US real estate

CFIUS National Security Reviews Cover Certain Real Estate Transactions – Inward/Foreign Investment

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The Committee on Foreign Investment in the United States (“CFIUS“) is an interagency committee chaired by the Secretary of the Treasury that screens certain foreign investments or acquisitions of U.S. businesses or real estate to determine whether they could harm U.S. national security. If CFIUS determines it has jurisdiction and a transaction raises relevant national security issues, CFIUS may ask the parties to agree to certain mitigations.If the parties refuse to agree to mitigations or if CFIUS determines that its concerns cannot be mitigated, CFIUS will ask the parties to withdraw or unwind their transaction. If the parties refuse, CFIUS will inform the President of the United States of this transaction. The President will then decide, on the advice of CFIUS, whether to exercise his legal authority to suspend, block or unwind the transaction.

As a result of the Foreign Investment Risk Review Modernization Act (FIRRMA), the authority and resources of CFIUS have increased significantly. The current CFIUS regulations are titled (i)
Provisions relating to certain investments in the United States by foreigners (31 CFR Parts 800 and 801) and (ii) Provisions relating to certain transactions by foreign persons involving real property in the United States (31 CFR Part 802). CFIUS regulations not only impact certain foreign investments in US companies, they also cover certain types of foreign investments in US real estate, even if there is no US company involved.

Part 802 authorizes CFIUS to review a purchase, lease, grant, or other type of transaction involving
certain real estate (discussed below) that provides a foreign person three or more the following rights to (i) physical access to the property; (ii) prevent others from physically accessing the property; (iii) improve or develop real estate assets; or (iv) attach fixed or immovable structures or objects to the property. CFIUS Part 802 jurisdiction applies to investments in certain types of real property that consist of, are near, or are within a designated area shared with certain air or seaports, military installations, or other identified sensitive facilities in a appendix to Part 802. Real estate locations must be screened to determine if they meet certain proximity requirements that trigger Part 802 jurisdiction. These screenings rely on tools provided by CFIUS itself as well as other sources.

Part 802 does not give CFIUS unlimited jurisdiction over real estate transactions. These regulations exempt from CFIUS authority certain types of transactions, including, but not limited to, (i) individual “housing units” or (ii) “urbanized areas” or “urban groups” ( defined by the U.S. Census Bureau) that are not in close proximity to certain designated military installations or located within or forming part of covered ports. These exemptions are narrowly tailored and require careful consideration before a party invokes them.

In addition, certain foreign investors who meet specified criteria
and have ties to “Excluded Real Estate Foreign States” may claim immunity from the jurisdiction of CFIUS under Part 802. Currently, Australia, Canada, New Zealand and the United Kingdom are the only states foreigners exempt. Investors seeking to take advantage of these exemptions must be able to demonstrate, among other things, that they have a history of compliance with certain laws, orders and regulations relating to matters of national security. Several other prerequisites must also be met before benefiting from these exemptions.

Part 802 also contains limited exemptions to CFIUS jurisdiction in certain cases involving (i) the lease or concession of real property in air or seaports (a) onlyfor retail purposes or (b) involving a foreign air carrier that has met security program standards accepted by the Transportation Security Administration; (ii) the purchase, lease or concession of certain commercial space in multi-residential commercial buildings (which could apply to many common commercial real estate investments); or (iii) real property owned by Alaska Natives or held in trust by the United States for certain Native peoples. Regulators have carefully crafted language regarding all of the above exemptions. Parties to have to review the specific wording of Part 802 before relying on these exemptions.

Real estate transactions subject to Part 802 are considered covered transactions subject to CFIUS voluntary filing process, either in the form of a detailed notice or an abbreviated statement. Parties who do not file a Voluntary Submission with CFIUS could face transaction uncertainty given that CFIUS may, on its own initiative, review and challenge an unnotified real estate transaction at any time, including months or years after the closing of the transaction. The CFIUS can also order the parties to file a case if they have not done so voluntarily. Parties who submit a Voluntary or Directed Filing that meets CFIUS approval are eligible for Safe Harbor protection from further challenges from CFIUS in the future.

Part 802 does not impose any mandatory filing requirements with respect to real estate transactions. However, if a particular transaction involving real estate is also related to a U.S. business, CFIUS regulations under Parts 800 and 801 will apply instead of Part 802. This could mean that a mandatory statement must be filed. if certain triggers are met under these regulations. . Please refer to our CFIUS guide available at
CFIUS-Overview.pdf ( for more information on CFIUS and mandatory reporting.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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