A4385

An Act concerning the ownership of real property by adverse foreign government interests and supplementing chapter 3 of Title 46 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. The Legislature finds and declares that:

a. A security threat is exacerbated if the actor posing the threat owns real property in the area being threatened;

b. The People’s Republic of China (PRC), Russia, Iran, and North Korea have been listed as threats to the national security of the United States and its citizens in each of the 2023, 2024, and 2025 Annual Threat Assessments of the United States Intelligence Community;

c. The PRC and other adversaries continually employ aggressive efforts to target and steal sensitive information, research, and technology of the United States, resulting in billions of dollars in economic losses, damage to the competitiveness of the United States, and the transfer of cutting-edge technology to adversarial militaries;

d. Since 2023, United States authorities have charged more than 20 individuals for activities related to intellectual property theft and for violations of sanctions or export controls for China, Iran, and Russia;

e. PRC-affiliated cyber actors are known to exploit vulnerabilities and publicly-available tools to pre-position efforts to disrupt the nation’s critical infrastructure;

f. Russian-affiliated cyber actors are known to continually seek access to government networks, including those of state and local governments, for espionage purposes, posing a threat to critical infrastructure;

e. North Korean cyber actors continuously target financial entities within the United States, including venture capital firms, exchanges, and individual accounts, to finance Pyongyang’s strategic priorities and weapons programs, posing a continuing threat to national security;

g. The Iranian government and other affiliated cyber actors are known to target the critical infrastructure of the United States, in retaliation for support provided to Israel, using a range of tactics, including exploiting publicly known software and hardware vulnerabilities, social engineering techniques, and publicly available cybersecurity tools;

h. As the United States Supreme Court observed in Board of Regents v. Roth, 408 U.S. 564 (1972), property interests are not created by the United States Constitution, but by independent sources such as state law;

i. Accordingly, the Legislature acts within the scope of its traditional competence when it provides statutory requirements governing the disposition of real property and restrictions on ownership, despite any incidental effect on foreign policy and affairs; and

j. Therefore, it is appropriate, and a narrowly tailored remedy for the Legislature to prohibit the ownership of real property in the State by adverse foreign governments and persons affiliated with those governments, in order to achieve the compelling government interest of the security of this State and its residents.

2. As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

"Adverse foreign government" means any government other than the government of the United States or any of its states, territories, possessions, or any political subdivision thereof that is listed, or a military company of which is listed, as posing a threat of terrorism and transnational repression, or as a threat to the critical infrastructure or economic security of the United States, in at least one of the three most recent Annual Threat Assessments of the U.S. Intelligence Community issued pursuant to section 108B of the National Security Act of 1947 (50 U.S.C. s.3043b). "Adverse foreign government" includes an agent, trustee, or fiduciary thereof, acting on behalf of an adverse foreign government.

"Beneficial owner" means, with respect to a partnership, corporation, association, limited liability company, trust, or other legal entity, or an affiliate, subsidiary, or holding company thereof, an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, exercises substantial control over the entity, or owns or controls not less than 10 percent of the ownership interests of the entity. "Beneficial owner" shall not include:

(1) an individual whose only interest in a corporation, limited liability company, or other similar entity is through a right of inheritance; or

(2) a creditor of a corporation, limited liability company, or other similar entity.

"Person of an adverse foreign country" means:

(1) any individual who is not a citizen of the United States, is not an alien friend as provided in R.S.46:3-18, and is a nonresident alien of the United States or one of its states, territories, or possessions, and is currently, or has been within the last five years, a resident or citizen, or both, of a country controlled by an adverse foreign government;

(2) a partnership, corporation, association, limited liability company, trust, or other legal entity created under the laws of an adverse foreign government; or

(3) a partnership, corporation, association, limited liability company, trust, or other legal entity created under the laws of the United States or any of its political subdivisions, which is directly or indirectly held, owned, managed, or controlled, legally or as a beneficial owner, by one or more adverse foreign governments, by one or more persons of adverse foreign countries, by one or more legal entities created under the laws of an adverse foreign government, or by any combination thereof.

"Real property" means property that shall include, but shall not be limited to:

a. agricultural land;

b. an improvement located on agricultural land;

c. commercial property;

d. industrial property;

e. groundwater;

f. residential property;

g. a mine or quarry;

h. a mineral in place;

i. standing timber; or

j. water rights.

3. a. Notwithstanding any law, rule, or regulation to the contrary, an adverse foreign government or person of an adverse foreign country shall not acquire, purchase, or otherwise obtain a legal, beneficial, or other interest in real property in the State on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill).

b. An adverse foreign government or person of an adverse foreign country owning or holding an interest in real property in the State upon the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) may continue to own or hold an interest in real property for a maximum of five years after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), and shall not acquire, purchase, or otherwise obtain an interest in, any other real property, in the State, on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), except:

(1) pursuant to a process of law involving the collection of debt, the execution of a deed in lieu of foreclosure, the forfeiture of a contract for deed, or the imposition of a lien or claim on the real property, whether created by a mortgage or otherwise, in which case, the provisions of subsection d. of this section shall apply;

(2) by devise or descent, or through the establishment of a bona fide encumbrance on real property taken for the purposes of security, in which case, the provisions of subsection f. of this section shall apply; or

(3) in compliance with any other condition that may be authorized by the Secretary of State in the rules and regulations adopted pursuant to subsection f. of this section.

c. An adverse foreign government or person of an adverse foreign country owning or holding an interest in real property in the State upon the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill) shall sell or otherwise convey the ownership of, or interest in, the real property within five years after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill). The real property or interest therein shall be sold or conveyed to an individual, trust, corporation, partnership, or other business entity that is not an adverse foreign government or person of an adverse foreign country that is subject to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

d. (1) Real property that is acquired by an adverse foreign government or person of an adverse foreign country, on or after the effective date of P.L. , c. (C. ) (pending before the Legislature as this bill), pursuant to the exception established in paragraph (1) of subsection b. of this section, shall be sold or conveyed, by the foreign owner thereof, within two years after title to the real property is transferred to the adverse foreign government or person of an adverse foreign country.

(2) Real property sold or conveyed in accordance with this subsection shall be sold or conveyed to an individual, trust, corporation, partnership, or other business entity that is not an adverse foreign government or person of an adverse foreign country subject to the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill).

e. A provision of this section that is inconsistent with, or in violation of, the federal Constitution, or any law, treaty, rule, regulation, or executive order shall not apply only to the extent that the provision of this section is determined to be inconsistent or in conflict with, impede the federal objectives, or in violation of the federal Constitution, or any law, treaty, rule, regulation, or executive order. If a provision of this section is determined to be inconsistent or in conflict with, impede the federal objectives, or in violation of the federal Constitution, or any law, treaty, rule, regulation, or executive order, the provisions of this section shall be construed to apply to only to those persons of an adverse foreign country that are determined to have taken action that directly poses a threat of terrorism and transnational repression, or that directly pose a threat to the critical infrastructure or economic security of the United States.

f. The attorney general may bring an action in a court of competent jurisdiction against an individual or entity that violates a provision of this section. An individual or entity in violation of this section shall be liable to the State for a civil penalty in an amount that shall not exceed the greater of:

(1) $250,000; or

(2) 50 percent of the market value of the interest in the real property that is the subject of the violation.

g. The Secretary of State shall adopt, pursuant to the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.), rules and regulations to effectuate the provisions of P.L. , c. (C. ) (pending before the Legislature as this bill), including but not limited to, rules and regulations concerning the application of P.L. , c. (C. ) (pending before the Legislature as this bill) to any particular country or individual.

4. This act shall take effect immediately.

STATEMENT

This bill prohibits adverse foreign governments and certain associated foreign persons, as defined in the bill, from acquiring, purchasing, or otherwise obtaining a legal, beneficial, or other interest in any real property in the State on or after the bill’s effective date, with limited exceptions. The bill applies to governments listed as a threat of terrorism, transnational repression, or to the critical infrastructure or economic security of the United States, in at least one of the three most recent Annual Threat Assessments of the U.S. Intelligence Community. These governments currently consist of the People’s Republic of China, Russia, Iran, and North Korea.

The bill permits impacted foreign governments and foreign persons that already own or hold an interest in real property in the State, on the bill’s effective date, to continue to own or hold that interest for a maximum of five years thereafter. Within five years after the bill’s effective date, the foreign government or foreign person would be required to sell or otherwise convey the ownership of, or interest in, the real property to an individual, trust, corporation, partnership, or other business entity.

The bill provides the following exceptions to the general prohibition on the continued foreign ownership of real property in the State:

1) the acquisition of real property through a process of law involving the collection of debt, the execution of a deed in lieu of foreclosure, the forfeiture of a contract for deed, or the imposition of a lien or claim on the property, whether by mortgage or otherwise, provided that the person or government sell or convey the property, within two years after the transfer of title to the person or government, to an individual, trust, corporation, partnership, or other business entity that is not prohibited from owning real property in the State; and

2) the acquisition of real property by devise or descent, or pursuant to a bona fide encumbrance established on real property taken for the purposes of security.

The bill provides that any provision of the bill that is inconsistent with, or in violation of, the federal Constitution, or any law, treaty, rule, regulation, or executive order (federal law) is not to apply only to the extent that the provision is determined to be inconsistent or in conflict with, impede the federal objectives, or in violation of the federal law. If a provision is determined inconsistent or in conflict, impeding the federal objectives, or in violation of federal law, the provisions of the bill are to be construed to apply to only to those persons of an adverse foreign country that are determined to have taken action that directly poses a threat of terrorism and transnational repression, or that directly pose a threat to the critical infrastructure or economic security of the United States.

The bill authorizes the attorney general to bring an action against an entity that violates the bill. An entity in violation of the bill is to be liable to the State for a civil penalty in an amount not to exceed the greater of:

· $250,000; or

· 50 percent of the market value of the interest in the real property subject to the violation.

The bill directs the Secretary of State to adopt rules and regulations to effectuate the provisions of the bill.