Generally, under present law, an alien, resident, or nonresident of the United States may take and hold real or personal property located in this state and dispose of or transmit it in the same manner as a native citizen. Present law also provides that the heirs or devisees of the noncitizen owner may in turn take or hold the property in the same manner as a citizen of the United States. This bill enacts restrictions on these provisions as explained below.
RESTRICTIONS
This bill prohibits a nonresident alien (defined in the bill as a person who is not a citizen of the United States or who has not been lawfully admitted into the United States for permanent residence); a foreign business or foreign government; or an agent, trustee, or fiduciary thereof from purchasing or otherwise acquiring real property in this state, including easements, water rights, agricultural land, or any other interest in real property, if the laws of the country where the nonresident alien resides, the foreign business is located, or the official foreign government representing the country, or agents, trustees, or fiduciaries thereof, prohibit citizens of the United States or its territories or possessions from purchasing real property located within that country.
This bill defines a foreign business as a corporation incorporated under the laws of a foreign country or a business entity whether or not incorporated, in which a majority interest is owned directly or indirectly by nonresident aliens. As used in this bill, the determination of owned, in terms of ownership or control of foreign business, is not affected by legal entities, including, but not limited to, trusts, holding companies, multiple corporations, and other business arrangements.
The restriction created under this bill does not apply to the following:
(1) Real property acquired by devise or descent;
(2) A bona fide encumbrance on real property taken for purposes of security; and
(3) Real property acquired by a process of law in the collection of debts; or by a deed in lieu of foreclosure, pursuant to a forfeiture of a contract for deed; or by a procedure for the enforcement of a lien or claim on the real property, whether created by mortgage or otherwise. However, real property so acquired must be sold or otherwise disposed of within two years after title is transferred. Pending the sale or disposition, the real property must not be used for a purpose other than what it was used for immediately prior to the time the property was put up for sale, and the property must not be used except under lease to an individual, trust, corporation, partnership, or other business entity not subject to the restrictions mentioned above.
This bill further clarifies that a nonresident alien, foreign business, or foreign government, or an agent, trustee, or fiduciary thereof, who holds real property in this state on July 1, 2023, may continue to own or hold the property, but is prohibited from the following:
(1) Purchasing or acquiring additional real property in this state on or after July 1, 2023; and
(2) Transferring the title to or interest in the real property to another nonresident alien, foreign business, or foreign government, or an agent, trustee, or a fiduciary thereof, except by devise or descent. In such a case, the alien, business, or government, or an agent, trustee, or a fiduciary thereof, must divest itself of all right, title, and interest in the real property within two years from the date of acquiring the real property or interest. However, this divestment requirement does not apply to an acquired interest through devise or descent in real property by a nonresident alien made prior to July 1, 2023.
After July 1, 2023, a person, business, or other entity who purchases or otherwise acquires real property in this state, except by devise or descent, and whose status changes so that it becomes a nonresident alien, foreign business, or foreign government, or an agent, trustee, or fiduciary thereof, must divest itself of all right, title, and interest in the real property within two years form the date that its status changed.
A nonresident alien, foreign business, or foreign government, or an agent, trustee, or fiduciary thereof, who owns an interest in real property in this state on or after July 1, 2023, must register the real property with the secretary of state within 60 days after July 1, 2023, or within 60 days after acquiring the real property or the interest in real property, whichever is later. The registration is required to be in the form and manner prescribed by the secretary of state and contain certain identifying information.
CAUSES OF ACTION AND PENALTIES
This bill provides that if the secretary of state finds that a nonresident alien, foreign business, foreign government, or an agent, trustee, or other fiduciary thereof, has acquired or holds title to or interest in real property in this state in violation of this bill, then the secretary of state must report the violation to the attorney general and reporter. Upon the receipt of the report, the attorney general and reporter must initiate an action in the circuit court of any county in which the real property is located and will file a notice of the pendency of an action initiated with the recorder of deeds of the appropriate county or counties.
If the court finds that the real property in question has been acquired or held in violation of this bill, then the court must enter an order so declaring and file a copy of the order with the recorder of deeds of each county in which any portion of the property is located. In addition, the court should declare the real property escheated to the state and order the sale of the real property in the manner provided by law for a mortgage foreclosure. The proceeds of the sale must be used to pay court costs and the remaining funds must be paid to the person divested of the property.
This bill further provides that if the secretary of state finds that a nonresident alien, foreign business, foreign government, or an agent, trustee, or other fiduciary thereof, violated this bill by failing to timely register as required, the secretary must assess a civil penalty that should not exceed $2,000 for each violation.
ON APRIL 21, 2023, THE HOUSE ADOPTED AMENDMENT #1 AND PASSED HOUSE BILL 40, AS AMENDED.
AMENDMENT #1 revises this bill to prohibit a sanctioned nonresident alien, sanctioned foreign business, sanctioned foreign government, or an agent, trustee, or other fiduciary thereof from purchasing or otherwise acquiring real property in this state.
This amendment defines a "sanctioned nonresident alien" as an individual who is either a citizen of a sanctioned foreign government, or a person identified on the office of foreign assets control of the U.S. department of the treasury's sanctions programs and county information list. A sanctioned nonresident alien does not include a person lawfully admitted into the United States for permanent residence by the United States immigration and naturalization service, even if such status is conditional.
This amendment defines a "sanctioned foreign government" as a government other than the government of the United States, its states, its territories, or its possessions, that is identified by the office of foreign assets control of the U.S. department of the treasury's sanctions programs and country list.
This amendment defines a "sanctioned foreign business" as the following:
(1) A corporation incorporated under the laws of a foreign country of a sanctioned foreign government;
(2) A business entity whether or not incorporated, in which a majority interest is owned directly or indirectly by sanctioned nonresident aliens. The determination of "owned," in terms of ownership or control of a foreign business, is not affected by legal entities, including, but not limited to, trusts, holding companies, multiple corporations, and other business arrangements; or
(3) A corporation or business, whether or not incorporated, that is identified on the office of foreign assets control of the U.S. department of the treasury's sanctions programs and country information list.
This amendment clarifies that there is no liability on any real estate licensee involved in a transaction with a sanctioned nonresident alien, sanctioned foreign business, sanctioned foreign government, or an agent, trustee, or other fiduciary acquire property in violation of the bill. The civil penalty assessed does not apply to any attorney in this state or title insurance company and agent licensed in this state in the performance of the transfer or real property to which the amendment otherwise applies.
ON APRIL 21, 2023, THE SENATE SUBSTITUTED HOUSE BILL 40 FOR SENATE BILL 122, ADOPTED AMENDMENT #1, AND PASSED HOUSE BILL 40, AS AMENDED.
AMENDMENT #1 revises the provision that provides that there is no liability on any real estate licensee involved in a transaction in which a sanctioned nonresident alien, sanctioned foreign business, sanctioned foreign government, or an agent, trustee, or other fiduciary acquired property in violation of this bill and provides, instead, that this bill does not impose liability on a person licensed under the Tennessee Real Estate Broker License Act of 1973; an attorney licensed in this state; or a title insurance company or an agent licensed in this state who is involved in a transaction in which a sanctioned nonresident alien, sanctioned foreign business, sanctioned foreign government, or an agent, trustee, or other fiduciary of such alien, business, or government, acquired property in violation of this bill.

Statutes affected:
Introduced: 66-2-101, 66-2-102
Amended with HA0048, SA0285 -- 04/21/2023: 66-2-101, 66-2-102