By Jenny Roan Forgey and Brad Lowry

On March 27, 2026, the Office of the Attorney General of Texas issued proposed rules for Senate Bill 17 (“SB 17”), which became effective on September 1, 2025. SB 17 makes it illegal for certain foreign persons and entities to purchase or otherwise acquire an interest in real property in the State of Texas. Importantly, the Act bars any “ownership” or “control” by prohibited persons, which include Chinese citizens that are not “lawful permanent residents of the United States”, and prohibited entities, which include companies that are headquartered in China. The Act itself does not define “ownership” or “control”.

Since its effective date, SB 17 has generated significant concern within the commercial real estate community, and many industry participants have been eager for regulatory guidance. While the proposed rules do offer welcome clarity on several key issues, they also introduce at least one notable requirement that goes beyond the plain language of the statute.

New Reporting Requirement for Real Estate Professionals

Perhaps most significantly, the proposed rules impose a reporting obligation on certain professionals involved in facilitating real estate transactions. Under the proposed rules, mortgage lenders, title insurance companies, property insurers, appraisers, and licensed real estate professionals would be required to report any suspected violations of SB 17 to the Office of the Attorney General. Complaints would need to be submitted electronically through the OAG’s online complaint form or by mail to the address designated by the OAG for that purpose.

This reporting requirement does not appear to be expressly required by the plain language of the Act and will have a significant impact on the commercial real estate industry. Real estate professionals should evaluate their current transaction workflows and compliance procedures to determine how this new obligation, if adopted, may affect their operations.

Clarification on Key Definitions and the Lease Exception

The proposed rules also provide guidance on three issues that have been at the forefront of practitioners’ questions since SB 17 took effect.

First, the proposed rules define the term “control,” which has been a source of considerable uncertainty for parties structuring transactions involving foreign persons or entities.

Second, the proposed rules address what has been perhaps the most frequently asked question among commercial real estate professionals: whether lease term renewals defeat the one-year lease exception in the Act. Under the proposed rules, the answer is a clear “yes” — renewal terms that extend a lease beyond one year would cause the lease to fall outside the exception. This is an important clarification that will affect how landlords and tenants structure lease arrangements involving covered foreign persons.

Third, these rules would address the State’s proposed treatment of a series of back-to-back 364-day lease agreements. Under the proposed rules, the definition of an “acquisition of an interest in real property” would extend to a series of licenses, leases, or other arrangements that, in substance, create a leasehold interest in real property in this State for one year or longer, even if structured as successive short-term agreements. Because most commercial leases are longer than one year for economic reasons, the proposed rules will require commercial real estate brokers, landlords, and tenants to examine how they will structure leases going forward if transacting with any person or entity implicated by SB 17.

Comment Period

The proposed rules are now subject to a public comment period. Stakeholders who wish to submit comments should review the proposed rules carefully and consider whether and how the new requirements may affect their business.

A link to the proposed rules is here. A link to the Attorney General’s press release is here.

For more information or for assistance with submitting comments to the proposed rules, please contact Brad Lowry, Chair of the Jackson Walker Real Estate Practice Group, or Jenny Roan Forgey, Senior Counsel in the Real Estate Practice Group.