Texas Senate Bill 17 Restricts Foreign Ownership of Real Property in the State

On May 31, 2025, the 89th Texas Legislature passed Senate Bill 17 (the Act), which is intended to address growing national security concerns related to foreign state actors, particularly China, Russia, Iran, and North Korea, acquiring real estate in Texas. On June 20, Gov. Greg Abbott signed the Act into law. Effective Sept. 1, 2025, the Act will prohibit the acquisition of interests in real property in Texas by foreign individuals or entities associated with designated countries identified as national security risks. This GT Alert provides a summary of the Act’s key provisions.

A. Prohibited Acquisitions

The Act covers the following acquisition types:

1. Real Property Purchases. Applies to residential (with limited exceptions), commercial, industrial, and agricultural land.

2. Other Interests in Real Property. Includes (without limitation):

• Easements
• Mineral and water rights
• Leaseholds of one year or more



B. Prohibited Parties

The following parties will be prohibited from acquiring interests in real property in Texas (subject to the exemptions listed in Paragraph C below):

1. Governments of Designated Countries. For purposes of the Act, a “designated country” is a country identified by the U.S. Director of National Intelligence as posing a national security risk in at least one of the three most recent Annual Threat Assessments of the U.S. Intelligence Community.

2. Entities That Are:

• Headquartered in or controlled by a designated country;
• Majority-owned by prohibited individuals (described in Subparagraph B.3 below); or
• Designated by the governor (in consultation with the Texas Department of Public Safety (DPS) and the U.S. Homeland Security Council) as threats to national security.

3. Individuals Who Are:

• Domiciled in a designated country (with limited homestead exceptions, as noted below);
• Citizens of a designated country residing abroad without naturalization;
• Citizens of a designated country who are unlawfully present in the United States; or
• Agents of a designated country or members of its ruling party.

4. Transnational Criminal Organizations

• A “transnational criminal organization” is a group of two or more persons who are citizens of, or domiciled in, a designated country, and who engage in serious cross-border criminal activities, such as trafficking or smuggling.
• The governor, after consulting with DPS and the U.S. Homeland Security Council, may designate a transnational criminal organization.



C. Exempt Transactions and Parties

The following parties and transactions will be exempt from the Act’s prohibitions:

1. U.S. Citizens and Lawful Permanent Residents

• Individuals who are either U.S. citizens or lawful permanent residents of the United States are not subject to the Act.

2. Entities Owned and Controlled by U.S. Citizens or Lawful Permanent Residents

• Includes corporations, LLCs, partnerships, and other organizations entirely owned and controlled by such individuals.

3. Leasehold Interests with a Term of Less Than One Year

• Short-term leases (e.g., residential or commercial leases under 12 months) are not prohibited.

4. Residential Homestead Exception

• Individuals from designated countries who are lawfully present and residing in the United States may purchase a residential property intended as their primary residence (homestead).



D. Enforcement

The Act will be enforced by the following mechanisms:

1. Attorney General Investigation. The Texas attorney general (AG) is authorized to:

• Review real estate transactions;
• Determine if an investigation is warranted;
• Investigate potential violations of the statute; and
• Refer cases to local, state, or federal law enforcement agencies for further action. (An individual who intentionally or knowingly acquires real property in violation of the Act commits a state jail felony, which is punishable with 180 days to two years in a state jail and a fine of up to $10,000.)

2. Legal Action

• If a violation is found, the AG may file an in rem action (a lawsuit against the property itself) in a district court in the county where the property is located. A notice of legal action must be recorded in the county’s real property records, alerting the public and potential buyers of the dispute.
• The AG may sue a company or entity that violates the law and, if found liable, the violator must pay the greater of: (a) $250,000; or (b) 50% of the market value of the property interest involved.

3. Divestiture and Receivership

• If a court finds that real property was acquired in violation of the Act:

a. the court orders divestment of the violator’s interest in the real property;

b. a receiver is appointed to: (i) sell or otherwise dispose of the interest; and (ii) manage the property until the sale or disposition is complete; and

c. the matter is referred for criminal prosecution.

• Proceeds from the divestiture sale first pay off any liens and then cover the state’s enforcement costs. Any remaining funds are returned to the violator (subject in some cases to the payment of civil penalties).



E. Practical Considerations

Sellers and lessors should consider the following:

1. The Act Applies Prospectively

• The Act only applies to acquisitions occurring on and after the effective date of the Act, Sept. 1, 2025.

2. Purchase and Sale Transactions Are Not Automatically Void; Lease Transactions Are

• A purchase or acquisition of an interest in real property that violates the Act is not rendered void or unenforceable solely due to the violation; however, it may be subject to enforcement action by the AG.
• In contrast, the acquisition of a leasehold interest in violation of the Act is considered void and unenforceable.

3. No Responsibility for Sellers/Lessors to Verify Compliance with the Act

• Enforcement lies solely with the AG.
• The Act does not impose a duty on sellers or lessors to investigate or verify compliance, nor does it establish penalties for parties who transact with prohibited parties.

4. Key Considerations

• Avoid knowingly entering into transactions with prohibited parties, as there is a risk that such transactions may be delayed or disrupted by enforcement actions.
• Consider whether to require purchasers/lessees to expressly represent compliance with the Act.
• Consider indemnification provisions that shield liability should a transaction ultimately be subject to an enforcement action.
• Whether an entity is a prohibited party may be ambiguous in some instances, and parties should seek legal counsel to assist in making such a determination.
• Be aware of AG rules and opinions pertaining to the Act.

The AG is required to adopt rules for implementing and enforcing the Act. We will continue to monitor developments.