Foreign Adversaries Prohibited from Purchasing Virginia Farmland
Legal Line - June 2023
Virginia will have a new law on the books July 1st that prohibits foreign adversaries from owning certain real estate in the Commonwealth. Similar legislation first appeared in Texas after a wealthy Chinese citizen, who had previously served in the Chinese military, purchased 130,000 acres in southwest Texas near Laughlin Air Force Base. Other states have followed suit and, currently, 21 states have proposed legislation that prohibits some foreign citizens from owning real property in their states.
The Virginia legislation provides that a foreign adversary shall not acquire any interest in agricultural land in Virginia after July 1, 2023. A “foreign adversary” is not a citizen of the United States, can be a government or nongovernment person, and is determined by the U.S. Secretary of Commerce. Foreign adversaries are defined under federal law as persons who have engaged in a long-term pattern or serious instances of conduct that are significantly adverse to the national security of the U.S. or U.S. persons, and include at present The People’s Republic of China, Republic of Cuba, Islamic Republic of Iran, Democratic People’s Republic of Korea (North Korea), Russian Federation, and Venezuelan politician Nicolás Maduro. “Agricultural land” is defined in the Virginia statute as real estate in Virginia used or zoned in a manner that includes the bona fide production of crops, fruits and vegetables, nuts, tobacco, animals, and fowl; meat, dairy, nursery and floral, and poultry products; and the production and harvest of products from silvicultural activity.
The Virginia legislation also provides that in the event a foreign adversary acquires an interest in Virginia agricultural land, the transfer is void and title to the interest in the land will vest in the name of the Commonwealth as of the date of the attempted acquisition. The Commonwealth will not make any payment to the foreign adversary in consideration for the transfer of the interest in the Virginia farmland. In addition, the foreign adversary is barred from making a claim against any party for restitution of the purchase price paid or for any other kind of payment relating to the loss of title. Importantly, the law preserves any liens that are attached to the agricultural land during the foreign adversary’s attempted acquisition. Such liens will remain valid liens against the property during the period of time that the Commonwealth has ownership. Lienholders, however, are not permitted to foreclose during the Commonwealth’s ownership nor is the Commonwealth subject to any loan terms related to the lien.
This new legislation will present challenges for banks by adding another layer of complexity to agricultural lending. Banks should look at their current policies to determine whether customer identification processes and customer due diligence processes would catch a foreign adversary loan applicant – even one using a shell company. Banks will be able to utilize FinCEN’s beneficial ownership database, but reporting doesn’t begin until 2024 and some entities are exempted from reporting ownership information. Banks should also consider evaluating their agricultural lending policies to determine whether changes need to be made to account for the possibility of transactions being voided and the related uncertainties regarding pledged collateral and lien payoff.
 15 C.F.R. § 7.4.
 § 55.1-507 of the Code of Virginia.
 § 55.1-508 of the Code of Virginia.
 The Commonwealth may hold or dispose of such interest in agricultural land in any proper manner.
For more information about this article or other legal banking issues, contact DeMarion Johnston, VBA General Counsel, at firstname.lastname@example.org. This article has been prepared for informational purposes only and is not legal advice.