Texas Attorney General Proposes Expanded Foreign Ownership Enforcement Rules

Reporting Duties Could Extend to Public Entities Involved in Real Property Transactions

On October 9, 2026, the Texas Office of the Attorney General (OAG) published revised proposed rules (“Proposed Rules”) implementing Senate Bill 17 (SB 17), the 2025 law restricting certain foreign acquisitions of Texas real property. The proposal replaces a March 2026 proposal that expired without adoption. If adopted, the Proposed Rules would broadly define control and covered acquisitions and require lenders, title companies, appraisers, real estate professionals and other “facilitating entities” to report violations they know or should have known about. The Proposed Rules are not final. The OAG provides a 30-day comment period, which should end on Monday, November 9, 2026.

SB 17 at a Glance

SB 17 took effect September 1, 2025, and is codified at Texas Property Code sections 5.251 through 5.259. The OAG’s October 9, 2026, announcement identifies countries covered by SB 17, including China, Russia, Iran and North Korea. SB 17 does not apply to U.S. citizens, lawful permanent residents or leasehold interests lasting less than one year. It also exempts companies and organizations owned or controlled by U.S. citizens or lawful permanent residents, provided no individual subject to SB 17’s restrictions owns or controls the entity.

Municipalities should consider SB 17’s significant penalties when evaluating real property transactions. Companies or entities that violate the law face civil penalties equal to the greater of $250,000 or 50% of the property interest’s market value, and courts may order divestiture. Except for leasehold acquisitions, a violation does not itself void the transaction.

Key Provisions

The following key provisions could affect how public entities and other participants review real property transactions and respond to potential violations. Obtaining control of an entity that owns Texas real property would count as acquiring that property, even if the entity bought it before September 1, 2025 (§ 67.2(7)(A)). Successive short-term leases or licenses that in substance create a leasehold of one year or longer would also be covered, although SB 17 excludes shorter leaseholds (§§ 67.2(5), 67.2(7)(B)).

Although the statute, SB 17, does not define “control,” the Proposed Rules deem general partners, managing members, executive officers and shareholders holding at least 10% of voting interests to control an entity. The same would apply to anyone with a present or future right to acquire or dispose of Texas real property through the entity (§ 67.2(2)). A purchase of 10% of voting interests, a redemption or a change of general partner could therefore qualify as an acquisition even without a recorded deed. Control is only one part of the evaluation; determining whether a transaction is prohibited also requires examining whether the purchaser is subject to SB 17’s restrictions and whether an exception applies.

The Proposed Rules also impose a reporting duty. A facilitating entity that knows or should have known, after reasonable due diligence, that a purchase or acquisition violates SB 17 must file a complaint with the OAG. Failure to report could result in referral to an appropriate licensing or disciplinary authority (§ 67.4(a), (e)). Facilitating entities include persons or entities that, in the regular course of business, assist with, broker, insure, finance, value or process an acquisition (§ 67.2(3)).

The Proposed Rules provide a limited safe harbor for facilitating entities that conduct know-your-customer due diligence consistent with either an applicable regulator’s guidelines or standards adopted in good faith by a recognized industry group. If that diligence does not reveal a violation, the entity would not be deemed to have “known or should have known” of one (§ 67.4(g)).

What Municipalities Need to Know

The proposed reporting duty could have significant implications for municipalities that finance or actively assist with real property acquisitions. The draft definition of “facilitating entity” does not exclude governmental entities; however, the Code Construction Act, “person” generally includes governmental subdivisions and agencies (Tex. Gov’t Code §§ 311.002(4), 311.005(2)). Cities, counties and related public entities that regularly finance or process real property acquisitions could therefore fall within the reporting duty. Acquisition loans, purchase-money financing and assistance with site assembly or closings present the clearest potential triggers.

The proposal does not clarify whether a municipality becomes a facilitating entity simply because it sells or leases property or issues routine governmental approvals. A municipality that qualifies must report violations it knows or should have known about after reasonable due diligence (§ 67.4(a)). Municipalities risk consequences for not reporting violations that reasonable due diligence should uncover. The proposal does not expressly establish that a buyer’s certification or another participant’s review alone satisfies the diligence requirement. The duty also reaches transfers to related entities used to effect or conceal a prohibited acquisition; failure to report could result in referral to an appropriate licensing or disciplinary authority (§ 67.4(e), (f)).

Public entities should evaluate their transaction roles and assign responsibility for diligence and reporting. They could also seek transaction-specific guidance through the written inquiries contemplated by proposed § 67.3(b)(3).

Issues Worth Raising with Comments on the Proposed Rule

• Public-entity coverage: Clarify when municipalities and related public entities qualify as facilitating entities, including whether acquisition financing and assistance are treated differently from property sales, ground leases and routine governmental functions such as permitting, recording instruments and tax appraisals.
• Due diligence and the safe harbor: Clarify reasonable diligence requirements, reliance on buyer certifications or other reviews and standards that qualify for the safe harbor.
• Attorneys and confidentiality: Clarify whether attorneys qualify as facilitating entities and how any reporting obligation would interact with attorney-client privilege and professional confidentiality requirements.
• Transaction-specific guidance: Specify a timeframe for responding to written inquiries and clarify whether public entities may rely on those responses before closing a land sale, ground lease or incentive agreement.
• Compliance costs: Explain how the OAG’s cost assessment accounts for staff training, transaction review, documentation and reporting.

Comments may be emailed to OAGRuleCommentsCh67@oag.texas.gov or mailed to the OAG’s General Counsel Division within 30 days of the October 9, 2026, publication. A public hearing may be requested in the same period and the OAG must grant one if a governmental subdivision or agency asks (Tex. Gov’t Code § 2001.029(b)). The OAG may adopt the rules as early as November 8, 2026, and adopted rules generally take effect 20 days after filing (Tex. Gov’t Code § 2001.036).

What to Do Now

In the meantime, public entities and other transaction participants should:

• Consider whether they may be facilitating entities;
• Review their diligence practices against the proposed safe harbor;
• Identify entity-level transfers and lease renewals the proposed definitions could reach; and
• Use consistent screening criteria tied to SB 17 and comply with applicable Fair Housing Act and Equal Credit Opportunity Act requirements.

If you have any questions about the Proposed Rules and how they may impact your agency or organization or would like assistance preparing comments for submission to the OAG, please contact Chandley Hayes-Crawford and Oscar Becerra or your BBK attorney.