A new law took effect Sept. 1, 2025, addressing one of the most discussed and debated topics in real estate.
Senate Bill 17, by Texas Senator Lois Kolkhorst, R-Brenham, District 18, prohibits governments, residents, citizens, and controlled entities of “designated countries” from acquiring interests in Texas real property, with certain exceptions. The initial designated countries include:
- China
- Russia
- North Korea
- Iran
That list isn’t exhaustive. The U.S. Director of National Intelligence maintains a list of countries that pose a risk to the national security, and any country on that list within the last three years is automatically added. Additionally, the governor of Texas may designate other countries or entities.
SB 17 passed the Senate 23-8 and the House 85-57-1, but it wasn’t easy. There were several competing bills on the same topic, and several changes were made during the legislative process. Sen. Kolkhorst filed a similar bill in 2023, but it was unsuccessful.
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Need to know:
SB 17 adds new Subchapter H “Purchase or Acquisition of Real Property by Certain Foreign Individuals or Entities” being Tex. Prop. Code § 5.251-259.
What Did the Law Say Before SB 17?
The previous law was clear regarding foreign investment in Texas real estate:
“An alien has the same real and personal property rights as a United States citizen.” Tex. Prop. Code § 5.005
Texas first restricted foreign ownership in 1891, but that law was declared unconstitutional on technical grounds later the same year. A revised, less restrictive bill was passed in 1892, then modified in 1921.
In 1965, foreign ownership limits were repealed as unreasonable and an undue interference on economic development. After another 60 years without restrictions, Texas is again restricting foreign ownership.
Who is Prohibited From Acquiring Land in Texas?
No designated country government entity, citizen, resident, headquartered entity, or controlled entity (nor the agent thereof nor a member of the ruling political party or its subdivisions) may acquire an interest in Texas real estate. Any type of real estate interest is prohibited, including minerals in place, water, undivided interests, easement, and the like.
Prohibited From Owning Real Estate in Texas:
- Government entity of designated country
- Individuals fitting any one of the following (Prohibited Individuals):
- Domiciled in a designated country
- Citizen of a designated country domiciled outside the U.S., but not in a designated country who is not a citizen of their resident country
- Citizen of a designated country illegally in the U.S.
- Non-U.S. citizen who is agent of designated country
- Member of ruling party (or subdivision thereof) of designated country
- Company or Organization fitting and one of the following (Prohibited Entities):
- Headquartered in designated country
- Controlled or “held” by a designated country government (directly/indirectly)
- Owned by or majority of ownership interest held or controlled by individual domiciled in a designated country
- Designated by Texas governor
- Company or Organization owned by or majority of ownership interest held or controlled by prohibited entity.
Exceptions From the Prohibitions
- U.S. citizen (even if also citizen of designated country) even if domiciled in prohibited country
- U.S. lawful permanent residents, even if citizen of a prohibited country
- Citizen of a prohibited country domiciled outside the U.S. (not in a prohibited country) who is also a citizen of the country of domicile
- Entities controlled by U.S. citizens or legal permanent residents without any control by any prohibited person or entity
- Leasehold for less than one year
- Texas homestead of prohibited person domiciled in a designated country but “lawfully present and residing in the U.S.” (like student visa) at time of purchase (personal residence only, not investment)
- Sales of real estate owned are not prohibited
The definitions in SB 17 are broad and it’s obvious that the scope of prohibition is intended to be wide. There is no current guidance on the type of new countries or entities which may be or will be added by the governor. The attorney general is to promulgate rules and regulation for implementing SB 17.
What Happens If a Foreign Entity Purchases Texas Real Estate?
It’s important to understand that purchases in violation of SB 17 are not void, but they are subject to the penalties and divestiture provisions of SB 17. A sales contract and related conveyance of the improperly acquired land are not affected. However, leases are excluded from the validation, so they are either void or voidable.
Additionally, all land under foreign ownership as of September 1, 2025 (including that owned by those now prohibited from acquiring additional land), may be held, managed, improved, leased, and sold under prior law (which provided that all owners have equal rights). SB 17 contains significant enforcement provisions to deter non-compliance, which provide enforcement authority to the governor, attorney general, and district courts.
The governor will determine whether a specific transaction/individual/entity “poses a risk to the national security” or an entity is a “transnational criminal organization.”
The attorney general will establish investigation rules/procedures as soon as possible. He is also responsible for investigating transactions, and determining potential violations, including reporting to law enforcement agencies.
Upon finding a violation, Texas district court will appoint a receiver to manage and sell the land and apply sale proceeds to lienholders, the state for costs for prosecution, and the owner.
There are also civil penalties against companies or entities. The attorney general may bring action against a prohibited entity in the greater of 50 percent of market value of land or $250,000.
Individuals who are in violation risk a state jail felony if they intentionally or knowingly purchase or otherwise acquire Texas land in violation of SB 17.
These serious consequences will be enforced by the Texas attorney general and not local government. The attorney general may seek civil penalties in any enforcement actions against prohibited entities. If you are involved in a prohibited acquisition, then you and your company could be involved in an enforcement action, even if not found to be knowingly complicit.
Key Takeaways
- These restrictions are effective today and have been since Sept. 1.
- Divestiture of land owned by a prohibited person or entity is not affected by SB 17 (only applies to land already owned by a prohibited person or entity prior to Sept. 1.
- Avoid engagement in any transaction that could be a violation of the prohibition against acquisition of Texas land by a prohibited person or entity. Even though you should not be subject to penalties, you could be entangled in an investigation by the attorney general which could include negative publicity.
- Licensees should implement a process for new purchaser/lease transactions to address foreign ownership limits.
- Beware of dealing with entities, as whether they are subject to SB 17 may be unclear..
- Be careful as you apply SB 17, which is likely to be broadly interpreted.
- Reach out to your attorney for advice and remember that only lawyers are authorized to provide legal advice to your clients.
- Look for and review the attorney general’s investigation/enforcement rules and procedures.
Nothing from the Texas Real Estate Research Center should be considered legal advice. For advice or representation on a specific situation, consult an attorney.
