Who Does Texas’ New Foreign Property Restrictions Impact?

Texas has long been one of the most business-friendly states in the country, but new proposed rules are raising a question many businesses haven’t thought to ask: Does your deal have a foreign ownership problem?

Texas Senate Bill 17 has been on the books for nearly a year, but the new proposed rules from the state AG signal that regulators will examine the economic reality of a transaction, not how it’s labeled. That means businesses that haven’t thought of themselves as doing a real estate deal may now have an SB 17 problem. Jeff Gifford explains what businesses operating in Texas need to know.

Key takeaways:

• Equity deals, MIPAs, and governance-rights arrangements may be covered if a foreign person gains control of an entity owning Texas real property (even if no deed changes hands)
• Service contracts, licenses, and colocation agreements that grant long-term rights to occupy space may be treated as leases regardless of how they are labeled
• Foreign-linked participants in a lender syndicate could be deemed to be acquiring a real property interest (particularly in a foreclosure scenario)
• A new proposed reporting obligation would require lenders, title companies, appraisers, and real estate professionals to report suspected violations to the Attorney General

The proposed rules are still in the comment period and subject to change.