The Texas Office of the Attorney General has proposed new rules to implement and enforce Senate Bill 17, the 2025 law restricting certain purchases or acquisitions of interests in Texas real property by designated foreign persons and entities. The proposed rules, published March 27, 2026, are significant because it provides the first detailed look at how Texas intends to investigate transactions, define covered acquisitions, and enforce the law in practice.
For businesses, investors, and real estate professionals, the rules suggest that Texas may take an expansive view of what counts as a covered transaction. The proposal indicates that SB 17 may apply not only to direct purchases of real estate, but also to certain entity acquisitions, lease structures, and post-closing transfers that effectively result in control over Texas real property.
What Do the Proposed Rules Do?
The proposed rules would create a new Chapter 67 in the Texas Administrative Code to implement Subchapter H of Chapter 5 of the Texas Property Code, which was added by SB 17 and became effective on September 1, 2025. The rules apply only to purchases or acquisitions of interests in Texas real property occurring on or after that date.
In general, the rules define key terms, establish an enforcement unit within the Office of the Attorney General, create procedures for complaints and investigations, and provide for coordination with other agencies. Although the rules do not change the statute itself, they provide a clearer roadmap for how the law may be applied.
The Rules Take a Broad View of Covered Transactions
One of the most important features of the proposal is its definition of “purchase or otherwise acquire.” Under the proposed rules, that phrase includes not only a direct acquisition of Texas real property, but also any transaction or series of transactions through which a person or entity obtains control of an entity that owns Texas real property. The rule specifically states that this can include a redemption or repurchase of ownership interests, even if the entity acquired the property before September 1, 2025.
The rules also address lease and occupancy structures. Although the statute excludes leasehold interests of less than one year, the proposed rules state that a series of licenses, leases, or other arrangements may still be treated as a covered interest if, in substance, they create a leasehold for one year or longer, even if structured as successive short-term agreements. This suggests that the state may focus on substance over form.
“Control” and “Facilitating Entities” Are Defined Broadly
The proposed rules define “control” as the direct or indirect power to direct management, policies, or the acquisition or disposition of Texas real property. They also state that general partners, managing members, executive officers, 10% voting owners, and persons with present or future rights to acquire or dispose of the property interest are deemed to be in control.
The rules also create new risk for “facilitating entities,” a term defined broadly to include mortgage lenders, title insurance companies, property insurers, appraisers, and licensed real estate professionals. A facilitating entity that knows or should have known, after reasonable due diligence, that a transaction violates SB 17 must submit a complaint to the Office of the Attorney General. That duty expressly extends to transactions structured as post-closing transfers or assignments to affiliates, parents, subsidiaries, or commonly controlled entities when used to effect or conceal a prohibited acquisition.
How Would Enforcement Work?
The proposed rules would require the Office of the Attorney General to maintain a designated enforcement unit responsible for receiving complaints, investigating potential violations, coordinating with other agencies, and enforcing compliance. The rules also state that the unit may issue guidance and respond to written inquiries about whether SB 17 applies to specific transactions.
They also establish procedures for complaints and investigative demands. In general, the OAG and the Texas Secretary of State must allow at least seven calendar days to respond to civil investigative demands or interrogatories unless exigent circumstances justify a shorter period. Complaints and related investigative materials are designated as confidential except as otherwise authorized by law.
What Does This Mean for Businesses and Investors?
For businesses and investors, the proposed rules make clear that SB 17 should not be viewed as a law limited to simple real estate purchase contracts. The proposal suggests that Texas intends to examine the substance of transactions, including entity acquisitions, control arrangements, lease structures, and affiliate transfers, when deciding whether a prohibited acquisition has occurred.
As a result, businesses involved in mergers and acquisitions, private investment, leasing, financing, or post-closing reorganizations should evaluate whether a transaction could be viewed as conferring a covered interest in Texas real property. The rules also raise practical diligence questions for lenders, brokers, title professionals, insurers, and others who participate in real estate transactions.
Looking Ahead
The proposed rules mark an important next step in the implementation of SB 17. If adopted, they would provide an enforcement framework that reaches beyond direct land purchases and into entity control, lease structuring, and transaction facilitation. For businesses and investors with Texas real estate exposure, early legal review and careful transaction planning will be increasingly important.
The Texas Register notice states that written comments will be accepted for 30 days following publication, giving businesses and professionals a limited opportunity to review the proposal and consider whether clarification or revision may be appropriate.
The proposed law, S.B. No. 17, imposes significant restrictions on Chinese investors seeking to acquire real property in Texas. While exceptions exist for U.S. citizens, lawful permanent residents, and certain types of property, the law's broad scope and stringent enforcement mechanisms create substantial barriers and risks. Chinese investors should carefully evaluate their eligibility under the exceptions and consider alternative investment structures, such as leasehold interests, to mitigate potential legal challenges. At MOSAIC Paradigm Law Group, we can help you navigate the current economic and investment landscape in Texas. Contact us if you need advice on how to pursue your business ventures in the state.
Sources:
“Attorney General Ken Paxton Proposes Rules to Stop Designated Foreign Adversaries, Including China, from Owning Texas Land.” Texas Attorney General, 27 Mar. 2026, www.texasattorneygeneral.gov/news/releases/attorney-general-ken-paxton-proposes-rules-stop-designated-foreign-adversaries-including-china.
“Title 1. Administration Part 3. Office of the Attorney General, 51 TexReg 1938 .” Secretary of State, State of Texas, Texas Register, 27 Mar. 2026, www.sos.state.tx.us/texreg/pdf/backview/0327/0327prop.pdf.
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