What to Know About State-Level Foreign Ownership Restrictions in Real Estate

For many commercial real estate transactions, state-level foreign ownership restrictions were historically a secondary consideration to federal regimes such as the Foreign Investment in Real Property Tax Act (FIRPTA) withholding, the Committee on Foreign Investment in the United States (CFIUS) screening for transactions near sensitive facilities, and Agricultural Foreign Investment Disclosure Act (AFIDA) reporting for agricultural land. Many states had alien-land and agricultural-ownership laws well before 2023, but those regimes were narrower in scope and rarely a driver of deal structure. What has changed, and changed quickly, is their prevalence, reach, enforcement, and focus on designated adversary countries. The consequences of getting it wrong now run from a deed the county clerk will not record to annual filing obligations to losing the property outright with no compensation.

Today, more than 30 states impose some combination of ownership restrictions, disclosure requirements, or related compliance obligations affecting foreign ownership of real property, and that number continues to grow. The majority were enacted or materially expanded within the last several years. They vary dramatically in scope, severity, and sophistication. At one extreme is Virginia’s automatic voidness provision, under which certain prohibited acquisitions of agricultural land are void: Title passes to the Commonwealth of Virginia and the buyer receives nothing. At the other extreme is Alabama’s prohibition, which specifies no penalty or enforcement mechanism at all. Some states restrict only agricultural land. Others restrict all real property statewide. Some target designated adversary nations. Others use broad alienage or residency-based tests.

For practitioners advising foreign-connected investors, fund sponsors with international LP exposure, or institutional buyers assembling multi-state portfolios, this patchwork turns three questions into threshold diligence items on every deal: Is the property covered? Is anyone in the ownership chain restricted? And how far up that chain does the state require you to look?

Practice Guidance on Structuring Deals

Because the answer to each question above is different in every state, it is imperative to carefully review the specific regulations relevant to each deal. That said, some broad themes and best practices are emerging from the shift across the regulatory landscape. Below are some necessary additions to standard transactional practice that can help ensure compliance.

Entity Structuring

How an investment is structured can make a real difference, but structure alone is not a workaround. These laws generally look past the entity signing the deed to who ultimately owns and controls the buyer, and several add up the stakes held by related parties instead of testing each investor on its own. Arkansas, for example, combines the interests of all restricted parties even when they are not acting together, so a deal built to keep each foreign investor below a state’s ownership limit can still cross that limit once those stakes are counted together. That is not to say there is no room to plan. A handful of states recognize specific exceptions. Oklahoma has treated a foreign corporation domesticated under Oklahoma law as a bona fide resident for purposes of the state’s constitutional alien-ownership restriction, although other state ownership restrictions remained applicable. Florida and Idaho set aside small, passive stakes in publicly traded companies, along with certain funds run by U.S. investment advisers. Idaho and Oklahoma recognize CFIUS-based exemptions, although Idaho limits its exemption to entities that had a national security agreement in place as of July 1, 2025, and continue to maintain it, and Kentucky allows a narrower version limited to agricultural research. The practical takeaway is that ownership thresholds, control, and indirect ownership all have to be checked state by state before a structure is locked in.

Enhanced Due Diligence

Standard title and survey review is no longer sufficient for transactions where the ownership structure or property may implicate a state foreign-ownership law. The enhanced diligence checklist now includes the following:

• Beneficial ownership. Trace who ultimately owns the buyer, through every layer of entities, down to the ownership percentage the relevant state cares about.
• Property classification. Confirm how the property is classified, including agricultural definitions, zoning overlays, and tax assessment categories.
• Proximity mapping. Measure the property’s distance from military bases, ports, and other sensitive sites in states that impose buffer zones.
• Federal list monitoring. Track the federal lists and designations the state statute incorporates, which may include Office of Foreign Assets Control (OFAC), Commerce Department, or International Traffic in Arms Regulation (ITAR) designations.
• Forward-looking risk. Assess planned infrastructure development or likely designation changes near the property that could bring it within a restriction later.

The ownership chain and the property’s classification both need to be verified before the deal is structured, not at closing.

Closing Mechanics

Several distinct compliance mechanics are emerging at the transactional level. Florida requires the buyer to provide an affidavit at closing attesting to compliance under penalty of perjury. Critically, a missing affidavit does not affect title or the insurability of title, and it does not expose the closing agent to civil or criminal liability unless the agent has actual knowledge that the transaction will result in a violation. Oklahoma takes a different approach: Subject to specified statutory exceptions, deeds submitted for recording must include a notarized compliance affidavit, and the clerk cannot accept a covered deed without it. This creates a mandatory checkpoint at the recording stage: no affidavit means no recording, which means potential closing delays. Iowa uses the same recording-gate structure: An affidavit is a precondition to recordation for conveyances and for leases of more than five years of agricultural land to nonresident aliens.

Title Insurance and Safe Harbors

Multiple states provide explicit statutory protection for title insurers and closing agents. Alabama, Arizona, Arkansas, Florida, Idaho, Louisiana, Nebraska, and New Hampshire all provide various forms of liability protection, title protection, or relief from investigative duties, but the mechanisms differ. Alabama directly immunizes enumerated professionals; Nebraska provides a broad no-duty-to-investigate and immunity rule; New Hampshire places compliance responsibility solely on the foreign principal; and Arkansas provides that noncovered persons have no duty to investigate while protecting subsequent title from prior-owner violations. Virginia’s automatic voidness provision presents a unique challenge: An initial acquisition of agricultural land by a foreign adversary creates a serious title defect and title-insurance underwriting issue, but the statute’s subsequent non-foreign-adversary purchaser or transferee protection makes title valid as though the prohibited acquisition had never occurred once the land is transferred to a person or entity that is not a foreign adversary.

Post-Closing Compliance

The compliance obligation does not end at closing. Florida imposes 30-day registration requirements on certain authorized acquisitions by covered foreign persons or entities. Illinois’ 90-day requirement is a different instrument: It is a 1970s disclosure statute modeled on AFIDA that generally reaches a foreign person acquiring or transferring agricultural land, whether or not adversary-designated, and provides that filing a copy of the federal AFIDA report satisfies the state requirement. Maine works the same way on the AFIDA point: Under its Agricultural Land Interest Act, which applies to any corporation or partnership, foreign or domestic, holding, acquiring, or transferring agricultural land, a report is due no later than 90 days after January 1 or the acquisition or transfer date, whichever is earlier, and a federal AFIDA filing can satisfy that obligation. Indiana’s legislation broadly prohibits certain foreign-adversary-connected persons from acquiring or entering into new leases of real property, subject to statutory qualifications and exceptions. Several states impose ongoing reporting requirements. Nebraska requires restricted entities relying on its CFIUS safe harbor to certify compliance annually; North Dakota requires qualifying foreign individuals to report their annual residency addresses.

When a Federal Designation Changes

Some states tie their restrictions to federal lists as those lists stand from time to time. Where a state dynamically incorporates a federal list and also regulates continued ownership or holding, a change at the federal level can make an existing ownership position prohibited without new state legislation or action by the owner. Other states freeze the incorporated list as of a specified date; Nebraska, for example, fixes certain federal lists as of specified 2025 dates. Even where a designation changes, whether an existing holding becomes prohibited or subject to divestiture depends on the applicable state’s rules on grandfathering, meaning protection for holdings acquired before the law took effect, and on forced sale. Ohio’s registry system creates a unique exposure: A person that acquired covered agricultural land and is later added to the Secretary of State’s registry must sell that land within two years.

The legislative momentum is clear: More states, broader property coverage, stricter enforcement, and a deeper look up the ownership chain. Several of these regimes have been the subject of constitutional and federal-preemption challenges, and in certain instances enforcement has been preliminarily enjoined. That a statute has been challenged is no basis for disregarding it, but counsel should confirm the current posture of any statute on which a transaction depends, since the operative rules in a given state may be altered by the courts as readily as by the legislature. No federal statute expressly and comprehensively preempts these regimes. The state patchwork will remain the operative compliance framework for the foreseeable future. As the landscape continues to evolve, the best practice for practitioners is to build diligence protocols now. Three steps are worth taking on the next deal: Map the buyer’s full ownership chain before the structure is fixed; confirm how each target property is classified and what sits near it; and calendar every post-closing registration, annual report, and list-monitoring obligation the applicable state imposes.

For a comprehensive guide to state-by-state regulations, or for help structuring a deal, reach out to Benjamin Altshul, Natalie Boyd, or another member of LP’s Real Estate Group.