by BarryGeorgia’s Amendment on Foreign Land Ownership and How It Impacts Foreign Real Estate Investment
For foreign investors interested in acquiring real estate in Georgia, understanding local laws is crucial to avoiding costly pitfalls. One of the most significant pieces of legislation impacting foreign real estate investment in the state is O.C.G.A. § 2-1-7. This law imposes restrictions on foreign nationals and entities acquiring certain types of land, particularly agricultural land and property near military bases.
Whether you’re a real estate investor, a foreign corporation, or an individual looking to invest in Georgia, it’s important to be aware of the provisions under this law to ensure compliance and protect your investment. In this post, we’ll explain the key aspects of O.C.G.A. § 2-1-7, how it affects foreign investors, and provide practical advice on how to navigate these restrictions.
Key Provisions of O.C.G.A. § 2-1-7
The Georgia law O.C.G.A. § 2-1-7 places specific restrictions on nonresident aliens and certain foreign entities seeking to acquire land in the state. The key points include:
Restricted Land Types: Nonresident aliens are prohibited from acquiring an interest in:
- Agricultural land: Land that can be used for farming, timber production, and similar activities.
- Land within a ten-mile radius of a military base: This includes military installations and military airports within the state.
Who Is a Nonresident Alien?: A nonresident alien is defined as:
- An individual who is not a U.S. citizen or legal resident and has been physically absent from the U.S. or Georgia for extended periods.
- A corporation or business entity domiciled in a foreign country designated as a foreign adversary by the U.S. Secretary of Commerce (this currently includes countries such as China, Russia, Iran, North Korea, and Venezuela).
Exemptions and Special Situations
Under certain circumstances, a nonresident alien may acquire a possessory interest in the restricted lands, but the law requires that these interests be disposed of within a set time:
- Security for Indebtedness: A nonresident alien can acquire agricultural or restricted land if it is part of a debt enforcement process (e.g., foreclosure or lien enforcement), but the land must be sold within two years.
- Inheritance: If a nonresident alien acquires the land through inheritance or a will, they have one year to dispose of the property.
- Termination of Nonresident Alien Status: If the individual or entity’s nonresident alien status changes, the restriction on ownership may be lifted.
It’s important to note that these restrictions do not apply to residential property, meaning foreign investors can purchase houses, residential buildings, or land intended for residential use without facing these limitations.
How Does This Affect Foreign Real Estate Investors?
For foreign real estate investors, particularly those looking to invest in agricultural land or properties near military installations, O.C.G.A. § 2-1-7 presents a significant barrier. Failing to comply with the law can lead to voided transactions, resulting in the loss of the property and the investment.
- Agricultural Land Investment: If you’re interested in purchasing agricultural land for farming, timber production, or other commercial purposes, this law will require careful planning. Nonresident aliens are restricted from holding these types of property unless acquired under specific exemptions, and even then, the ownership must be temporary.
- Land Near Military Bases: Investors looking to acquire land near military installations must be aware of the 10-mile restriction radius. This is particularly relevant for those interested in property development or large-scale land acquisitions near Georgia’s many military sites.
Planning Your Real Estate Investment Strategy
Foreign investors can still invest in Georgia real estate, but it’s crucial to plan your purchases carefully to avoid running afoul of O.C.G.A. § 2-1-7. Here are some practical steps you can take:
- Know Your Land Type: Before making any purchase, verify whether the land is considered agricultural or falls within the restricted zone near a military base. Work with a real estate attorney to assess the zoning status of the land and ensure it complies with local laws.
- Understand Your Status: If you or your business is considered a nonresident alien under Georgia law, be sure to understand the limitations on acquiring land. Pay special attention to the countries currently designated as foreign adversaries by the U.S. Secretary of Commerce, as this will impact your ability to own land in Georgia.
- Explore Exemptions: If you find yourself acquiring restricted land due to foreclosure or inheritance, understand the deadlines for selling the property and plan accordingly. This can help you avoid losing the investment.
- Focus on Residential Properties: Since O.C.G.A. § 2-1-7 does not apply to residential properties, foreign investors can confidently explore opportunities in Georgia’s residential real estate market, including single-family homes, condos, and apartment buildings. This may be a better route for long-term investments without the risk of restricted land ownership.
Conclusion
While O.C.G.A. § 2-1-7 restricts foreign ownership of certain types of land in Georgia, it doesn’t mean foreign investors are barred from real estate investment altogether. By focusing on residential properties, understanding the type of land you’re purchasing, and working with a real estate attorney, you can navigate these restrictions and make informed investment decisions.
At Edwards Law, we specialize in helping foreign investors navigate Georgia’s real estate laws. Contact us today to schedule a consultation and let us help you make the most of your real estate investments in Georgia.
by BarryCondo Association CCRs and Leasing Restrictions: What Real Estate Investors Need to Know
When considering the purchase of a condo as a long-term investment, one of the most important factors you need to understand is the condo association’s declaration of covenants, conditions, and restrictions (CCRs). These are the rules that govern how you can use your condo, and they can have a significant impact on your investment strategy—especially if you plan to lease the unit. Leasing restrictions outlined in the CCRs can determine whether or not you’ll be able to rent out your condo, and they can even affect the condo’s eligibility for Fannie Mae loans.
In this post, we’ll break down what CCRs are, how leasing restrictions work, and what real estate investors should be aware of to avoid buying a condo they can’t lease.
What Are CCRs?
Covenants, conditions, and restrictions (CCRs) are the rules established by the condo association that govern what owners can and cannot do with their property. When you purchase a condo, you automatically become part of the condo association, which means you agree to abide by the CCRs. These rules are designed to maintain the appearance, value, and quality of life within the community, and they can cover a wide range of topics, such as:
- Rules for common areas (pools, parking lots, gyms, etc.)
- Exterior changes or renovations to individual units
- Pet policies
- Noise restrictions
- Leasing restrictions
While some CCRs may seem straightforward, others—like leasing restrictions—can have a serious impact on your ability to use your condo as a rental property.
Understanding Leasing Restrictions
Leasing restrictions in condo CCRs are rules that limit the ability of owners to rent out their units. These rules are becoming more common as condo associations aim to maintain a balance between owner-occupied and rental units within the community. The idea is that a higher proportion of owner-occupied units tends to enhance the stability and overall quality of life in the condo development.
Here are some common leasing restrictions you might encounter:
Waiting Periods: There may be rules that require new owners to wait a certain period—such as one or two years—before they are allowed to lease their units.
Minimum Leasing Periods: Some condo associations require that units be leased for a minimum period, such as six months or a year. This prevents owners from renting their units on a short-term basis, such as through Airbnb or similar platforms.
Rental Caps: A rental cap limits the percentage of units in the building that can be leased at any given time. For example, the condo association may restrict leasing to no more than 25% of the total units. Once that cap is reached, owners who want to lease their unit will have to wait until other units come off the rental market.
Lease Approval Requirements: Some associations require that leases be submitted for approval by the board before tenants can move in. This adds an extra step to the process and can delay finding renters.
Fannie Mae Loan Eligibility and Leasing Restrictions
If you plan to finance your condo purchase with a loan backed by Fannie Mae, it’s important to understand how leasing restrictions can affect the condo’s loan eligibility. Fannie Mae has specific requirements for condo projects that are eligible for its loans, particularly when it comes to the percentage of owner-occupied units versus rented units.
For a condo project to qualify for Fannie Mae financing, typically at least 51% of the units must be owner-occupied. If leasing restrictions cause the number of rental units to increase beyond that limit, Fannie Mae may refuse to back loans for units in the building. This can limit your ability to get a mortgage and can also affect the resale value of the condo in the future.
Pitfalls to Avoid for Real Estate Investors
For real estate investors, purchasing a condo that you intend to lease without thoroughly understanding the CCRs and leasing restrictions can lead to significant issues. Here’s what you should do to avoid pitfalls:
Consult with an Attorney: Working with a real estate attorney, like those at Edwards Law, can help ensure you fully understand the implications of the CCRs and protect your investment.
Read the CCRs Carefully: Before making an offer on a condo, make sure to request a copy of the association’s CCRs and review them thoroughly. Pay special attention to any sections on leasing restrictions.
Ask About the Current Rental Cap: If the condo association has a rental cap in place, find out what percentage of units are currently being rented. If the cap has been reached, you may not be able to lease your unit immediately after purchase.
Check the Fannie Mae Eligibility: Ensure that the condo development meets Fannie Mae’s owner-occupancy requirements if you plan to finance your purchase with a loan backed by Fannie Mae.
Investing in a condo can be a smart long-term strategy, but it’s essential to know the rules set by the condo association before you buy. Leasing restrictions in the CCRs can significantly impact your ability to rent the unit and even affect your financing options. At Edwards Law, we’re here to help real estate investors navigate the complexities of condo purchases and ensure your investment is protected. Contact us today for a consultation and let us guide you through the process.