Bulletin: AR2023002

Dear Associates:

Arkansas enacted into law a series of statutory amendments and new statutes through an act known as “An Act to Amend the Law Concerning Ownership and Possession of Real Property; and for Other Purposes” under Chapter 11 of Title 18 of the Arkansas Code. These laws (“Statutes”) are effective on July 31, 2023. This bulletin outlines key points and provides a brief explanation of the new law as it relates to title insurance and title agents.

What it does:

The Statutes generally prohibit two forms of real property ownership:

• Prohibited Foreign-Party-Controlled Business Entities (“PFBE”) having a “controlling interest” in public or private land.
• Prohibited Foreign Party (“PFP”) that is not a resident alien with a residence in the State of Arkansas having any interest in “agricultural land”.

Key Terms: 

• Agricultural land is defined as:

o Any Arkansas land which is outside the corporate limits of a municipality and is:

(i)  Used for forestry production, including without limitation land exceeding ten (10) acres in which ten percent (10%) of the land is stocked by trees of any size, including land that formerly had trees of any size covering the land that will be naturally or artificially regenerated; or

(ii)  Currently used for, or, if currently idle, land last used within the past five (5) years, for farming, ranching, or timber production, except land not exceeding ten (10) acres in the aggregate, if the annual gross receipts from the sale of the farm, ranch, or timber products produced on the land do not exceed one thousand dollars ($1,000), including without limitation land used for activities described in the Standard Industrial Classification Manual (1987), Division A, exclusive of industry numbers 0711-0783, 0851, and 0912-0919 which cover animal trapping, game management, hunting carried on as a business enterprise, trapping carried on as a business enterprise, and wildlife management.

o Agricultural land does not include oil, gas, and all other minerals, including coal, lignite, brine, and all minerals known and recognized as commercial minerals underlying the land.

• Controlling interest means an ownership interest of fifty percent (50%) or more, in the aggregate.
• Prohibited Foreign-Party-Controlled Business Entities (“PFBE”) means a corporation, company, association, firm, partnership, society, joint-stock company, trust, estate, or other legal entity whose controlling interest is owned by a prohibited foreign party.
• Prohibited Foreign Party (“PFP”) is defined to include ANY of the following:

o A citizen or resident of a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1;

o A foreign government formed within a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1;

o A party other than an individual or a government, that is created or organized under the laws of a foreign government within a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1; or

o Any party other than an individual or a government:

(i)  That is created or organized under the laws of any state; and

(ii)  In which a significant interest or substantial control is directly or indirectly held or is capable of being exercised by:

(a)  A citizen or resident of a country subject to International Traffic in Arms Regulations;

(b)  A foreign government formed within a country subject to International Traffic in Arms Regulations;

(c)  A party other than an individual or a government, that is created or organized under the laws of a foreign government within a country subject to International Traffic in Arms Regulations; or

(d)  A combination of the individuals, parties, or governments referred to above;

o An Entity of Particular Concern designated by the United States Department of State; or

o An agent, trustee, or other fiduciary of a person or entity enumerated in (a) – (d) above.

 Currently the above referenced countries, entities, and foreign governments include:

 Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China, Cuba, Cyprus, Democratic Republic of Congo, Ethiopia, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela, and Zimbabwe

 Al-Shabaab, Boko Haram, Hayat Tahrir al-Sham, the Houthis, ISIS-Sahel (formerly known as ISIS-Greater Sahara), ISIS-West Africa, Jamaat Nasr al-Islam wal Muslimin, the Taliban, and the Wagner Group based on its actions in the Central African Republic.

• Residence means a person's principal dwelling place where the person intends to remain permanently for an indefinite period of time.
• Resident alien means a person who:

o Is not a citizen of the United States; and

o Is a resident of a:

o (i) State of the United States;

o (ii) Territory of the United States;

o (iii) Trusteeship of the United States; or

o (iv) Protectorate of the United States.

• Significant interest or substantial control means:

o An interest of 33% or more held by a PFP;

o An interest of 33% or more held whenever the PFPs are acting in concert with respect to the interest even though no PFP holds an interest of 33% or more;

o An interest of 50% or more, in the aggregate, held by the PFPs even though not acting in concert.

Are there circumstances where these laws do not apply?

Yes, the Statutes do not restrict foreign ownership in the following circumstances:   

• Ownership or interest in private or public land (non-agricultural) vested in any party OTHER THAN a business entity where 50% of the controlling interest is held by a foreign party (or multiple parties together) identified above.
• Ownership or interest in agricultural land by a resident alien of the United States with a residence in the state of Arkansas.

Penalties for Violations

If an individual, entity, trust, or foreign government violates the Statutes and fails to divest themselves of the real property within 2 years, the Attorney General will commence an action in circuit court of the county in which the property lies and file a notice of pendency of the action. If deemed a violation, then a judicial foreclosure of the property will take place with the proceeds of the sale to be disbursed to lienholders in order of priority. Violation may also result in criminal penalties and fines.

It is important to note that the Statutes do not hold title to be invalid or subject to divestiture due to a violation by a former owner or other person holding or owning a former interest in the land.

What do Title Agents Need to Know?

The Statutes do not provide for specific penalties for a title agent handling a closing of affected property, but state that a person not subject to the Statutes is not required to determine or inquire as to whether another person is or may be subject to the Statutes.

At this time, Stewart is not requiring the inclusion of a general exception relating to the matters raised in the Statutes. However, if a notice, lien, lis pendens, order, or other recorded document indicates applicability of the Statutes, proper requirements need to be made to clear the item.

Given the uncertainty created by the broad provisions of the Statutes, determining whether a property, party or transaction is affected by the act is extremely difficult and given the potential for criminal/civil liability and insurability, STG agents should continue to closely review entity organizational structure, trust documents, and individual citizenship/identification. Find links here for the updated list of PFBE and PFP.

Attached is a copy of the new Statutes for your reference. You should reach out to your local STG underwriter for any questions or additional guidance.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter. What it does:

The Statutes generally prohibit two forms of real property ownership:

• Prohibited Foreign-Party-Controlled Business Entities (“PFBE”) having a “controlling interest” in public or private land.
• Prohibited Foreign Party (“PFP”) that is not a resident alien with a residence in the State of Arkansas having any interest in “agricultural land”.

Key Terms: 

• Agricultural land is defined as:

o Any Arkansas land which is outside the corporate limits of a municipality and is:

(i)  Used for forestry production, including without limitation land exceeding ten (10) acres in which ten percent (10%) of the land is stocked by trees of any size, including land that formerly had trees of any size covering the land that will be naturally or artificially regenerated; or

(ii)  Currently used for, or, if currently idle, land last used within the past five (5) years, for farming, ranching, or timber production, except land not exceeding ten (10) acres in the aggregate, if the annual gross receipts from the sale of the farm, ranch, or timber products produced on the land do not exceed one thousand dollars ($1,000), including without limitation land used for activities described in the Standard Industrial Classification Manual (1987), Division A, exclusive of industry numbers 0711-0783, 0851, and 0912-0919 which cover animal trapping, game management, hunting carried on as a business enterprise, trapping carried on as a business enterprise, and wildlife management.

o Agricultural land does not include oil, gas, and all other minerals, including coal, lignite, brine, and all minerals known and recognized as commercial minerals underlying the land.

• Controlling interest means an ownership interest of fifty percent (50%) or more, in the aggregate.
• Prohibited Foreign-Party-Controlled Business Entities (“PFBE”) means a corporation, company, association, firm, partnership, society, joint-stock company, trust, estate, or other legal entity whose controlling interest is owned by a prohibited foreign party.
• Prohibited Foreign Party (“PFP”) is defined to include ANY of the following:

o A citizen or resident of a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1;

o A foreign government formed within a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1;

o A party other than an individual or a government, that is created or organized under the laws of a foreign government within a country subject to International Traffic in Arms Regulations, 22 C.F.R. § 126.1; or

o Any party other than an individual or a government:

(i)  That is created or organized under the laws of any state; and

(ii)  In which a significant interest or substantial control is directly or indirectly held or is capable of being exercised by:

(a)  A citizen or resident of a country subject to International Traffic in Arms Regulations;

(b)  A foreign government formed within a country subject to International Traffic in Arms Regulations;

(c)  A party other than an individual or a government, that is created or organized under the laws of a foreign government within a country subject to International Traffic in Arms Regulations; or

(d)  A combination of the individuals, parties, or governments referred to above;

o An Entity of Particular Concern designated by the United States Department of State; or

o An agent, trustee, or other fiduciary of a person or entity enumerated in (a) – (d) above.

 Currently the above referenced countries, entities, and foreign governments include:

 Afghanistan, Belarus, Burma, Cambodia, Central African Republic, China, Cuba, Cyprus, Democratic Republic of Congo, Ethiopia, Eritrea, Haiti, Iran, Iraq, Lebanon, Libya, North Korea, Russia, Somalia, South Sudan, Sudan, Syria, Venezuela, and Zimbabwe

 Al-Shabaab, Boko Haram, Hayat Tahrir al-Sham, the Houthis, ISIS-Sahel (formerly known as ISIS-Greater Sahara), ISIS-West Africa, Jamaat Nasr al-Islam wal Muslimin, the Taliban, and the Wagner Group based on its actions in the Central African Republic.

• Residence means a person's principal dwelling place where the person intends to remain permanently for an indefinite period of time.
• Resident alien means a person who:

o Is not a citizen of the United States; and

o Is a resident of a:

o (i) State of the United States;

o (ii) Territory of the United States;

o (iii) Trusteeship of the United States; or

o (iv) Protectorate of the United States.

• Significant interest or substantial control means:

o An interest of 33% or more held by a PFP;

o An interest of 33% or more held whenever the PFPs are acting in concert with respect to the interest even though no PFP holds an interest of 33% or more;

o An interest of 50% or more, in the aggregate, held by the PFPs even though not acting in concert.

Are there circumstances where these laws do not apply?

Yes, the Statutes do not restrict foreign ownership in the following circumstances:   

• Ownership or interest in private or public land (non-agricultural) vested in any party OTHER THAN a business entity where 50% of the controlling interest is held by a foreign party (or multiple parties together) identified above.
• Ownership or interest in agricultural land by a resident alien of the United States with a residence in the state of Arkansas.

Penalties for Violations

If an individual, entity, trust, or foreign government violates the Statutes and fails to divest themselves of the real property within 2 years, the Attorney General will commence an action in circuit court of the county in which the property lies and file a notice of pendency of the action. If deemed a violation, then a judicial foreclosure of the property will take place with the proceeds of the sale to be disbursed to lienholders in order of priority. Violation may also result in criminal penalties and fines.

It is important to note that the Statutes do not hold title to be invalid or subject to divestiture due to a violation by a former owner or other person holding or owning a former interest in the land.

What do Title Agents Need to Know?

The Statutes do not provide for specific penalties for a title agent handling a closing of affected property, but state that a person not subject to the Statutes is not required to determine or inquire as to whether another person is or may be subject to the Statutes.

At this time, Stewart is not requiring the inclusion of a general exception relating to the matters raised in the Statutes. However, if a notice, lien, lis pendens, order, or other recorded document indicates applicability of the Statutes, proper requirements need to be made to clear the item.

Given the uncertainty created by the broad provisions of the Statutes, determining whether a property, party or transaction is affected by the act is extremely difficult and given the potential for criminal/civil liability and insurability, STG agents should continue to closely review entity organizational structure, trust documents, and individual citizenship/identification. Find links here for the updated list of PFBE and PFP.

Attached is a copy of the new Statutes for your reference. You should reach out to your local STG underwriter for any questions or additional guidance.

If you have any questions relating to this or other bulletins, please contact a Stewart Title Guaranty Company underwriter. 

For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.