Texas Attorney General Proposes Rules to Enforce S.B. 17’s Restrictions on Foreign Ownership of Real Property

By: Sarah E. Delaney, Derrick Kyle, and Thomas Williams

During the 2025 Regular Session, the Texas Legislature enacted Senate Bill 17 (S.B. 17),¹ which prohibits certain foreign individuals, governmental entities, and companies from a “designated country” from purchasing, acquiring, or, if for a year or longer, leasing real property in Texas.² The current designated countries include China, Iran, North Korea, and Russia. 
 
On March 27, 2026, the Office of the Texas Attorney General (OAG) published proposed rules to implement and administer the state’s new restrictions on foreign ownership of real property, marking a significant new development for the Texas real estate market.³ The proposed rules provide clarity on key statutory terms regarding control and ownership of entities, institute anti-evasion measures, and require mandatory reporting of violations by facilitating entities. The OAG has received public comments on the proposed rules and is now required to adopt or withdraw the finalized rules by September 27, 2026.⁴
 
I. What the OAG’s Proposed Rules Do
 
The OAG’s proposed rules define key terms left open by statute, close potential evasion pathways involving short-term leaseholds and indirect acquisitions, and establish a mandatory reporting regime backed by a dedicated enforcement unit.
 
A. Key Definitions
 
Following the enactment of S.B. 17, a central source of uncertainty with enforcement has been the statute’s lack of definitions for terms like “control” and “ownership” with respect to certain corporate entities. The proposed rules fill those gaps and provide clarity for parties conducting real estate transactions in Texas.
 
“Control” is defined broadly as the direct or indirect possession of the power to either direct (a) the management or policies of an entity, or (b) the acquisition or disposition of an interest in Texas real property by an entity, whether through ownership, contract, office, position, or otherwise.⁵ Five categories of persons are deemed to be in control: (1) a general partner; (2) a managing member; (3) a shareholder or stockholder holding 10% or more of voting interests; (4) any executive officer; and (5) any person with the present or future right to acquire or dispose of an interest in Texas real property held by the entity. The 10% threshold is particularly significant, as it could materially expand the scope of beneficial-ownership due diligence required in real property transactions.
 
A “facilitating entity” is defined as any person or entity that, in the regular course of business, assists with, brokers, insures, finances, values, or processes a purchase or acquisition of an interest in Texas real property — including mortgage lenders, title insurance companies, property insurers, appraisers, and licensed real estate professionals.⁶
 
B. Anti-Evasion Measures
 
The proposed rules also contain anti-evasion provisions directed at two potential loopholes on short-term leaseholds and changes of control. First, an interest in real property under the proposed rules now extends to “a series of licenses, leases, or other arrangements that, in substance, create a leasehold interest in real property . . . for one year or longer, even if structured as successive short-term agreements.”⁷ Renewal terms, options to renew, and sequential short-term leases may therefore aggregate into a covered interest.
 
Second, the proposed rules expand the term “purchase or otherwise acquire” beyond direct purchases to include “any transaction or series of transactions by which a person or entity obtains control of an entity that owns an interest in real property . . . including a redemption or repurchase of the entity’s outstanding interests, regardless of whether the entity acquired the real property before September 1, 2025.”⁸ In practical terms, a change of control brings the transaction within S.B. 17’s reach even if no direct sale of real property occurs.
 
C. Mandatory Reporting and Enforcement
 
The proposed rules impose an affirmative reporting duty on every facilitating entity that “knows or should have known, after reasonable due diligence,” that a purchase, acquisition, or leasehold violates S.B. 17.⁹ These facilitating entities are required to submit a complaint to the OAG of the violative conduct. If the OAG determines that a facilitating entity knew or should have known of a violation but failed to report, the OAG may refer the matter to the appropriate licensing or professional disciplinary authority.¹⁰
 
The duty expressly reaches transactions “structured as post-closing transfers or assignments to affiliates, parents, subsidiaries, or entities under common ownership or control when used to effect or conceal a prohibited acquisition.”¹¹ The use of a negligence standard effectively requires every facilitating entity touching a covered transaction to develop and implement a compliance protocol capable of detecting potential violations. The proposed rules also establish a dedicated enforcement unit within the OAG responsible for receiving and reviewing complaints, as well as referring violations to the appropriate licensing or regulatory body,¹² signaling that the OAG intends to treat enforcement as an ongoing operational priority.
 
II. Exemptions and Carve Outs
 
Certain groups of persons and transactions are exempted from S.B. 17 and the OAG’s proposed rules. These include:

However, transactions resulting in an entity change of control — including the 10% threshold — for interests in real property acquired before September 1, 2025, would be a covered event under the proposed rules. Likewise, facilitating entities should be aware that successive short-term arrangements that effectively create a leasehold of one year or longer are treated as a covered interest, even if each individual agreement is under one year. Although violations of S.B. 17 do not void purchases or transactions of real property, the violating parties are still subject to civil penalties, forced divestiture, and criminal prosecution.¹³
 
III. Practical Implications and Next Steps
 
The proposed rules, if adopted as written, will impose new reporting and due diligence responsibilities across the Texas real estate industry. Stakeholders should ensure that they have a compliance and reporting protocol in place, conduct enhanced beneficial ownership and control diligence, scrutinize lease structures and plan for renewal risk for short-term leases, and avoid structuring leases that may resemble evasion. Importantly, these risks are not limited to commercial or residential transactions or leaseholds. S.B. 17 and the OAG’s proposed rules broadly reach mineral and water rights, standing timber, groundwater, energy, ranching, and natural-resource transactions.¹⁴
 
Snell & Wilmer is actively monitoring the OAG’s adoption of final rules and will provide updates as the regulatory landscape develops. The governor’s continuing authority to expand the designated-country list may mean that additional compliance obligations could be on the horizon.¹⁵ Companies and individuals with exposure to Texas real property transactions should engage experienced counsel to assess their compliance posture and develop protocols that will comport with the proposed regulatory changes.