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2.1 International Context

2.2 General Considerations

2

245

3.1 Individuals

3.1.1 A Test of Nationality or Citizenship

3.1.2 A Test of Residence

3.1.3 A Test of Ethnicity

7

789

10

12

3.2 Companies and other Legal Persons

3.3 The Issue of Ultimate Benefit

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15

16

17

5.1 A Comment on Constitutions

17

24

28

28

6.1 The Outright Ban

6.2 Intermediate Restrictions

6.2.1 The “Key Sector” Approach

6.2.2 Land Quantity Restrictions

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30

31

32

32

33

35

36

6.2.3 Prior Authorisation

6.2.3.1 Who Decides the Application?

6.2.3.2 What Must Be Supplied?

6.2.3.3 What is the basis of the decision?

6.2.3.4 What Other Restrictions or Requirements May Be Imposed?

6.2.4 Registration and Notification

6.3 How Are State Requirements Enforced?

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41

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46

49

This study is a revised version of a working document originally prepared for the Development

Law Service and Land Tenure Service of FAO in April 1995. The genesis of the document lay in

the request of the Government of Lithuania for assistance from FAO in analysing the policy and

legal options available for dealing with the sensitive issue of foreign ownership of land. There

were concerns at that time that Lithuania’s constitutional prohibition on ownership by noncitizens

might negatively affect the country’s efforts to join the European Union. There were

also, however, persisting fears that complete elimination of all restrictions on foreign ownership

would result in a loss of control by the nation over its own territory. Consequently, the

Government of Lithuania was eager to know how other countries had approached the issue of

foreign ownership, and to learn in particular about any intermediate strategies that might have

been designed, falling somewhere between complete prohibition and complete liberalisation.

The purpose of the 1995 document was to provide an overview of the wide-range of approaches

used around the world, in order to help ensure that the ongoing debate in Lithuania was

informed by as much comparative experience as possible.1

Since 1995, it has become increasingly clear that the issue of foreign ownership of land remains

high on the agenda of many nations around the world. Indeed, as the pace of economic

integration and globalisation accelerates, it can be expected that many existing regulatory

approaches will be re-examined. New techniques will be sought that are designed to strike a

better balance between a country’s perceived interests in regulating foreign investment in land,

and the modern imperatives of an international economy.

Because of the widespread and growing interest in this topic, the Development Law Service

decided to update the original 1995 document and to make it available to a wider audience.

The study is based on a review, where possible, of relevant legislation and other legal

instruments. Given the difficulties of access to many primary sources, however, the survey also

relies on foreign investment guides, country summaries in legal yearbooks, short articles from

the news sections of legal periodicals, internet databases, and the somewhat limited academic

and professional literature directly on the subject.2

The objective of this study is to provide information on the approaches that are, or have been

adopted to regulate foreign ownership of land. As such, it aims at providing a framework for

analysis and a representative sample of the legal techniques and strategies that have been

devised to deal with the issue; it is not intended to be an authoritative summary of the state of

the law in this area.

conference. In recent years, the restriction has been relaxed with respect to ownership of non-agricultural plots by

EU and OECD nationals. See Constitutional Law of the Republic of Lithuania On Subjects, Procedure, Terms and

Conditions and Restrictions on the Acquisition into Ownership of Land Plots Provided for in Article 47, Paragraph 2 of

the Constitution of the Republic of Lithuania, which came into force on 2 February 1998.

2 This literature was described as "scanty", in 1980, and the position has not improved greatly since then. Joshua

Weisman, "Restrictions on the Acquisition of Land by Aliens", 28 Am. J. Comparative L. 39 (1980).

Moreover, while every effort has been made to refer to the most recent accessible information

on the subject, it has not always been possible to ensure that the legal situation described for a

given country is up-to-date in all respects. Perhaps because of the fundamental nature of land

rights, the laws in this area do not change frequently, as a general rule. Nevertheless, dramatic

changes in basic land laws have occurred and are ongoing in a number of places around the

world, most notably in the countries of central and eastern Europe and central Asia, as well as in

parts of Africa and Latin America. European Union access criteria has prompted attention to the

issue of foreign ownership in many countries contemplating future EU membership, and a

economic crisis in Asia has inspired a number of countries, including Korea, Thailand and

Philippines, to consider changes to their restrictions on foreign ownership, in order to bolster

Consequently, it should be noted that the examples used here are presented primarily for their

indicative and illustrative value, a value that they retain even as they are, from time to time,

revised or discarded by the country in question. Nevertheless, future updates to this paper are

planned (including, inter alia, coverage of new developments in Central Asia and Africa), and will

be posted on the FAO Legal Office web site as they are completed. A paper version is

expected to be published in 2000.

Although restrictions on foreign ownership and use of land are frequently flagged in the

literature, if there are no references to restrictions, it does not necessarily follow that no

restrictions exist. In such cases, the study follows a cautious approach to characterising states

as having no restrictions on foreign land ownership.

The focus of this study is on foreign ownership and use of land. Accordingly, a number of

important related issues are not discussed in any detail. In particular, the study does not deal

with general restrictions relating to foreign investment and foreign exchange (which may also

impact on foreign ownership of land) nor with the issue of mineral and mining rights (some

states such as Australia and Brazil regulate the right of foreigners to exploit and mine for

minerals and other resources).

Jonathan M. Lindsay

FAO Development Law Service

3 See Box 5, below.

Land is a fundamental resource of the nation state. Without land, without territory, there can be

all based upon land management and use.

As the modern state emerged, those who were not citizens were classified as "foreigners" or

"aliens" who, by their very status as such, were deemed not to be appropriate recipients of full

attitudes towards "foreigners" have changed, a process assisted by global communications,

increases in foreign investment and the growth of international trade. In many areas states

mutually accept the rights of each other's citizens to receive the same treatment as their own

citizens, and this trend is likely to continue. However as regards land, many states still restrict

its ownership and use by foreigners.

This comparative study looks at the legal and administrative techniques which various countries

have adopted to prohibit, restrict and regulate the ownership and use of land by foreigners

whether they be natural or legal persons.

A number of states such as Germany, France, the United Kingdom, Portugal, the Netherlands,

Belgium and Luxembourg, do not have any restrictions on foreigners as regards land ownership

countries which apparently also have no specific restrictions on foreign ownership or use of land

The presence or absence of restrictions and regulations designed to limit or control foreign land

ownership, may not be the end of the matter. If the purchase of land by a foreigner is for

investment purposes, or ancillary to investment, it may be subject to the rules and restrictions

set out in a state's foreign investment code. A comparison of foreign investment restrictions is

6 For a description of the historical development of foreign land ownership restrictions in England and France, see

7 In Germany, Article 14(2) of the Grundgesetz provides that there are no distinctions regarding ownership of

property between citizens and non-citizens. A similar provision exists in Article 711 of the Civil Code in France. In

Belgium, the ownership of property is a fundamental right of both Belgians and non-Belgians. For further information,

reported that Argentina had substantial restrictions on foreign ownership.

9 Equally a foreigner purchasing land, such as a family home, in the United Kingdom might not necessarily be in a

position to use the land for the intended purpose if that individual is unable to satisfy immigration requirements.

10 For many years foreign land ownership in India was severely affected by the exchange control restrictions in the

Foreign Exchange Regulation Act of 1973. Those restrictions have now been significantly liberalised. D.C.

A majority of the states reviewed discriminate against foreign ownership and, less frequently,

foreign use of land through various restrictions and regulations. These can range from an

outright ban to a simple requirement that notice of foreign ownership be given to the relevant

authorities. Such policies can apply to all of the land within a state's boundaries, or only to land

in certain areas, of a particular nature or designated for a particular use, or to a combination of

these.

This survey begins by considering the fundamental issues of the existing forms of land

ownership or tenure; what is meant by "land"; and who or what is a "foreigner". We will then

consider the various policy rationales for different approaches to land, before examining the

range of techniques and approaches.

The range of approaches to regulate foreign land ownership is striking. In one sense this

should not be surprising given that the issue is largely unregulated by international law, leaving

states to legislate in accordance with their own policies and requirements.

Customary international law places no restriction on the right of states to restrict or regulate

foreign ownership of land within their territories. States have sovereignty over their natural

to allow them entry only on terms - including a term that they may not own or use land or

International law is primarily concerned with the issue of the expropriation of land already

lawfully owned by foreigners. While expropriation itself is not unlawful under international law,

deciding whether or not to purchase land in a particular state might well be influenced by that

state's attitude to the issue of expropriation, this cannot in itself be considered to constitute a

legal restriction.

There are no global multilateral treaties on the issue of foreign land ownership or use. The

instrument which comes closest to regulating in this area is the Organisation for Economic

Cooperation and Development (OECD) Code of Liberalisation of Capital Movements which

imposes a general obligation on each state signatory to liberalise its policies towards

transactions and money transfers necessary for direct investment. However its impact on

11 This principle of customary international law was most recently affirmed in Principle 2 of the Rio Declaration at the

Earth Summit in 1992.

13 Various rules relate to the basis and manner for expropriation, including the amount of compensation paid; how

that amount is determined; when payable; and the appropriate forum for the assessment of any disputes that may

foreign ownership of land is minimal. One commentator has noted that it has "only a marginal

effect on existing real property law and would not prevent a participant country from enacting

Other related instruments are the draft United Nations Conduct of Transnational Corporations

Code, and the draft Multilateral Agreement on Investment, currently being negotiated through

the OECD. The former is designed to regulate the conduct of multinational corporations, and

the latter to minimise trade barriers to foreign investment. Neither of these draft agreements

Regional international treaties can have a more direct bearing on the issue. Until the passing of

Decisions 220 and 291 by the Commission of the Cartagena Agreement, members of the

Andean Pact (Colombia, Venezuela, Peru, Ecuador and Bolivia) were each bound at national

level to severely restrict levels of foreign investment in their economies, and by extension,

of Member States to restrict or regulate the ownership of land by foreigners who are nationals of

other Member States as set out in Box 1.

Other potential restrictions in international law on a state's right to regulate or restrict foreign

ownership of land are bilateral Friendship, Commerce and Navigation Treaties or their modern

cousins, Bilateral Investment Treaties. As the latter's name suggests, such treaties are more

concerned with investment regulation in general, in particular the grant of “national treatment”,

whereby foreign investors are accorded the same treatment as national investors, or “most

favoured nation” status, whereby all foreign investors, regardless of nationality, are treated

equally.

Few such treaties, however, grant foreign nationals a right to own property in the host state.

While treaties typically provide that each state "shall" admit investments from the other state

party, such obligations are frequently qualified by a clause adding words to the effect that the

restricting foreign ownership of land would therefore still apply. Indeed in a 1976 study of the

thirty-six such treaties entered into by the USA, only three guaranteed foreigners the same

treatment as nationals in respect of the general acquisition of land, and six in respect of the

acquisition of land by inheritance. By far the greatest number gave a time allowance for the

Therefore although the terms of bilateral investment treaties vary considerably, requiring each to

be considered on its own terms, in general such treaties have little practical effect on the

a discussion of the UN Conduct of Transnational Corporations Draft Code.

(1976).

restriction and regulation of foreign ownership of land.

The Treaty of Rome, which establishes the European Economic Community, as amended by the

Single European Act 1987, the Treaty of European Union 1992, and the Treaty of Amsterdam 1997,

does not specifically deal with the issue of foreign land ownership, whether or not the foreigners are

nationals of other Member States.

However, treaty provisions prohibiting discrimination on the grounds of nationality, guaranteeing the

free movement of goods, persons, services and capital, and freedom of establishment within the

European Union, combine to restrict the competence of Member States to limit land acquisition by

nationals of other Member States. Foreigners who are not nationals of EU Member States are still

subject to the laws of the individual Member States.

Within the scope of application of this Treaty, and without prejudice to any conditions contained

therein, any discrimination on the grounds of nationality shall be prohibited …

The Community shall adopt measures with the aim of progressively establishing the internal market …

The internal market shall comprise an area without internal frontiers in which the free movement of

goods, persons, services and capital is ensured in accordance with the provisions of the Treaty.

(1) … the Council shall … draw up a general programme for the abolition of existing restrictions

on freedom of establishment within the Community …

(2)(e) The Council and the Commission shall carry out the duties devolving upon them under the

preceding provisions, in particular: … (e) by enabling the national of one Member State to acquire and

use land and buildings situated in the territory of another Member States …

Also relevant is Regulation 1612/68/EEC granting nationals of Member States equal employment rights

and rights of accommodation in connection with their employment (Article 9).

Belgium, Germany, France, Luxembourg, the Netherlands, Portugal and the United Kingdom have no

restrictions on foreign ownership of land. In the Republic of Ireland, foreigners (except those with 7

years continuous residence) are required to obtain the permission of the Land Commission to

purchase land or hold a lease, mortgage or contractual interest, such as an option, in agricultural land.

Italy and Spain have restrictions on the acquisition of land by foreigners in border areas. In Spain, EU

national are exempted from these restrictions, although in Italy, ownership and use of land in border

areas by EU nationals and other foreigners must be authorised by the local Prefect of Police. Greece

also has special restrictions on the acquisition of land in border areas. EU nationals are subject to the

same restrictions and must obtain the same authorisation as Greek citizens. Other foreigners are

subject to a different regime.

Ownership and use rights in relation to land in some legal systems (including most common law

systems) are based on a distinction between real property (land and land rights) and personal

property. In other legal systems, particularly civil law systems, rights in respect of land are

based on distinctions firstly, between immovable things (land and buildings) and movables and

secondly, between real rights enforceable against the world and personal rights which are only

enforceable against specific parties. In some legal systems, land ownership rights are described

as permanent use rights although for practical purposes, the effect of such a right often appears

However there are many variations among countries, even between legal systems from the

same "family". For example in most legal systems, particularly those influenced by Roman law,

Furthermore, in addition to the substantive law differences, there are numerous other

differences between jurisdictions as to the practicalities and proof of land ownership, notably

whether this is by deed or registration. Further, it should be noted that in federal states, land

ownership legislation is often left to the provinces or states, which have more direct control over

A comparative survey of different legal concepts of, or approaches to, land ownership is beyond

the scope of this paper. However, it is important to be aware of the effects which differences in

underlying legal concepts can have on the formulation and implications of restrictions on the

foreign ownership and use of land.

Despite the many differences between legal systems in this area, broadly speaking notions of

of possession, of use and enjoyment, and of alienation (i.e. the right of sale or other disposal).

Ownership rights are usually subject to some restrictions in the interests of the community at

large. For example, under Roman law (on which the ownership regimes in many civil law

systems are based), the general rule that ownership was absolute and conferred upon the

owner the right to deal with property in any way whatsoever unless prohibited by law, was

tempered by the qualification that in doing so, the legal rights of others must not be infringed.

Not all legal systems, however, admit such a concept of private land ownership. For example in

19 See for example, Article 7 of the Ukrainian Land Code. Cited in W.E. Butler, M.I. Braginski, and A.A. Rubanov,

20 For example, Article 750 of the Mexican Civil Code defines land - ("Bienes Immuebles" or real property) - as

including the "soil and constructions attached thereto ... plants and trees while united to the ground ... everything

which is united to the ground in permanent manner..."

23 Although there may be significant differences as regards rules on the inheritance of land.

ownership of land is not permitted for ideological reasons - although it may be used or leased by

both nationals and foreigners. Some states which were formerly part of the USSR have

changed or are in the process of changing the law in this area, although state ownership retains

a strong hold in many of these countries.

In many African countries, the notion of land ownership being vested in the state prevails,

though private use or occupancy rights based on statute or customary law are recognised in one

result of major reform of the land regime in the 1970s which sought to consolidate and simplify

the previous mixture of customary and statute law, nearly all land is vested in the Governor of

each state to be held on trust for the citizens of Nigeria. The State Governors have power to

grant rights of occupancy over the land, to consent to the alienation of such rights and to

override them in the public interest. The licensing of alienation gives the Governors power to

In Israel, 92 per cent of the land is state owned, and subject to very limited exceptions, the law

provides that it cannot be sold. Therefore, apart from the 8 per cent of Israeli territory in which

land can be owned privately, land holding takes place on the basis of the grant of long term

Although restrictions on the ownership of land by foreigners are more common, some states

place restrictions on types of land use. A number of states restrict the rights of foreigners to

using land for certain purposes. Furthermore, even if a state does not expressly regulate

foreign use of land, it may retain the right to approve or grant leases or use rights which means

that the state retains an element of control which can be used to regulate foreign land use.

In some parts of the world, such as in substantial portions of many African countries and the

South Pacific, land systems are based upon customary land tenure, "… a phrase which is widely

26 See for example Eritrea, Land Proclamation, 1994; Tanzania, Land Act, 1999.

27 Land Use Act 1978. See Emmanuel Nwabuzor, "Real Property Security Interests in Nigeria: Constraints of the

28 Normally leases are for 49 years with an option to renew for a similar term, to a maximum of 98 years. See

(Kluwer, 1992), part on Israel.

customary land tenure in the South Pacific, more than 90 per cent of the land in the 22 countries and territories

Pacific, Fiji, 1995), at 2.

land tenure is a form of land holding which is based upon the customary laws of the community,

which are often unwritten.

The Vanuatu Constitution, for example, states that all land belongs to indigenous customary

owners and their descendants, and that only indigenous citizens who have acquired land in

However, customary land holding is permitted for 75 year terms, and foreigners (or persons

from other islands in Vanuatu) wishing to acquire land on an island may do so with the

To regulate ownership of land by foreigners it is essential to define which natural and legal

persons (such as companies) are considered "foreigners". This issue may raise complex

definitional questions, particularly regarding legal persons, which will be answered in different

ways depending on the policy objective that the state concerned seeks to achieve.

Different states use different terminology. For consistency, the terms "foreign" and "foreigner"

have been used throughout this study, and may apply to both natural persons and to legal

persons, such as companies. These terms have been used instead of words like "national",

"citizen", "alien", in order to encompass the wide variety of tests of "foreignness" which are used

in the regulation of land ownership and use.

This Part examines three issues: the definition of a foreign natural person (including a member

of a foreign partnership); the definition of a foreign company or legal person; and how the issue

of ultimate benefit is relevant in respect of both natural and legal persons.

It is important to appreciate from the outset that in most cases the question of whether a person

is foreign is raised only once - at the point when, or before, the land in question is purchased or

of a lease, has been completed. One of the few exceptions discussed in the literature is Ireland,

where the Land Act provides that where "control" of company with an interest in agricultural land

passes to foreigners the company is under a duty to notify the Land Commission within one

As regards individuals, two main tests are used: nationality/citizenship alone and a combination

test of nationality/citizenship and residence. However there is no rigid distinction between the

two tests and elements of each may overlap. A third, more infrequent test, makes reference to

ethnicity.

33 Land Act 1965, s. 54(5)(a). See also the US International Investment and Trade in Services Survey Act of 1976

which requires notification by foreigners acquiring 10 per cent or more of the shares of US real estate corporations.

International law provides that each state should determine who is and who is not a national

nationality, citizenship and its attendant privileges is beyond our scope. For the purposes of this

survey a reference to a person as a national follows the classification adopted by the state in

Although the national/non-national test might seem straightforward, a review of its use in the

context of land ownership shows that the notion has a wide variety of applications. A common

provision permits only nationals or citizens to own land, either at all, or free from restriction. For

example the Constitution of Lithuania originally provided that only the State and natural persons

foreigners may not own land, or that they are subject to certain restrictions, many of which will

be considered below.

Some states differentiate between "types" or classes of foreigner in regulating land ownership or

use. Typical examples are legislative provisions that place additional restrictions on enemy

aliens in time of war. For instance the US Trading with the Enemy Act 1970 allows the federal

government to take control of enemy alien property in times of war or a declared emergency.

Further, under the US Foreign Assets Control Regulations, during a state of emergency prior to

the outbreak of war aliens from designated states may be required to obtain Treasury

Similarly, in the Canadian province of Nova Scotia the relevant statute expressly provides that

Other jurisdictions positively discriminate in favour of classes or types of foreigner, the most

striking, perhaps, being the concept of the "alien friend" in New Jersey law (see Box 2).

Similarly, Saudi Arabia, which otherwise prohibits foreign ownership of land, makes an

In determining which foreigners will be granted privileged status as regards land rights, the

issue of reciprocity is a common criterion. Certain states such as Turkey and El Salvador

international custom, and the principles of international law; Articles 1 and 2 of the Hague Convention on Certain

Questions Relating to the Conflict of Nationality Laws 1930.

35 In addition it is accepted under international law that a person may be a stateless person.

36 Article 47(1). These restrictions have been relaxed at least with respect to ownership of non-agricultural plots by

37 James R. Mason, "PSSST, Hey Buddy, Wanna Buy a Country? An Economic and Political Policy Analysis of

generally permit foreigners to hold land on condition that reciprocal rights are granted to their

nationals. Taiwan permits the acquisition of land rights by foreigners whose own governments

have entered into equal and reciprocal treaties with it - such as a Treaty of Friendship,

described in Box 1 are another example of treaty obligations giving rise to a preferential status

for some foreigners on the basis of the existence of reciprocal rights (in this case for citizens of

other Member States).

Article 16 of the Italian Civil Code on the other hand makes the grant of all civil rights to

foreigners, including the right to own land, conditional on reciprocal rights being granted to its

Poland has taken the notion of reciprocity further, where, as of January 1997, any EU

companies operating in the country are able to purchase real estate and lease natural

This reciprocity can also apply to the manner of land acquisition. For example the US State of

North Carolina permits the acquisition of land rights by succession or testamentary disposition

differentiating on the basis of nationality, a further variation relates to an exception based on the

intended acquisition of citizenship. Indiana State law requires that aliens not intending to

become naturalised citizens must dispose of all property in excess of 320 acres within 5 years of

preferential treatment is the result of a bilateral treaty, but may also be a factor in Poland seeking accession to the

EU.

alien not intending to become a citizen escheats after 8 years. KY.Rev. Stat. Ann § 381.300(1) (Michie/Bobbs-Merrill

1970).

Alien friends shall have the same rights, powers, duties, liabilities and restrictions in respect of real

estate situate within this State as native born citizens. Any alien who shall be domiciled and

resident in the United States and licensed or permitted by the government of the United States to

remain in and engage in business transactions in the United States, and who shall not be arrested

or interned or his property taken by the United States shall be considered an alien friend within the

meaning of the act.

Occasionally legislation permits individuals to cure their nationality "deficiency" in the context of

land ownership by allowing them become pseudo-citizens in so far as land ownership or holding

27 provides that only Mexicans by birth or naturalisation have the right to own land, but that "the

same right may be granted to foreigners, provided they agree before the Minister of Foreign

The Constitution of the Philippines, which prohibits foreign ownership of land, even limiting the

rights of occupation of foreign mortgagees, makes an exception for those who acquire lands by

to the devolution of land to foreign statutory heirs who are parents or children of the landowner,

"immovables", has limited exceptions, and will permit a foreign spouse to own land jointly with

Not all jurisdictions allow such exceptions. In Thailand, where foreign ownership of land has

Article 22(1) of the Bulgarian Constitution also requires that any acquisition of land through legal

inheritance be transferred.

Finally there can be links between the concept of citizenship or nationality and residence, such

as in the case of Malta where restrictions on land ownership apply to people who are "nonresident",

which is in turn defined as a person who is not a citizen of Malta or who is not the

A test of residence is the other most common method of restricting or preventing foreign

45 Commonly known as a "Calvo" clause.

46 David L. Callies, "Land Ownership, Use and Property Rights: the Balance Between Local Ownership and Foreign

Europe"), at 20-25.

48 Foreign Currency Act, 219/1995, s. 17.

the 1998 financial crisis, made some inroads into what has been one of the most restrictive national regimes

concerning foreign ownership. The foreign ownership ceiling in condominium projects was raised to 49% from 40%,

and to 100% (for five years) if the buildings are located in or near Bangkok; payment terms for foreigners were

relaxed, allowing them to pay in baht; foreigners can acquire up to one rai each for residential purposes if he or she

1999 Economic Review, 1999 Year End Edition.

residence is used by states partly to ensure that absentee owners, who may be less inclined to

use the land productively and contribute to the state economy, do not own land. Trends in this

regard relate to the protection of agricultural land for active use, and concerns about absentee

landowners on vacation properties. Consequently granting ownership rights only to those

foreigners who are resident is seen as being justified (see Part 4).

may only buy rural property, subject to authorisation and compliance with specified formalities, if

Some jurisdictions specify residence for a certain period. Irish law provides that a non-Irish

citizen who has been ordinarily resident in Ireland for 7 years need not obtain the prior written

consent of the Land Commission to purchase, lease, or acquire any interest in rural agricultural

Further, satisfying a residence test regarding land purchase may not be sufficient to guarantee

unrestricted use of the land. For example, there is no bar to non-residents buying or renting

property in Monaco but unless they have a residence permit they may only stay in Monaco for

In contrast the 1984 Swiss Federal Law on the Acquisition of Real Estate by Persons from

Abroad (the "Lex Friedrich") bases its requirements on residency permits. Foreigners with yearround

residence permits do not need government authorisation for the real estate they occupy.

If the presence or absence of a residence permit is not the test, and not all states require them,

how is residence to be measured for the purpose of land ownership regulation?

The Canadian province of Saskatchewan, which provides that aliens may not hold farmland of

51 States may have other tests of residence, habitual residence or domicile, often in connection with tax and

immigration laws and this survey does not purport to offer a comparative analysis of those concepts - except where

they are expressly defined in foreign land ownership legislation.

(Kluwer, 1991) (hereafter "Campbell Latin America”), at 20-24, Brazil.

55 The Land Act 1965, s. 45(2)(a).

ownership policies (i.e. no restrictions at all), but with increasingly tough immigration and visa policies.

more than a certain value unless they have been "resident farmers" of the land for five years,

The Australian Foreign Takeovers 1975 Act, which requires notification of proposed acquisitions

ordinarily resident non-citizens. An ordinarily resident non-citizen is defined as someone who

has been in Australia for 200 days in the preceding 12 months, and whose presence is not

What happens if residence is surrendered? Most laws with residence as the test seem to be

silent on the point - being concerned with status at the date of acquisition. The US State of

Missouri however provides that a resident owner of farmland must dispose of such land within 2

Some states apply tests based on ethnic origin due to their unique land holding structures; this

situation is most likely to occur in systems of customary land tenure. For example 90 per cent

of land in Fiji is held in trust for native Fijians according to native custom and tradition. Such

lands cannot be owned by people who are not native Fijians unless a whole community (the

beneficiaries) dies out, after which the land reverts to the state. However in certain limited

circumstances the Native Lands Commission can lease land to a non-native Fijian. Similar

restrictions on non-native ownership apply in Papua New Guinea, where customary groups,

according to unwritten rules and principles, own nearly 99 per cent of the territory.

"Landowners" within such groups can only sell "their" land to another group member.

Most of the provisions concerning ownership of land by legal persons in various countries’

legislation are in respect of companies rather than other legal entities such as trusts or

associations. The status of partnerships is usually determined by reference to the status of

some or all of the individual partners. For example, to fulfil the requirements of Icelandic Law,

requirements as outlined in the Canadian Income Tax Act.

59 Foreign Takeovers Act 1975, as amended by the Foreign Takeovers (Amendment) Act 1989.

63 Act on the Control of Acquisitions of Real Property by Persons Residing Abroad and by Foreign Legal Entities

(1613/92). The same rule applies in Norway where partnerships are foreign even if only one foreigner participates -

including a sleeping partner.

foreign individuals. South Korea permits foreign companies to own the land necessary for their

operations, with the approval of the Economic Planning Board. A separate approval process

operates in South Korea for companies with over 50 per cent foreign equity, which may

Romanian Senate approved a bill that, for the first time, permits foreign companies, but not

foreign individuals, to buy property. Similarly, while Bulgarian law imposes restrictions on

foreign individuals, there are no limits on Bulgarian partnerships or companies with foreign

A range of tests are applied to determine whether or not a company is foreign for the purpose of

limiting or restricting land ownership or use rights. The simplest test is to examine where a

incorporated. For example in Bermuda the law simply provides that foreign registered

straightforward.

While such a test of corporate nationality may be simple, however, it may also be misleading.

Thus it is common for international treaties to "pierce the corporate veil", and to look beyond

Such "extended" examination is frequently adopted in the context of foreign ownership of land.

Indeed it may be very relevant to popular fears of foreign economic domination, particularly in

connection with the activities of transnational corporations. Land ownership restrictions based

on the narrow test of foreign registration would obviously not apply to locally incorporated

subsidiaries of transnational corporations or to other locally incorporated companies controlled

by foreigners.

One of the difficulties facing regulators is defining at what stage a national company is to be

regarded as controlled by foreigners and therefore subject to land acquisition restrictions. The

laws of many states simply require an examination of the share registers to ascertain the

proportion of foreign shareholders and the extent of their voting rights. In the Dominican

Republic a company is regarded as foreign controlled where foreigners control 51 per cent of

transitional legislation in the early 1990s which provided that foreign legal entities and Finnish

1992), at 2A.10.18. There have been some recent moves to liberalise Korea’s law concerning foreign ownership.

65 Boris Bogdanov Landjev, "Legislation on Foreign Investments in Bulgaria: Historical Background and Current

66 But they can own up to 40 per cent of the shares of a Bermudan company which owns land. Campbell Latin

legal entities controlled by foreigners (where control means having more than 50 per cent of the

In Oman, Royal Decree 24/95 now permits companies with up to 49 per cent foreign ownership

to purchase land, a measure likely to encourage foreign investment, but not foreign ownership.

In Malta the Immovable Property (Acquisitions by Non-Residents) Act 1974, provides that a

Maltese company with 25 per cent of its shares owned by non-residents, as well as one directly

or indirectly controlled by non-residents is a non-resident company and is governed by the

Other states set higher thresholds. Icelandic law provides that in order to qualify as a national

company and thereby avoid the somewhat burdensome restrictions on foreign land ownership, a

limited company must not only be domiciled and based in Iceland but all the directors must be

Icelandic and Icelanders must own 80 per cent of the shares and control the majority of votes at

Arabian law to taint a company as "foreign" as regards land ownership. A Saudi entity having

non-Saudi shareholders (which must already be licensed under the Foreign Capital Investment

Code) may only own real property for corporate purposes if it has obtained a licence from the

Similarly the 1976 US Agricultural Foreign Investment Disclosure Act ("AFIDA"), which requires

foreigners to register the acquisition of any interest (except a security interest) in agricultural

land larger than 10 acres within 90 days, defines a "foreign person" as any "entity that is created

greater interest, or where a "coalition" of such persons owns at least 10 per cent; or if 50 per

Until the introduction of liberalisation measures in 1990, the issue of foreign control of a

company was also extensively defined in the law of Trinidad & Tobago (see Box 9). In addition

to considering the amount of shares held by foreigners, regard was had to the size of any

69 See the Act on the Control of Acquisitions of Real Property by Persons Residing Abroad and by Foreign Legal

71 These conditions can be dispensed with by the relevant ministry - but no dispensation is needed if the lease can

regime is nearly as strict. Joint stock companies need concessions, unless the company is registered in Norway, has

an entirely Norwegian Board, and at least 2/3 of the stock is Norwegian owned.

72 Regulations for non-Saudis taking Possession of Real Property in the Kingdom, Royal Decree No. M/22, 13

73 7 USC §3508(2)-(4),1988; 7 CFR §781.3(b), 1989.

74 See Box 9.

is foreign controlled. The Land Act 1965, which applies to agricultural land, provides that a

person will be regarded as controlling a company or body corporate if the articles of association

or similar document confers powers of control upon them and the affairs of the company are

conducted in accordance with their wishes. If that person is a non-resident foreigner, then the

The Swiss Lex Friedrich also takes a broad approach to the issue. Permission to acquire land is

required not only by companies which are not domiciled in Switzerland but also by Swiss

companies controlled by non-residents. To determine the issue of control the law examines

whether or not non-residents have a "dominant position" in the company. There is a

presumption of such a dominant position if more than one third of its shares are held by nonresidents,

if the management is substantially non-resident or if according to a special statutory

noted that the Swiss government recently sought to revoke the Lex Friedrich, but Swiss citizens

Finally some states, usually those which restrict direct foreign land holding, do permit joint

ventures to own land even though they might otherwise have foreign status by reason of the

participation of foreign venture members. An example is Latvia where in December 1994 the

Parliament approved an amendment to the land law which allows the purchase of land by joint

ventures with foreign participation provided that Latvian citizens hold the majority stakes and by

foreign companies from countries with which Latvia has agreements protecting foreign

hand, prohibits even joint venture companies from owning land - although they may acquire

lesser land use rights and can also rent land. Since 1980, the grant of "cultivation titles" in

respect of agricultural land to foreign investment companies has been prohibited. Title is

granted to the local joint venture partner who can rent, but not sell, the land to the joint venture

Even if an individual or company does satisfy the relevant tests, it may not be the ultimate

beneficiary of the land, or any other assets, which it legally owns or is entitled to use.

Ownership of such rights may be a mere front. As a result some states seek to determine the

75 Land Act 1965, s. 54(5)(b).

77 Some amendments to the Lex Friedrich are that: companies no longer need authorization to purchase real estate

for trading, manufacturing or any other commercial business (though approval is still required for companies trading

only in real estate); authorisation is no longer required where the foreign acquirer does not intend to use the property

directly, but rents to a third party for a commercial purpose. In relation to natural persons, those with a year round

residence permit no longer need authoristion to buy the real estate they occupy; also those employed in international

organisations or engaged in diplomatic missions no longer need approval; and the net size of properties requiring

approval has dropped. Holiday properties are still subject to approval. "Switzerland: Acquisition of Real Estate",

78 A. Peterson, "Latvia authorises the sale of land to foreigners" NOVECON, 19 December 1994.

status of the party which ultimately derives the economic benefit from the land

In New York State, the law provides that restrictions on foreign ownership apply to the person

Takeovers Act 1975, a "foreign person" includes the trustee of a trust estate, in which a natural

person or persons not ordinarily resident in Australia or a foreign corporation or corporations,

In contrast, the use of trust provisions in Mexico offered a government sanctioned device for

foreigners to get around the prohibition of foreign ownership in border and coastal areas (see

Box 3).

Some regimes specifically prohibit the use of the trust to get around land ownership restrictions.

A US state of Missouri statute prohibits foreign individuals and companies from owning

agricultural land and expressly prohibits persons acting as their trustees and fiduciaries, from

Even where a state devises comprehensive legal tests to determine whether a person or legal

entity is a foreigner; is controlled by a foreigner; or seeks to hold land for the benefit of a

foreigner, the laws establishing those tests will only be effective to the extent that they are

implemented. There is very little reference in the literature as to implementation in this regard.

What seems reasonably clear is that the more complex the law is the more costly it will be to

apply, even if the burden of proof is placed on the suspected foreigner. One author refers to the

"very tedious enquiries" which are often necessary in Switzerland in order to determine whether

Pursuant to Article 27 of the Mexican Constitution, foreigners cannot own land within the strip of land

100 kilometres wide along the borders and 50 kilometres wide along the country’s beaches. Since

the issuing of a 1971 Decree, however, the Ministry of Commerce and Industrial Development has

been able to authorise foreign investors and Mexican companies with foreign shareholders to obtain

beneficial rights in Mexican trusts owning property in the zones. Legal title is held by a financial

institution, the trustee, and the trust interests are marketed by a means of trust participation

certificates. These beneficial interests, which are lawful because they are personal rather than real,

may last up to 30 years after which new trusts can be granted on the same terms and conditions if

the same foreign investor appears as beneficiary of the new trust.

may be able to afford to pay for such enquiries but for poorer countries, if laws on this issue are

to be applied then a balance arguably has to be struck between the degree of complexity of its

tests and the amount of resources it is politically prudent to allocate to implementation.

In any event it seems likely that no test is absolutely guaranteed to address all eventualities.

One author has noted that "the struggle between those applying the tests and foreigners trying

to mask themselves demonstrates that no single test nor any combination of tests can

hermetically seal off foreign infiltration".85 The problem of foreign owners hiding their identities

by establishing several layers of ostensible owners was noted in the 1979 US Federal

Regulations under AFIDA. While these regulations initially appeared to establish no limit for

proving the ultimate level of ownership, a subsequent cut-off point was decided: ownership was

to be traced to the third level, or the true owners of company C, which owns company B, which

owns company A, the owner of the land, would not be enquired into. Even this level is admitted

to be somewhat arbitrary and while it is more stringent than most of the tests of "foreignness"

considered, would not prevent a determined foreigner from avoiding compliance with AFIDA's

Perhaps unsurprisingly, the literature does not reveal the extent to which foreigners do

successfully mask their purchases of land. If, as seems the case, foreigners can often manage

somehow or other to get around foreign ownership restrictions through the use of trusts and

holding companies the question remains as to the purpose of such restrictions. Are they

designed to regulate and restrict foreign ownership of land - or is their purpose to appear to do

so? Tests that claim to examine the issue of ultimate benefit will be of little effect unless they

can actually be applied.

86 See T.L. Schmidt, "Closing the Barn Door: A Suggested United States Response to International Restrictions on

of AFIDA.

A number of different possible policy reasons exist for restricting and regulating foreign

ownership and use of land - and for adopting different techniques. An understanding of the

various policy rationales will better inform our consideration of the techniques for controlling

foreign land ownership.

A number of possible policy objectives are set out below, but these headings tend to overlap.

For example restrictions on foreign ownership of agricultural land might conceivably be justified

under a number of policy headings, all or only some of which may be invoked in a given

situation, including the protection of national security, the prevention of speculation, the

prevention of foreign economic domination and the protection of rural communities.

Nevertheless a review of the topic and literature suggests the that the various techniques

adopted seek to implement the following policy objectives:

The US Agricultural Foreign Investment Disclosure Act defines a “foreign person” as:

(A) any individual:

(i) who is not a citizen or national of the United States;

(ii) who is not a citizen of the Northern Mariana Islands or the Trust Territory of the Pacific

Islands; or

(iii) who is not lawfully admitted to the United States for permanent residence, or paroled into the

United States, under the Immigration and Nationality Act …

(B) any person, other than an individual or a government, which is created or organized under

the laws of a foreign government or which has its principal place of business located outside

of all the States;

(C) any person, other than an individual or government,

(i) which is created or organized under the laws of any State; and

(ii) in which, as determined by the Secretary under regulations which the Secretary shall

prescribe, a significant interest or substantial control is directly or indirectly held – (I) by any

individual referred to in subparagraph (A); (II) by any person referred to in subparagraph (B);

by any foreign government; or (IV) by any combination of such individuals, persons and

governments; and

(D) any foreign government.

7 USC § 3508(3) (1988).

Border area restrictions on foreign land ownership - and in the case of Peru in

part of states' policies on military security. Arguably measures to protect food security

and to prevent economic domination could also be included under this heading.

Fears of foreigners "taking over" the US has led to various restrictive measures at both

such concerns may be more common in states with weak or undervalued currencies.

The border protection measures in Mexico may fulfil national security objectives, but

more directly address concerns about the creation of foreign enclaves in the border

Some governments, such as that of Hungary, have expressly included restrictions on

foreign ownership to deal with this perceived threat in a time when demand exceeds

supply. Again measures to prevent land speculation on the basis of rising prices could

also be grouped under the next heading.

requirements may also be designed to prevent extensive absentee ownership where the

landowner has no connection with the community.

Earlier this century, various US West Coast states used land ownership restrictions to

An example is the Australian Foreign Takeovers Act 1975, which restricts acquisitions by

foreigners of urban land.

Examples include those states that severely limit the purposes for which land may be

87 See Box 8.

90 Turkey.

92 Malta.

purchased, such as Thailand and Malta, to ensure that such land holdings are in

accordance with national economic development aims and objectives.

number of Canadian and US states that also restrict or forbid foreign ownership of

speculation in agricultural land and to preserve the social fabric of rural areas.

Perhaps the best example is the US where extensive reporting requirements were

implemented precisely so that such information could be ascertained. For example, in

1995, foreign persons owned 15.1 million acres of US agricultural land, and Maine has

Restrictions on foreign ownership of land may also be in accordance with other stated, or

a problem in that the "reasons formally advanced are not necessarily identical with those which

their very nature remain unacknowledged. These might include nationalism, racism, and

ownership and use of land will depend in each case on the historical, political and economic

context.

One author has traced various stages in the history of the restriction of foreign land ownership in

the US. Sullivan describes how concern in the late nineteenth century at the size of holdings of

agricultural land by British companies, and also the activities of one Irish absentee landlord, in a

time of rural depression led to restrictions on foreign ownership being introduced by a number of

states. He then considers the restrictions imposed on foreign land holding by a number of West

94 Country Profile: Morocco (London: Foreign and Commonwealth Office and Department of Trade & Industry,

1992).

95 Similarly Missouri forbids non-resident alien ownership of farmland. Resident aliens may own farmland but must

36. In Iowa aliens can own all types of state land except agricultural lands IOWA Code Ann. § 567.3(1)(1992). The

term "alien" includes corporations or other entities where non-resident aliens own a majority interest § 567.3(3), 4, 5

(1992).

96 USDA, Economic Research Service, Internet: www.econ.ag.gov/epubs.

97 Political ideology might supply reasons for such a policy. However of the Socialist and former Socialist states

considered it would seem more accurate to say that objections to private ownership of land are ideological, and not

reflective of a bias against foreigners

99 Regarding US concern about perceived rises in levels of petro-dollar funded acquisitions of US land by Middle

East buyers in the 1970s, Schmidt notes, "(t)he threat perceived from OPEC investment rests a good deal on racial,

immigration. It is not suggested that the US has any monopoly on such attitudes - simply most of the source material

on policy issues is to be found in US periodicals.

Coast states in the early part of this century, and then again around the time of the Second

Sullivan argues that the absentee landlords may have became a focus, and personification

even, of the hardships caused by rural economic recession, as these landlords were not

enduring in the same manner as their tenants; and that although the restrictions on Japanese

immigrants were adopted with an economic justification, that they were essentially racist in

History does sometimes repeat itself. More recently, another author has observed that a fear of

Japan taking over has sparked off concern about Japanese land purchases in the US. Despite

the fact that the Japanese have made a number of high profile acquisitions, they are not the "big

buyers" of US land. Foreign investors of a number of other nations own property portfolios of

inflationary period of the 1970s such fears, together with fears of land shortages, led to

foreigners being temporarily banned from acquiring land, and restrictions have been in place

Other unacknowledged motives may include fear of an economically or militarily more powerful

neighbour. It is possible that the conditions justifying such restrictions may shift with time, but

the restrictions remain, as in the case of Mexico. The Mexican border restriction and its

predecessors (see Box 3) were originally designed to protect Mexico from a perceived northern

military threat, particularly from Texas. This threat clearly receded long ago. However the land

ownership restrictions now provide a means of controlling foreign development in the area south

of the border with the US, an issue even more significant in view of the conclusion of the North

Elsewhere, Callies has suggested that in the context of colonial and other foreign domination,

"the rational basis for restricting rights to native peoples is easy to discern. The literature -

103 In the US context, “[t]hat alien land ownership poses a serious threat to national well-being is doubtful." Statistics

showing that foreign direct investment in US farmland represents slightly less than 1 per cent of privately owned

farmland and less than 0.5 per cent of all land in the US; see James A. Frechter, "Alien Landownership in the United

major political issue in Hungary in light of that country’s aspirations to join the EU. Foreign ownership of agricultural

land has largely been prohibited since 1994: farmers in particular are concerned about possible amendments to this

North Africa and the short border with Andorra, all of Spain's land borders are with EU States and in any event the

restrictions on foreign land ownership do not apply to citizens of Member States.

historic, legal, political, geographic - is filled with tales of economic dispossession by invaders,

whether armed or economic." The extent to which the Maori in New Zealand have lost their land

is just such an example, and he states that "... it is equally clear that when a legally-enlightened

indigenous people are able to gain control of sufficient government machinery, among the first

While Callies sees the logic behind such restrictions as "largely unimpeachable", these

landholding regimes do present challenges in reconciling them with the need to attract foreign

investment. In Vanuatu, all freehold land was taken over by the government, and handed back

to the descendants of the former customary owners in 1980 without compensation. While this

was justified in light of the way in which the land was initially taken from its customary owners,

Another example of restriction being introduced in a specific historical context is again provided

by the US. A number of states introduced so-called reciprocal inheritance statutes in the 1940s

and 1950s allowing foreigners to inherit property, including land, in their jurisdiction only if

reciprocal rights were afforded to US citizens. This was apparently a form of retaliation for the

practical inability of US beneficiaries to receive their share of estates of deceased citizens of

One more factor that should not be overlooked is the importance of land within a country's

economic structure. The importance of land in a largely agricultural economy is obvious, and

indeed in North America it is the farming states of the US, which have been at the forefront of

measures to restrict foreign ownership of agricultural land. But again, care should be taken to

avoid reaching hasty conclusions in this regard. For example if one were to simply consider the

economic importance of land, one might expect to find a correlation between the scarcity of land

in a country and its tendency to restrict foreign land ownership, with smaller and more populous

states tending to restrict foreign land ownership more. Yet the variety of approaches adopted in

small states indicates that this factor is by no means decisive. For example in the Caribbean

islands some states such as Trinidad and Tobago restrict foreign land ownership while other

(even smaller) islands, such as the Turks and Caicos and the Cayman Islands, do not.

ownership or use of land.

The literature reviewed suggests that the main policy objective of complete deregulation of

foreign land ownership (or at least a reduction in levels of restriction) is to create an

environment favourable to foreign investment. Such policies may be freely chosen or in

response to external pressures to liberalise the foreign investment regime (for example under a

structural adjustment programme). They may seek to specifically encourage investment in land,

but more frequently land ownership will be ancillary to industrial or agricultural investment. In

this context it can be important for a foreign investor to own the land on which their investment

is sited, not only to acquire the benefits of use which ownership affords, but also to use the land

land, and the ease with which such ownership can be acquired may be a factor in investment

decisions.

The extent to which foreign investment can benefit a country and the extent to which it is

affected by restrictions on the ownership and use of land by foreigners, is beyond the scope of

this paper. However, the balancing of this objective against those stated and unspoken policy

motives described above, forms the basis of government decisions regarding foreign land

ownership and use.

The most active example of this occurrence is found in Eastern Europe, where states have

moved to embrace free market economies. As can be seen from the brief summaries in Box 6,

the variety of approaches is wide, and it is clear that a number of states are still in transition. A

further factor to bear in mind is that while in the former Czechoslovakia private land ownership

has been permitted under the present code since the 1950s, a number of former Soviet Union

states have had to re-introduce the concept of private land ownership. Another problem in

certain states is that both land and foreign investment laws are still in the process of being

Regarding future developments in Eastern Europe, it is clear that while often the stated policy

considerations will be invoked, the unstated motives are likely to play a significant role. In a

number of states in the former Soviet Union "(p)roponents of Communist fundamentalism have

opposed giving to foreign citizens and especially to foreign juridical persons the right to own

land privately. Their aim is to preserve land in State ownership in order to avoid what they call

Equally, while historical factors and perspectives may well play an important role in the

development of legal techniques to restrict and/or regulate foreign ownership, they may also be

a factor in the manner in which such techniques are implemented. In 1995, calls were made by

the Polish Minister of Internal Affairs to liberalise the rules on foreign land ownership due to the

number of applications relating to agricultural land being refused by the Minister of Agriculture.

Specifically the latter Minister was reported to have consistently refused requests for permits to

acquire agricultural land over one hectare. One can only guess at the motives behind this

Government was facing a political backlash at that time due to the scale of foreign

109 In this context the lack of ownership rights in Vietnam and the consequent inability of foreign investors to secure

1994, at 10.

Foreigners are permitted to lease land but cannot own it.

Foreigners may not own land although they may lease it for terms of

up to 99 years. The Foreign Investment Law does acknowledge the

possibility that foreigners may be granted the right to buy land in the

future. In September 1998, a Presidential Edict was signed allowing

legal entities, including foreign entities, to apply for ownership of the

land on which their service or manufacturing facilities are located. The

Article 5(1) of the Encouragement and Protection of Foreign

Investments Acts allows foreign persons to acquire ownership rights in

buildings as well as other real property rights, except the ownership of

land. However, foreigners can acquire use rights. Also, these

limitations do not apply to Bulgarian partnerships or companies with

foreign participation, or to companies with majority foreign ownership

registered in Bulgaria. Recent changes allow such entities even to

purchase agricultural land. Special permissions are required for

border areas or where other security interests are involved.

The Law on Property permits land ownership by foreigners (including

foreign-owned businesses incorporated as Croatian entities) with

approval from the Ministry of Foreign Affairs, although not in certain

geographically-designated areas due to national security concerns.

Section 17 of the Foreign Currency Act establishes limitations on

foreign ownership of immovables (land). The law distinguishes

between "foreign exchange foreigners" and "foreign exchange

nationals". The latter (Czech registered companies and permanently

resident individuals) can freely rent and buy land but "foreign

exchange foreigners" can only acquire land in limited circumstances

such as inheritance or restitution. Czech companies with foreign

participators may have to pay a higher price.

Among the exceptions are that foreigners and foreign companies may

only acquire land through inheritance; as part of a diplomatic mission;

or, rather uniquely, for a foreign spouse in the joint acquisition of

property where the other spouse is a Czech national.

Section 6(3) of The Law of Property Act (15 February 1995), states

that the acquisition of property by foreign legal persons and citizens

may be restricted by law "in the public interest". These restrictions are

found in the Republic of Estonia Land Reform Act (30 April 1996)

which deals with the return of and compensation for the return of land.

The Act provides that only foreign natural persons may privatise land

granted to him or her for perpetual use, pursuant to the Estonian SSR

Farm Act, or the land necessary for servicing a building owned by him

or her (ss. 20, 21(2)). Foreign legal entities may privatise the land

necessary for such purposes with the permission of the county

governor. The Act establishes a hearing process, whereby the

governor hears the opinion of the local government, and grants

permission if it is not contrary to public interest or state security (ss.

21(3) and (5)). Finally, no aliens, foreign states, or foreign legal

persons may participate in the privatisation of land by auction (s.

21(7)), and foreigners (natural persons and legal persons whose

share capital is more than 50 per cent held by foreign legal persons),

are not entitled to use the voucher system for payment, and must pay

for privatised land in money, and not in instalments (s. 22(5)).

Under the Land Law (Act VI of 1994) foreigners may acquire land,

except agricultural land, with the permission of the Ministry of Finance

according to set criteria, though a resident foreigner with a Hungarian

ID card does not require such permission. Purchase of land by

foreigners is limited to 6,000 square meters; leases may be granted

for 10 years for up 300 hectares. A Hungarian company with foreign

participation can own land with the prior permission of the Ministry of

Finance. Generally no permission is needed for a lease.

The Land Law prohibits foreigners from purchasing agricultural land,

due to concerns about foreigners taking excessive control over

agriculture. Efforts to liberalise restrictions on arable land ownership

were derailed – at least temporarily – in 1997.

After independence foreigners were not allowed to own land. A

December 1994 law permitted land ownership by joint ventures with

foreign participation (provided that Latvian citizens hold the majority

stakes), and registered foreign companies registered from countries

with which Latvia has agreements protecting foreign investments.

The Constitution provided that only the State and natural persons of

Lithuania can own land, although foreign investors can rent land for 99

years with a priority right to extend that term. The Land Act of 26 April

1994 expressly provided that companies whether foreign or

Lithuanian, are prohibited from owning land and that individuals are

prohibited from concluding transactions with them. Companies and

foreigners could only acquire land use rights over land owned by a

Lithuanian citizen or the state by way of lease or a special land use

agreement.

The government has approved a constitutional law that came into

effect in 1998 that permits EU and OECD foreigners meeting

European and Transatlantic integration criteria to own non-agricultural

land. The acquired land must be land designated for construction of

buildings and facilities required for commercial activities, or land

beneath existing buildings and facilities.

Foreign individuals and companies registered abroad or controlled by

foreigners can buy land with the permission of the Minister of Internal

Affairs and, depending on the location of the land, consent of the

Ministers of Defence and Agriculture. Applicants are required: to

prove their ties with Poland (not a formal requirement); that they are

licensed to do business in Poland; and the acquisition of the property

must be justified by "actual needs". Under liberlised requirements

passed in 1996, foreign individuals and firms may own an apartment,

0.4 hectares of urban land or up to one hectare of agricultural land

without the need for a permit. These provisions are independent of

the special regime in place for EU companies.

In April 1997, Law 35/1991 was modified to clearly stipulate that a

Romanian legal entity with partial or total foreign capital can acquire

ownership over land.

1996 presidential decree purported to allow the ownership and sale of

land, including agricultural land, but its constitutionality is questioned.

It appears that both law and practice restrict foreign ownership of land.

A 1993 presidential decree appears to bestow rights of real property

ownership on joint ventures with foreign participants, and a 1994

decree permits foreign owners to receive title to enterprise land that

has been privatised. In both cases, these decrees have not yet been

codified. Most foreign investors use long term leases with an option to

buy as a mechanism of real estate development. In the meantime,

there is a strong current of political sentiment against foreign

ownership, as evidenced by debate in the Duma of new draft

legislation that would ban sale of land to foreigners.

Under the Foreign Exchange Act, only Slovak legal persons may own

real estate, though foreign persons or business entities may own real

estate through establishment of a legally-registered Slovak company.

Article 68(2) of the Constitution originally stated that foreigners may

not acquire title to land except by inheritance "in circumstances where

reciprocity of such rights of acquisition are recognized." This restriction

has received a significant amount of attention during the EU preaccession

process. Paragraph 2 of Annex XIII of the Europe

Agreement commits Slovenia “to take the measures necessary to

allow the citizens of the Member States of the European Union, on a

reciprocal basis, the right to purchase property in Slovenia on a nondiscriminatory

basis by the end of the fourth year from the entry into

force of the Association Agreement; and to grant to the citizens of the

EU Member States, having permanently resided on the present

territory of the Republic of Slovenia for a period of three years, on a

reciprocal basis, the right to purchase property from the entry into

force of the Association Agreement.” Pursuant to this obligation,

Article 68 was amended in 1997 to state that foreigners can acquire

title to land under such conditions are determined by international

agreement, ratified by the National Assembly, in circumstances where

reciprocity of such rights of acquisition are recognised. A new law to

define reciprocity, and the Rules to establish permanent residence

were adopted in February 1999.

The 1992 Land Code states that only citizens of Ukraine may own

private land, and only for private residences or agricultural use. Legal

entities, whether Ukrainian or not (with the exception of Ukrainian

agricultural entities) are not allowed to own land. Ownership of land

by foreigners is prohibited, though foreigners may lease land.

Following a Presidential decree in 1992, foreigners are permitted to

purchase buildings, apartments and offices in major cities.

The range of sources for restrictions on land ownership is also very broad. Although most

restrictions result from legislation, other legal authority includes constitutions, administrative

In Italy the source of restriction is the general civil code, which grants civil rights to foreigners on

contained in specific laws, in the general land law or code, in investment laws and in laws

restricting the rights of foreigners in general. Some relevant provisions are to be found in laws

on privatisation, especially in Eastern Europe. Elsewhere restrictions are contained in

use of land by foreigners - such as restrictions on specific foreign investments, immigration and

residence.

There is no consistent method by which constitutions deal with the issue of land and foreign

land ownership. Generally, constitutions may address the matter in one of a number of ways.

First, there may be no reference whatsoever to land or foreign land ownership. Second, they

may address the issue of compensation for expropriation, which is more of a fundamental rights

issue than a land management concern. Third, constitutions may provide that foreign states

116 Section 15 of the Land Acquisition Act 1992 of Zimbabwe gives the Minister of Lands power to make regulations

to prohibit or restrict the rights of non-residents to own, lease or occupy land; Simon Coldham, "The Land Acquisition

117 Spain, Saudi Arabia and Oman.

can only acquire land for diplomatic and consular purposes, as is the case with Costa Rica,

Finally, a constitution may contain restrictions or even outright prohibitions on foreign ownership

of land. Examples include Mexico, Honduras and Guatemala, whose constitutions limit the

areas in which foreigners can own land.

In some countries, the constitution imposes a total ban on foreign land ownership, such as

Cambodia, which restricts the right to land ownership to Khmer citizens and Khmer legal entities

(Article 44(1)). Bulgaria also provides an absolute prohibition, as even property acquisitions

through legal inheritance must be transferred (Article 22(1)). In a similar situation however, the

Liberia's Constitution prohibits foreigners from owning real property in fee simple and leaseholds

for long terms, but does permit lease arrangements for limited terms, and foreigners may be

granted concessions which confer extensive rights of easement and land use (Article 57).

Slovenia's Constitution provided that foreigners may not acquire title to land except by

inheritance "in circumstances where reciprocity of such rights of acquisition are recognized"

(Article 68(2)). This provision was changed in connection with Slovenia’s efforts to join the

While it is questionable whether the location of such a restriction in a country's constitution will

affect its normative strength, it certainly may affect the chance of it being amended. A

regulation, for example, is easier to amend than a restriction entrenched in a state's constitution.

Morse argues that the possibility of Article 27 of the Mexican Constitution being amended to

remove the ban on foreign ownership in the border areas (see Box 4) has proved to be

politically impossible due to the symbolic importance of that document in confirming the land

The Constitutional arrangements of a state may also have other implications as regards

restrictions on foreign ownership, especially in federal states. In Canada and Nigeria

restrictions on foreign ownership and use of land are set at the provincial and state level, while

in the US there are both federal and state regulations on foreign ownership, with the state

regulations reflecting a broad range of possible regulatory techniques.

Article 47(1). Of the countries which ban foreign ownership, it is not uncommon to find an exception for foreign

diplomatic missions.

Having considered to whom they might apply, the policy reasons and their sources, the various

legal and administrative techniques for restricting foreign ownership of land will now be

considered.

The wide variety of techniques applied around the world is striking. Differing approaches

adopted by otherwise similar countries (in terms of stage of development, location, resource

base, etc.) seems to suggest that more subjective factors, such as public opinion, play a role in

determining certain measures. It has been difficult to ascertain from the literature the practical

effects and aspects of implementation.

In attempting to categorise the various approaches we have borrowed from the classifications

suggested by Morse, in a 1976 article, amending them as necessary to keep pace with current

categories, as the policy reasons for these laws, even in similarly situated states, can be

radically different.

While restrictions on foreign land ownership do exist in many states, there are ways to avoid them,

based upon loopholes in certain country practice and legislation.

First, the legal framework may be incomplete, resulting in legitimate “loopholes”. For example, in one

state, foreigners are prohibited from purchasing agricultural land. However, they are not prohibited

from purchasing shares in existing companies which already own agricultural land. The result has

been that foreign investors have been able to legitimately acquire effective control over large areas of

agricultural land.

Elsewhere, more complex and arguably more devious approaches are necessary. For example, in

another country, neither foreign individuals nor companies may own land, subject to governmental

discretion regarding certain classes of investment. To bypass such procedural requirements, the

necessary land is routinely acquired on behalf of foreign investors by locally registered companies,

that have local directors on their boards, and whose shares are entirely owned by local nominees.

However, to retain control, the foreign investor first requires each nominee shareholder to sign a

stock transfer form, and each director to sign a letter of resignation. These documents are left

undated and kept secret, to be used in the event that the “shareholders” and “directors” do not

comply with foreign investor’s wishes.

It is questionable whether a test of “ultimate benefit”, as described in Part 3.3, would be able to

perceive such arrangements.

Relatively few countries surveyed have an outright ban on foreign ownership or use of land.

Some countries such as China, Vietnam, Ethiopia and a number of others form a distinct

treatment" to foreigners in that they too may be granted land use rights. In Zambia, the Land

(Conversion of Titles) Act provides that all land vests absolutely in the President, “and shall be

held by him in perpetuity for and on behalf of the people of Zambia”, and that no person shall be

the African context, does not in itself preclude foreigners from acquiring land rights as strong as

any national might acquire. Such land rights may in practice be tantamount to ownership,

Even fewer countries have an outright ban on foreigners leasing land. One example where long

leases to foreigners are prohibited is the Commonwealth of the Northern Mariana Islands.

Foreigners may not own "long term" interests in land. This provision has been held to prevent

Most of the other countries which prohibit foreign ownership outright are economies in transition

in Eastern Europe and the former Soviet Union, and even the practice of many of these states

Armenia it appears that while the issue of foreign ownership has not yet been resolved,

The original ban on foreign land ownership in the Constitution of Lithuania was reinforced by the

Land Act of April 1994, which prohibited foreign or Lithuanian companies from owning land, and

prohibits individuals from concluding transactions with them. Companies and foreigners could

only acquire land use rights over land owned by a Lithuanian citizen or the state by way of lease

123 Article 40.3 of the Ethiopian Constitution (Proclamation No. 1/1995), vests all rural and urban land, as well as all

natural resources, in the State and in the peoples of Ethiopia, and states that “[l]and is a common property of the

Nations, Nationalities and Peoples of Ethiopia and shall not be subject to sale or to other means of exchange.”

124 Sections 4 and 12, Chapter 289, 19 August 1975.

126 For a non-European example, see Law No. 5/1960 (24 September 1960), which forbids foreign ownership of land

industrial and real estate projects, for up to 30 years. A foreign investment company can also acquire a lesser right of

use title, which is not mortgageable, for an unlimited duration. Such companies can also rent land. Hornick and

128 Euromoney Publications, 1 October 1994.

constitutional law of 1997, referred to in Box 5, now allows foreigners meeting European and

Transatlantic integration criteria to own non-agricultural land. The acquired land must be land

designated for construction of buildings and facilities required for commercial activities, or land

Saudi Arabia's approach is so restrictive as to effectively prevent foreign land ownership. A

Royal Decree provides that: "Only citizens and in certain limited exceptions citizens of other Gulf

Of the countries considered, the majority adopt an intermediate approach to foreign land

ownership, in that foreign land use is permitted, but subject to regulation and various

restrictions. It is difficult to categorise the various techniques due to the wide range of

approaches. Further, the types of restrictions may themselves overlap. For example as

regards land in specific areas there may be either a total prohibition or restrictions/regulations

on foreign ownership or use, such as the need for prior permission. If ownership is permitted

there may also be further types of restrictions, for example a limit on the number of foreigners

allowed to own land in that area.

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131 See Box 5, above. See also Resolution No. 1423 on The Procedure for Submission, Examination and Issuance

of Permissions for the Established National and Foreign Entities with respect to the Applications for Allowance of

Acquisition into Ownership of Land Plots of Non-Agricultural Purpose, December 1998, in Law Update Bulletin,

132 Royal Decree No. M/22, 1970, "Regulations for non-Saudis taking Possession of Real Property in the Kingdom".

Prior to its reversion to Chinese rule in 1997, all land belonged to the (British) Crown, and was sold

primarily at auctions on renewable 75 year leases. No restrictions were placed on the acquisition by

foreigners of such leases. Since June 1997, this reversionary title has now passed over to the Chinese

government. In order to preserve investor confidence in the real estate market, China and Britain

agreed to continue to recognise all existing leases which extend beyond 30 June 1997, and all those

expiring before this date without a right of renewal could be extended until 30 June 2047 without the

payment of an additional premium. While this Agreement effectively maintains the status quo for the

next 50 years, it does not specify what will happen to these land leases after 2047.

States use this approach to restrict foreign land ownership, or use of types of land (such as

agricultural and industrial land) or areas of land within their borders. Foreign ownership of land

in such sectors may be prohibited, regulated or restricted, or such sectors might be the only

areas in which foreigners may own or use land.

These use of this approach "... limits or excludes aliens' rights in real property that affect certain

economic areas of particular importance to a nation", some examples being "... land for

essential economic purposes such as agriculture or mining, and designated strategic sections of

Perhaps the most obvious example of a "key sector" restriction is in states that prohibit land

ownership by foreign individuals, but not by foreign companies for business related purposes,

such as Oman and Romania. The economic rationale here is obvious.

What is striking about "key sector" restrictions is the variety of types of land subject to such

restrictions, including rural or agricultural land, land in urban areas or in villages,

environmentally sensitive areas, land for recreational purposes and land in border areas.

A number of states place restrictions on the acquisition by foreigners of rural and agricultural

land. As mentioned above, in the Republic of Ireland foreigners who are resident in the country

for less than 7 years may not purchase, lease or acquire interests in rural land save with the

permission of the Land Commission and subject to compliance with any conditions attached to

In New Zealand the prior approval of the Land Valuation Tribunal is required in respect of the

purchase (or leasing for over 3 years) by foreigners of land zoned as a "public reserve or

amenity" or land above a certain size which is not zoned for commercial, residential or industrial

While foreigners may generally buy land in Turkey they are not permitted to buy land in

134 Land Act 1965, s. 45(2)(a).

137 Law on Land Ownership. BBC Monitoring Service, 7 April 1994.

MISSOURI, ARKANSAS, IOWA, ILLINOIS.

from owning land for recreational purposes to preserve the integrity of the Finnish

By contrast, in Australia restrictions apply to acquisitions by foreigners of urban land (defined as

a lessee or licensee which gives such a person the right to occupy urban land for more than five

years, an interest in an arrangement for the sharing of profits or income from dealings in or use

of urban land, and an interest in an Australian urban land corporation. The Canadian province

of Alberta also is concerned about ownership of urban land. It limits the foreign ownership of

"controlled lands", which include crown lands, lands with mines and minerals, and land within

Other sectors that are regulated - or rather specified - relate to housing. In Bermuda foreigners

can only purchase residential property with an “Annual Rental Value” (as defined) which is

equivalent to or greater than a specified amount. Similar restrictions are applied in Malta to

Properties Act places restrictions on the acquisition of residential property by foreigners, but no

such restrictions exist in relation to non-residential land. In Thailand, the Land Code is so

explicit as to only permit foreigners to own condominiums, and then foreign ownership of the

In a sense, by specifying what foreigners may not buy and directing them to what the state

deems that they may purchase, these restrictions could be described as "reverse key sector

restrictions". For example in Egypt foreigners generally may not buy land, but by Investment

Law 230 of 1989 foreign investors were granted the right to buy land and property necessary for

owning land with certain exceptions, including diplomatic missions, land acquired through

inheritance, and some other conditions such the size of the property, and provided that it is not

140 Act on the Control of Acquisitions of Real Property by Persons Residing Abroad and by Foreign Legal Entities

141 Foreign Takeovers (Amendment) Act 1989, s. 6(e).

(1994).

In Malta foreigners may only purchase land if it is for an approved tourist, industrial purpose or

prohibition on foreign ownership can be waived if the land is needed for petroleum exploitation

or relates to and is necessary for a commercial activity which is the subject of an existing

investment licence. These provisions imply a degree of discretion, which can be exercised by

Finally another common key sector restriction applies to restrictions and prohibitions on foreign

ownership in border areas. Such restrictions are found in the laws of a number of countries in

Europe and Central and South America (see Box 8). Restrictions apply in respect of border

areas in Greece, Spain, Italy (to foreigners who are not EU nationals, see Box 1), and

While it seems that in European states, such border areas are defined by county or region,

kilometres wide. The range of limits is set out in the table in Box 8. A final comment on border

restrictions is that the areas involved can be substantial. Some 51 per cent of Greek territory is

subject to the border areas regime while the figure for Mexico is 43 per cent of national

Percentage restrictions on the total amount of land foreigners can own are a feature of a

number of schemes. In September 1994, the Latvian Parliament passed a land ownership bill

that was to allow the ownership of land by legal entities and foreigners. It was anticipated that a

requirement that at least 50 per cent of rural land would be owned by Latvians was to be

Such restrictions may limit either the total proportion of land owned by foreigners (usually

The Spanish border area restrictions mentioned above also require that the amount of real

1997, at 38.

154 Morse discusses the issue of percentage restrictions on the size of foreign holdings in national corporations

pursuant to regional treaties and regulations, in particular Decision 24 of Andean Pact. Such limits would by

mentioned above, Thailand's limitations on condominium ownership were set at 40 per cent of

the units in a condominium complex (though, as noted, this was broadened in 1999 to 49 per

cent, and for 5-years, up to 100 in Bangkok and vicinity.

Box 9: Restrictions in Border Areas in Central and South America

subsoil within 50 kilometres of the national boundaries, except in case

of national necessity declared by law.

Constitution, Articles18,19, 23-25; Decree-laws of 2 August 1937 and

13344 of 30 Jan 1976; Law 1243 of 11 April 1991. Martindale-Hubbell,

areas considered essential for national security, a strip of land 150

kilometres wide, after prior approval from the Government.

of the ocean, 200 metres from lakes, 100 metres from navigable rivers,

and 50 metres from springs is government property, except for land

situated in urban areas and/or registered as private property before

1956. Foreigners need special permission to acquire properties in

these exempt areas. Article 123 stipulates that only Guatemalans and

corporations owned by Guatemalans can own land within a band 15

kilometres wide along the Guatemalan border – except for real estate

situated in urban areas and/or registered as private property before

1956. Foreigners already owning such property can only sell it to

and lands in islands, cays, reefs, cliffs, rocks, shoals, and sandbanks

except in urban areas. Otherwise there are no restrictions and no need

for prior approval.

borders and 50 kilometres along the country's beaches.

the capital belongs to Nicaraguans can own property within an area 20

kilometres from the borders.

kilometres of the national borders.

the borders.

In Brazil there are limits on the amount of rural land which foreign individuals resident in Brazil

can own (non-resident foreigners may not own rural land). The maximum holding per individual

must not exceed 50 "modules" (defined for each region by the Ministry of Agriculture and Land

Reform), taken separately or together and the acquisition of between 3 and 50 modules requires

entities must not exceed 25 per cent of the land area of each municipality and individuals of the

same nationality must no hold more than 10 per cent of that land area - presumably to prevent

the creation of foreign enclaves.

Another type of restriction is on the amount of land that each foreigner may own. A limit may be

set on the amount of land a foreigner may own without needing prior authority as in the cases of

Trinidad. Alternatively, as in the case of the US under AFIDA, the size of the land holding may

trigger reporting requirements. Such restrictions may apply to all types of land or only to

specific types of land, as in the case of New Zealand described above.

In cases where foreign ownership is not prohibited, either state-wide or in specific sectors, a

requirement for prior authorisation is a common method of ensuring its restriction and

regulation. One author has suggested that this approach may be chosen by states that intend

generally little information as to the proportion of applications by foreigners for permission to buy

or use land which are successful.

Again a wide variety of approaches are adopted. This Part addresses the questions of: who

decides the application; what must be supplied; on what basis is the decision made; and what

other restrictions or requirements may be imposed?

157 Law Number 8269, 25 February 1993, dealing primarily with land reform, also provides that Law 5709 also

applies to the leasing of rural land by aliens.

The survey shows that applications for such authorisation are made to a wide variety of bodies

with nearly every level of government being represented.

For example, in Italy applications by non-EU nationals to live in the border areas are made to

Greece applications to rent or buy land in the border areas by Greek and EU nationals are

required to be made to the local prefecture, for evaluation by an ad-hoc committee, but to the

Applications under the Lex Friedrich by non-residents and corporate foreigners for land

purchase and long leases in Switzerland are made to the Cantonal authorities. In the Bahamas

applications for permission to acquire land, or "immovable property", are made to the Foreign

In Liechtenstein applications by resident and non-resident foreigners, or by legal entities in

which foreigners have a majority interest to buy land have to be licensed by a special

Land Commission in Ireland and the Land Valuation Tribunal in New Zealand. And, as

mentioned earlier, land acquisition by foreigners must have the approval of the island, village or

clan chiefs in Vanuatu.

Applications to own land in Denmark are addressed to the Ministry of Justice while in order to

legislation specifically provides that only the Congress of Brazil, and no longer the President

alone, is authorised to permit foreigners to exceed the statutory limits on ownership of rural

at 17-19.

161 See Box 5, above.

166 Law Number 8269, 25 February 1993, which modified law 5709.

Examples of the types of information that must be supplied include the following.

In Bermuda, under the Immigration and Protection Act 1956 foreigners, who require a permit to

buy land and leases for more than five years must supply a bankers reference and two personal

permit to buy land must be made on the prescribed form accompanied by character references,

In Poland, a foreign individual seeking permission to acquire land must include specified

information in their application including full personal details (including details of their

citizenship) a description of the land, the legal form the transaction will take and details of their

ties with Poland. They must attach to the application copies of: documents proving those ties, a

written declaration from the seller confirming willingness to sell and the price, land registry

entries, a certified valuation and revenue stamps for a prescribed fee for the application and

It seems logical that the relative complexity of different states application procedures, and the

bureaucratic obstacles, will act as a deterrent to some potential investors, although the literature

does not deal with this.

The literature available only refers to clearly stipulated approval criteria in a few states. It would

appear that in many others the authorisation process is less transparent although guidelines

may exist even if these are not made public.

Factors taken into account in Sweden when deciding whether or not to authorise a foreigner to

purchase land are the benefit to the State of the purchase; the personal state of affairs of the

applicant; the purpose for which the land is intended to be used; whether the applicant has been

permanently resident in Sweden for 2 years or has some connection with Sweden; and whether

the applicant has a family relationship with the owner of the land. If any one of the foregoing

The Swedish scheme sets out different criteria for different types of property, such as one and

two family dwellings, summerhouses, farming property apartment buildings and real property for

167 NOVECOM COMMERSANT 1994.

In Hungary various criteria are specified in the Government Decree on the Acquisition of Real

Estate by Foreigners, the most important of which is the preservation of the national or local

in the limited instances where foreigners may purchase land, a hearing be held where the local

government in which the land is situate present the case to the governor, who may then grant

The Swiss Lex Friedrich permission will only be granted to foreigners (non-residents and foreign

companies as described above) if one of the grounds set out in the law is fulfilled, and none of

the grounds for refusal apply. Examples of the latter include the prevention of mere capital

investments, protection of military safety and the political interests of the country. The most

frequent ground for granting permission is for the purpose of setting up a permanent

Under Finland’s transitional law, foreigners (defined as persons residing abroad), required a

permit to purchase land for recreational purposes. The law provided that such a permit may be

refused if there was a danger that widespread foreign ownership would prevent residents from

173 Land Reform Act, 30 April 1996, s. 21.

In some jurisdictions where administrative authority is required for foreigners to purchase land,

even if consent is granted it may be subject to additional conditions. Under the Swiss Lex

Friedrich, where permission is granted it is generally subject to further conditions including: that

the land be used for the purpose specified in the application, that where the land has been

acquired for business operations there be no sale for a 10 year period and that shares in real

estate companies (the purchase of which also require prior permission) are not sold or

In Iceland conditions attached to a authorisation granted to a foreigner are even more onerous.

The basic prohibition on foreign ownership under the Act on the Right to Own or Lease Real

Estate (1966) can be dispensed with by the relevant Minister, but on condition that a power of

attorney is granted to an Icelander living in the area of jurisdiction in which the property is

situated. That person, whose details must be notified to the local court, must represent the

recent amendments to the Lex Friedrich.

The Aliens (Landholding) Act of 1921 set out a comprehensive and potentially restrictive scheme for

the regulation of foreign land ownership. The Act applied to “aliens” defined as individuals who were

not citizens; partnerships containing one or more non-citizen; and companies either not incorporated

in Trinidad and Tobago, or if incorporated there, were under “alien control”.

Aliens could only own, rent, or be the mortgagee of land, if they held a licence granted at the

President’s discretion, which could be subject to conditions. The licence was not operative until

registered with the Registrar General, and if any of its conditions were breached, the land or interest

was forfeit to the state. To prevent trusts as a means of evading the license requirement, trustees

also had to obtain a licence if they held land in trust for an alien. Unlicensed aliens could rent 5 acres

of land or less annually for residence purposes, trade or business. If they inherited land, they had

one year, or such extended time as the President considered reasonable, to dispose of it.

than 2/3 of votes eligible to be cast at a general meeting of the company were held by unlicensed

aliens; if in its share capital more than 2/3 of the votes were held by unlicensed aliens; and if no share

capital, 2/3 of its members were unlicensed aliens. Further, if unlicensed aliens received more than

1/3 of the total value of dividends paid or payable, or held more than 1/3 of the nominal value of

outstanding debentures or interest in the debentures, the company was also under “alien control”.

Aliens also had to obtain a general licence renewable annually to hold as mortgagee land held as

security for funds lent. Such acquisitions were also subject to conditions.

In 1990, under pressure from the World Bank to liberalise the investment regime, the Act was

repealed by the Foreign Investment Act, which allows foreigners to acquire land of less than one acre

for residential purposes without the need for a licence. Similarly, the licence requirement was

dispensed with for land under 5 acres acquired for a trade or business. Such acquisitions must be

paid for in foreign currency.

foreigner in all matters relating to the land and their decisions regarding the land are binding on

In cases where no prior authorisation is required, a number of states nevertheless require

foreigners to register landholdings or to notify the authorities of their acquisition, either before or

after it has been completed. These requirements are in addition to any land registration

formalities applicable to nationals as well.

Specific requirements that foreigners register or give notice of land transactions can be

regarded as a form of restriction, in that they deny foreigners who acquire land the

confidentiality they might seek. Further, if a government has information about the extent of

foreign ownership of land it will be better placed to regulate such use. The Canadian province

of Ontario provides an example of a registration requirement where foreigners acquiring

Recent changes in Latvia permit the purchase of land by joint ventures with foreign participation

(provided that Latvian citizens hold a majority stake) and by foreign companies from countries

with which Latvia has agreements protecting foreign investments, would require such purchases

government to keep a record of the extent of foreign ownership of land. If not combined with a

requirement for prior authorisation they may only amount to information gathering exercises. It

was partly the perception in the US during the 1970s that the Federal Government simply did

not know the extent of foreign ownership which led Congress to introduce legislation requiring

notification of by foreigners of land acquisitions. The International Investment Survey Act of

concerned with foreign direct investment in respect of any business enterprise, including land,

are the provisions for benchmark surveys, every five years, and for any US citizens who have

participated in a relevant transaction ("whistle-blowers") to file a special report form unless they

are certain that the foreign investor has duly notified the authorities of the transaction.

Other states require notification prior to the conclusion of a foreign purchase. For example,

Japanese law requires foreigners to give prior notification to the authorities before any

acquisition of land, or rights relating thereto, except in the case of property for office, factory,

residential or certain other uses. In "extraordinary circumstances" the authorities then have the

181 7 USC § § 3501-3508 (1988).

Similarly, the Australian Foreign Takeovers Act 1975, which applies to investments and urban

land, requires prior notice of proposed acquisitions by foreigners/non-residents to be given to

the Treasurer who can examine proposals and, if they are deemed to be "contrary to the

days the transaction can proceed. Obviously this type of prior notification is in many ways a

form of default prior authorisation.

A wide variety of sanctions are provided for to ensure compliance with techniques adopted,

although the literature does not reveal the extent to which such sanctions are relied upon.

A common legal response to unauthorised or prohibited transactions is for them to be deemed

case in the Bahamas where a transfer without permission is void, although retrospective

In Switzerland a transaction not carried out in accordance with the Lex Friedrich is voidable.

There is a risk that a sale of land without authorisation will be declared null and void. Further,

the authorities may seek orders for the restoration of land to its previous state, and for any legal

entity involved in an unauthorised transaction to be dissolved and have its funds confiscated if

Some states, such as Peru, provide that land unlawfully held by foreigners is simply forfeit to the

Elsewhere the foreign owner may dispose of their land or may cure their "deficient" status to

prevent its forfeiture. In the US state of Indiana, foreigners not intending to become naturalised

citizens must dispose of all property in excess of 320 acres within 5 years of acquisition failing

A number of states also provide for criminal sanctions in the case of non-compliance. In

US the IISA also provides for fines and imprisonment for failure to comply with reporting and

reporting requirements of the Foreign Takeovers Act 1975.

What of the case of an innocent acquisition of land by an un-authorised person, such as a

has been largely prohibited, such a beneficiary must dispose of the land within one year or else

Given the disparate range of practices and techniques undertaken by states in relation to

foreign land ownership, perhaps the only conclusion one may draw is that there is no direct

correlation between the nature and extent of restrictions on foreign ownership of land and a

country's economic strength; stage of development; political system and constitutional

arrangements; size; or history of colonisation or foreign domination.

Legal restrictions on ownership and use of land by foreigners are designed to achieve a variety

of policy objectives unique to the circumstances of each state, and may also be expressions of

other unexpressed motives. Regardless of the implications of foreign land ownership, it is an

issue that strikes at the heart of the nation state, and can evoke nationalist and protective

sentiments. Public perceptions frequently play a significant role in determining the nature and

extent of the restrictions imposed.

Once a decision is made to regulate foreign ownership or use of land the first issue to be

addressed is who or what is a foreigner. The exact definition adopted may depend on the policy

objectives which are sought to be achieved.

Thereafter, a variety of techniques are theoretically available to regulate in this area, ranging

from outright prohibition of foreign land ownership, to requirements that prior authorisation be

obtained, that foreign land acquisitions be registered, that prior notice of transactions be given

or, that post acquisition notice be given or the transaction registered. These could be applied to

all the land within the national borders or be based upon the:

• type of land (agricultural or recreational);

• type of use for which land is designated (residential);

• location of the land (border or urban areas);

• purpose for which the land is required (such as implementing an approved investment);

• quantity of the land (either per foreigner or the total amount available for foreign

ownership).

191 Compare with the Philippines where this is the only exception admitted to the general prohibition on foreign land

ownership.

However the choice of technique does not take place in a vacuum, and the range of options

may be restricted because responses will be determined by the political pressures of the day.

Frequently, different restrictions will be employed concurrently, resulting in vague justifications

and policy rationales, possibly shielding less laudable motives. The literature is surprisingly

sparse as to the extent to which compliance with such restrictions is actually ensured or

monitored. This may be an area of law where the mere existence of legislation may be more

important, for its political message, than for ensuring compliance.

What seems most certain is that despite pressures leading towards the globalisation of markets

and investments and in increasingly internationalist world community a uniform approach is

unlikely for the foreseeable future.

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