New Texas Senate Bill 17 Requiring Diligence on Non-U.S. Entities

What is Texas SB 17?

Texas Senate Bill 17 (“SB 17”) was signed into law in Texas by the Governor on June 20, 2025 and went into effect on September 1, 2025. The law was signed to restrict the acquisition of real property in the state of Texas by foreign individuals, foreigners illegally residing in the U.S., governments, members of a ruling political party, and entities from designated countries, including Iran, North Korea, China, and Russia. Penalties can be stiff, including either $250 thousand fines or 50% of a property’s value levied against the owner, with potential felony charges against offending parties. Leaseholds that are deemed to violate SB 17 are voided and unenforceable, while those that are less than 12-months are allowed an exemption.

When should you consider conducting tenant diligence?

Commercial Landlords with tenants that that are majority owned by entities or individuals from the impacted countries should consider tracing beneficial ownership if existing leases exceed 12-months in term. Landlords should consider reviewing all tenants’ ultimate beneficial ownership (“UBO”) for all new leases that exceed 12-months.

What tenant diligence do you need?

When evaluating tenants, either existing or new, who may be in violation of SB 17, the following approach should be considered:

• Request 2024 federal tax returns from the tenant entity or guarantor entity. (Tax returns list beneficial owners on business tax returns).
• Conduct a Secretary of State screens and traces on all entities listed on the lease or in the tax returns
• Trace UBO using commercial databases to determine exposure to potential violations of SB 17

How can TRA help?

Legal entity and UBO tracing is a time-consuming process. TRA leverages commercially available databases to trace UBO, while also identifying potential for Office of Foreign Assets Control (“OFAC”) compliance, sanctions violations, politically exposed persons, organized crime, criminal activity, fraud, and other special circumstances. Reach out to see how we can aid in your compliance with SB 17.