Florida’s Foreign Entities Act Declared Unconstitutional in Recent Ruling

In a recent legal development, the 11th US Circuit issued a consequential verdict in Shen v. Simpson, a federal lawsuit challenging Florida’s Conveyances to Foreign Entities Act (SB 264), which restricts individuals from China and other “foreign countries of concern” from owning real property in the state. This ruling has far-reaching implications for the constitutional aspects surrounding real estate transactions within Florida.

The genesis of this legal process traces back to May 2023, when a group of Chinese individuals filed a lawsuit challenging the constitutionality of SB 264. Enacted on July 1, 2023, under Chapter 692, FS, SB 264 faced scrutiny based on allegations of violating the 14th Amendment (equal protection/due process), the Fair Housing Act (42 USC §3601 et seq.), and the Supremacy Clause of the US Constitution.

The 11th US Circuit’s Opinion, issued on February 1, 2024, determined that SB 264’s provisions, which prohibited certain real estate acquisitions by foreign nationals, notably those from China, contravene federal laws governing real estate purchases. While the immediate focus was on restrictions against Chinese nationals, legal observers anticipate broader implications, with potential challenges against similar restrictions on citizens from Russia, Iran, North Korea, Cuba, Venezuela, and Syria.

In a separate concurring opinion, Judge Nancy Abudu, the presiding judge, expressed her support for the injunction based on the plaintiffs’ claim that SB 264 violates the Equal Protection Clause. She noted that recent US Supreme Court decisions have cast doubt on the constitutionality of such state-based “alien” restrictions, suggesting that SB 264 might not withstand strict scrutiny.

The overall takeaway from this ruling is twofold. First, the State of Florida is currently barred from enforcing SB 264 against Yifan Shen and Zhiming Xu regarding their pending home purchases. However, the law can still be enforced against other plaintiffs and the general public for all other real estate transactions in Florida.

Despite the limited scope of the injunction, the court’s decision indicates a level of skepticism regarding the validity of SB 264. This skepticism, voiced not only by the majority decision but also in Judge Abudu’s concurring opinion, suggests that the court may scrutinize the law more closely in the upcoming oral arguments scheduled for April. As the case proceeds on an expedited track, the legal landscape surrounding SB 264’s constitutionality remains uncertain, awaiting further clarification from the Eleventh Circuit.

It is essential to note that as of the last public update, this ruling has established a precedent in finding the Conveyances to Foreign Entities Act unconstitutional, at least in part. However, the legal landscape is dynamic, and subsequent developments may influence the ongoing narrative of this case. Dickinson Wright’s Real Estate attorneys are keenly monitoring any further proceedings or challenges that may arise in response to this landmark decision.

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About the Author:

A member in the firm’s FT. Lauderdale office, Charles D. (Chuck) Brecker principally represents residential and commercial real estate builders and developers, as well as investors and joint venturers, in acquiring, financing, developing, constructing, selling, and leasing residential, commercial, and mixed-use projects, many of which consist of vast acreage and vertical mixed-use towers. He can be reached at  954-991-5448 or cbrecker@dickinsonwright.com. To view his full bio, please click here.