The Louisiana Constitution permits “[e]very person…the right to acquire, own, control, use,…private property.” La. Const. Ann. art. I, § 4. However, the state constitution authorizes the state legislature to enact “reasonable statutory restrictions” to this right. On June 27, 2023, Louisiana Governor John Bel Edwards signed into law House Bill 537 (“HB 537”) (codified under La. Stat. Ann. § 9:2717.1) which seeks to restrict certain foreign investments in real property located within the state. As a result, Louisiana joined approximately eleven other states to enact a foreign ownership law during the 2023 legislative session.
This is the first of two articles discussing Louisiana’s newly enacted foreign ownership law. This article explains which foreign investors are prohibited from acquiring real property located within the state, the exceptions to this restriction, and the enforcement and penalty provisions of Louisiana’s foreign ownership law. The second article of this series will discuss the protections the law provides to persons involved in a transaction that violates the restriction and protections provided to persons who have an interest in land acquired or held in violation of the state’s foreign ownership law.
Restricted Foreign Investors
Louisiana’s foreign ownership law restricts a “foreign adversary” and a “person connected with a foreign adversary” from purchasing, leasing, or otherwise acquiring an interest in “immovable property” (i.e., real property) located within the state after August 1, 2023. See La. Stat. Ann. § 9:2717.1(A)(1). Like any piece of legislation, the definitions contained under Louisiana’s law are important because they provide context to how the words or phrases are to be understood throughout the legislative text.
Under the law, a “foreign adversary” is any individual or government of a country that is designated by the U.S. Secretary of Commerce as a “foreign adversary” under 15 C.F.R. § 7.4(a) that is subject to any sanction list of the U.S. Office of Foreign Assets Control (“OFAC”). The Secretary of Commerce’s foreign adversary list currently includes China, Cuba, Iran, North Korea, Russia, and Venezuela’s Maduro Regime. Essentially, an individual or government of these countries that is listed under OFAC’s sanction list is a “foreign adversary” under Louisiana’s foreign ownership law and is likely prohibited from acquiring real property within the state.
A “person connected with a foreign adversary” means an entity—such as a corporation, partnership, or other business structure—in which a foreign adversary has the authority to control or direct the management or policies of the entity. It is presumed that a foreign adversary has this authority if they (1) directly or indirectly hold a 50% or more of the voting interests in the entity or (2) are entitled to 50% or more of the entity’s profits. Thus, entities that are connected with a foreign adversary are prohibited from acquiring Louisiana real property.
Every foreign ownership law contains exceptions to its restriction on foreign landholdings. In other words, every state’s law contains provisions that permit foreign investors to acquire or hold land in certain situations. One exception in Louisiana’s foreign ownership law is a “grandfather clause.” Essentially, a grandfather clause exempts certain persons from the requirements of a law by allowing these persons to continue with the activities that were permissible before the implementation of the new law. Louisiana’s law expressly states that the restriction does not apply to landholdings and leases of land before August 1, 2023. Contracts for the purchase or lease of real property or the renewal of existing leases that were in place prior to that date are also exempt from the restriction.
Further, Louisiana’s foreign ownership law exempts U.S. citizens, legal permanent residents of the U.S., and other individuals that are lawfully present in the U.S.—such as holders of visas that permit temporary U.S. residency—from the restriction. Any businesses entities wholly owned by these individuals are exempt from the restriction. Also exempt from Louisiana’s restriction are individuals that acquire or lease certain residential properties and certain entities that owned or conducted oil and gas operations before July 1, 2023.
Enforcement and Penalty
Many states’ foreign ownership laws contain enforcement and penalty provisions. Some states’ laws include a provision that directs a governmental agency to investigate possible violations of their foreign ownership law. Under Louisiana’s law, the state’s attorney general has authority to investigate and enforce the restriction against foreign adversaries and entities connected to a foreign adversary. However, the statutory language expressly states the attorney general may investigate and enforce the restriction. Because of this, the attorney general likely has discretion to investigate and bring a legal action against potential violations of the foreign ownership law.
The attorney general may investigate a potential violation when they have “evidence that a foreign adversary or a person connected with a foreign adversary is attempting to enter into, conspiring to enter into, or has entered into a contract to” acquire an interest in real property located within the state. La. Stat. Ann. § 9:2717.1(B)(4)(a). The attorney general may also open an investigation if they believe it would serve the public interest to determine whether a transaction violates the state’s restriction.
Louisiana’s foreign ownership law authorizes the state’s attorney general to enforce the restriction prescribed under the law. The attorney general has the authority to file a lawsuit to prevent the transfer of real property to a foreign adversary and persons connected to a foreign adversary prior to the transfer. If a foreign adversary or a connected entity has already obtained and is holding an interest in real property in violation of the law, the attorney general may bring a forfeiture action against the prohibited foreign landholder. This means the attorney general will likely seek a court order that requires the disposition of the foreign adversary’s interest in the real property, which is primarily accomplished by selling the property. Any legal action brought by the attorney general must be in a district court in a parish in which a portion of the real property is located, and the attorney general may recover reasonable attorney fees and court costs for bringing an enforcement action against a prohibited foreign investor.
The law also contains an express penalty provision. If a court determines a violation of the restriction has occurred, the court may order the foreign adversary’s interest in the land be sold through a public auction or be sold—most likely through a private sale—to a person who is not a foreign adversary or connected to a foreign adversary. Either way, the law requires the court to order the sale price of the land to be no less than the sum of all taxes, mortgages, liens, and interests attached to the property and any costs associated with the sale of the real property. In other words, every enforceable interest held by a person in the real property will be satisfied by the sale of the real property.
After all interests and costs have been paid, any remaining proceeds from the sale of the land are forfeited to the Louisiana Department of Justice. The law directs the department to use these funds to support services for veterans of foreign wars or contract with other state or local governments to fund “services for veterans who suffer from injury or disability as a result of a foreign war.” This type of provision in a foreign ownership law is unique to Louisiana. Some states’ laws are silent on who receives any remaining proceeds from a sale of the land while a few states direct any remaining proceeds to fund further enforcement actions of their foreign ownership law. Louisiana is the only state to direct remaining proceeds to fund a service unrelated to the enforcement of its foreign ownership law.
In 2023, Louisiana enacted HB 537 which seeks to restrict foreign adversaries and persons connected to foreign adversaries from acquiring any interest in real property located within the state after August 1, 2023. However, this piece of legislation was not the only measure considered by the Louisiana state legislature during the previous legislative session. In fact, the state legislature passed House Bill 125, which sought to restrict certain foreign investments only in agricultural land located within the state. Ultimately, Governor Edwards vetoed this measure and instead signed into law HB 537. Louisiana is now one of approximately twenty-four states that seek to restrict certain foreign acquisitions in land located within the boundaries of their state.
To read the Louisiana’s foreign ownership law, click here.
To learn more about foreign ownership of agricultural land, click here.
To view states’ laws regulating foreign ownership of private land, click here.
For other NALC resources on foreign ownership of ag land, click here.
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