On March 13, 2023, Utah Governor Spencer Cox signed into law House Bill 186 (“HB 186”)—also known as the “Restrictions on Foreign Acquisitions of Land Act”—which seeks to restrict certain foreign purchases of real property located within the state. In 2023, the majority of states have proposed at least one piece of legislation that seeks to prohibit or restrict foreign investments and landholdings in land—specifically private farmland—located within their state to some degree. Utah is the first state in 2023 to enact a foreign ownership law. By enacting HB 186, Utah joins fourteen other states that have laws that specifically forbid or limit certain foreign investors from acquiring or owning an interest in land located within their state.
House Bill 186
Like the other fourteen states that have a foreign ownership law, Utah takes its own approach to restricting foreign investments. In general, HB 186 prohibits a “restricted foreign entity” from acquiring an “interest in land” within the state. The definitions contained in any piece of legislation are important because they provide context to how the words or phrases are to be understood throughout the legislative text. This is especially true for legislation that seeks to restrict certain foreign investors from purchasing specific types of real estate within the state.
HB 186 defines “interest in land” as “any right, title, lien, claim, interest, or estate with respect to land.” Because “interest” is broadly defined, a “restricted foreign entity” is most likely in violation of the restriction prescribed under HB 186 if they acquire any property interest, including leaseholds and security interests in Utah land.
The law defines “land” to mean all real estate located in the state. Furthermore, the law specifies that “land” includes various types of real property, such as private land, public land, waters of the state, subsurface land, and agricultural land. Under Utah state law, “agricultural land” is “land devoted to the raising of useful plants and animals with a reasonable expectation of profit, including: (i) forages and sod crops; (ii) grains and feed crops; (iii) livestock…; (iv) trees and fruits; or (v) vegetables, nursery, floral, and ornamental stock….” See Utah Code Ann. §§ 4-46-102(1); 59-2-502(4)(a).
Under HB 186, a “restricted foreign entity” means a military company required to be identified by the U.S. Department of Defense (“DOD”) under Section 1260H of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (“NDAA 2021”). Under Section 1260H, DOD is required to identify Chinese military companies operating directly or indirectly in the U.S. The NDAA 2021 defines “Chinese military company” as an entity: (i) “directly or indirectly owned, controlled, or beneficially owned by…the People’s Liberation Army or any other organization subordinate to the Central Military Commission of the Chinese Communist Party; (ii) contributing to the Chinese “defense industrial base”; or (iii) “engaged in providing commercial services, manufacturing, producing or exporting”. The list of Chinese military companies identified by DOD is available here.
A business entity that is affiliated with or a holding company of a company identified under DOD’s list is considered a “restricted foreign entity” under HB 186. In other words, subsidiaries or shell corporations for the listed entities are also restricted from acquiring Utah land.
Further, a country that has a listed company as part of their “commercial or defense industrial base” is also considered a “restricted foreign entity”. In general, a “defense industrial base” is a collection of businesses that provide goods and services to satisfy the needs of a country’s military. Because some or all the companies identified under DOD’s list are part of China’s defense industrial base, the country China is a “restricted foreign entity” and is prohibited from acquiring land within Utah. The restriction under HB 186 extends to China’s governmental entities, committees, and agencies.
Although HB 186 restricts China, its governmental entities and institutions, and Chinese military companies identified by DOD from acquiring an interest in land located in Utah, there are some exceptions to the restriction. Specifically, HB 183 exempts restricted foreign entities that acquired an interest in land before May 3, 2023:
- By purchase, grant, gift, donation, devise, or bequest;
- As security for the repayment of a debt; or
- As a party to a contract for the transfer or conveyance of an interest in land to the restricted foreign entity.
Also, the law permits a restricted foreign entity that acquires land on or after May 3, 2023, by grant, gift, donation, devise, or bequest to hold that property up to five years from the date of acquisition, but the foreign party must divest or transfer their interest in the land before the five-year period expires. If a restricted foreign party fails to do so, their interest in the land escheats to the state, meaning the state takes ownership of the land. However, HB 186 does not specify who has authority to bring an escheat action against a restricted foreign entity suspected of violating this provision. Some states that have enacted foreign ownership laws authorize the state’s attorney general to bring an escheat action against a suspected violator of the law, but Utah’s law is unclear on the procedure for enforcement of this provision.
Under Utah’s HB 186, the law provides that a “deed or other written instrument…purporting to convey an interest in land to a restricted foreign entity in violation of [this law] is invalid.” While this provision penalizes a restricted foreign entity for acquiring land in violation of the law by invalidating their ownership, this provision could possibility raises title issues. Essentially, the law does not specify what happens to title to the land after a conveyance is deemed invalid. As a result, it is unclear who owns the land once a transaction is invalidated.
Utah may not be the only state in 2023 to enact a law that restricts certain foreign acquisitions of land within their state. Since the beginning of 2023, the majority of states have proposed at least one piece of legislation to prohibit or restrict foreign investments and landholdings in land—specifically private farmland—located within their state to some degree. NALC is tracking each states’ foreign ownership proposal(s) and will update its Statutes Regulation Ownership of Agricultural Land compilation when there are changes to a state’s law.
To learn more about foreign ownership of agricultural land, click here.
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