SB 17, on the other hand, is a blanket prohibition on the acquisition of real property in Texas by individuals or entities connected to designated countries, with no allowance for flexibility or negotiation and only a limited review mechanism.

Third, CFIUS provides a formal review and pre-closing clearance process for transactions. but under SB 17, enforcement occurs after a transaction has closed, through investigation by the Texas Attorney General. Companies and individuals found to have violated SB 17 can face civil fines (up to $250,000 or 50% of the property’s value, whichever is greater) and potential criminal liability.

Whereas CFIUS allows for proactive engagement and negotiation, SB 17 is reactive, rigid, and punitive. It is possible that a transaction that survives federal review under CFIUS may still run afoul of SB 17. For foreign companies—especially those from China, Russia, Iran and North Korea—this means real estate transactions in Texas require careful vetting under both federal and state law. This will have a ripple effect in real estate finance, even in transactions that don’t involve affected parties or countries, as lenders will have to expand their existing Know Your Customer procedures to ensure that their borrowers are not at risk of violating SB 17, which could subject the borrower to civil or criminal penalties and impact such borrower’s ability to repay the loan.

Conclusion
SB 17 represents a dramatic shift in how Texas regulates foreign investment in its land and buildings. The law’s broad reach, combined with its lack of clarity and absence of a pre-clearance mechanism, creates a major obstacle for some categories of investors, lenders, developers and other stakeholders, and new uncertainty for others. As SB 17 comes into effect, property owners, occupiers and operators will be watching to see how the bill is enforced, and how it affects ordinary business dealings in the real estate sector going forward.

Meanwhile, foreign investors, particularly companies from China, intending to purchase or lease interests in commercial property in Texas must verify the location of property, review the ownership and governance structure, and conduct thorough due diligence with respect to the underlying transactions so as to mitigate the legal and regulatory risks.