You may have seen media reports about some states proposing or enacting legislation that restricts foreign property ownership in the United States. You might be aware that Alabama passed its own law relating to real property ownership by foreign entities during the 2023 regular legislative session, Act 2023-332. All of that may have left you wondering what exactly Alabama’s new law does. To be clear, the Act applies to multiple foreign countries, but not to individual citizens. Read on to learn more about the Act, including the bottom line for REALTORS®.

Alabama’s new law, titled “The Alabama Property Protection Act,” is aimed at preventing certain foreign nations from being able to own certain types of property in Alabama. It went into effect on August 1, 2023. Different from some other states’ legislation, Alabama’s Act does not apply to private citizens. Instead, it applies only to “foreign principals.” Under the law, a “foreign principal” is a government, government official, or political party (including their members) of “countries of concern.” The countries of concern are China, Iran, Russia, and North Korea. The law also applies to any nation or government that has been sanctioned by the Department of Treasury’s Office of Foreign Asset Control

The new law prohibits foreign principals from being transferred title to or a controlling interest in certain types of real property. First, foreign principals are barred from owning agricultural and forest property in Alabama. This includes real property used for 1) raising, harvesting, or selling crops, 2) feeding, breeding, management, raising, sale of, or production of livestock, or 3) the growing or sale of timber or forest products. Second, the law bans foreign principals from owning real property in Alabama within 10 miles of military installations and “critical infrastructure facilities.” There are ten types of critical infrastructure facilities listed in the new law, including places like refineries, electricity-generating facilities, wastewater treatment facilities, and telecommunications central switching offices.

Licensees who followed this legislation may be concerned over what will happen to them now that the law has taken effect. It is important to note that the law only holds foreign principles liable, not anyone involved in the real property process. In fact, the law specifically exempts title insurers, title agents, real estate licensees, and “other settlement providers as defined by the Real Estate Procedures Act [RESPA], 12 U.S.C 2601 et seq.” The law does not require any licensee to change their current ethical or lawful practices, and changing those practices in response to Act 2023-332 could land a licensee in hot water. Remember, REALTORS® have a duty – under federal law, state law, and NAR’s Code of Ethics – not to discriminate based on race, color, or national origin (or based on one of the other 6 protected classes).¹Under no circumstances should a licensee inquire into a person’s national origin. Not only is that information irrelevant under the law (since the law does not apply to individual citizens of foreign nations), but inquiring about it could also put a licensee in violation of federal law, state law, and the REALTOR® Code of Ethics.

Who: Governments, government officials, or political parties of 1) China, Iran, North Korea, or Russia, or 2) nations sanctioned by the Department of Treasury’s Office of Foreign Asset Control. (Collectively referred to as “foreign principals” under the law.)

What: Foreign principals are prohibited from acquiring title to or controlling interest in certain property.

Where: Any real property in Alabama that is 1) agricultural or forest property or 2) located within 10 miles of a military installation or critical infrastructure facility.

When: The law became effective on August 1, 2023.

The law does not restrict the actions of REALTORS® and is not aimed at individual citizens of other nations. Under no circumstances should a licensee inquire into a person’s national origin. Not only is that information irrelevant under the law (since the law does not apply to individual citizens), but inquiring about it could also put a licensee in violation of federal law, state law, and the REALTOR® Code of Ethics. REALTORS® should continue providing services without regard for prospective or current clients’ race or national origin. 

Q1: If a transaction in which I am involved as a licensee results in a foreign principal acquiring an interest in real property which they are prohibited from owning under Alabama Act 2023-332, will I be held liable?

A1: No. Real estate licensees (and other settlement providers, as defined by RESPA) are exempt from liability under Alabama Act 2023-332. 

Q2: Am I now required to ask potential clients whether they are agents of the foreign governments of China, Iran, North Korea, or Russia before I take them on as potential clients?

A2: No. You are not required to inquire about national origin information under Alabama Act 2023-332, and are prohibited from doing so under federal and state law and the REALTOR® Code of Ethics.