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Last updated 11 January 2023.
Long expected proposals to establish a register of the beneficial owners of overseas entities which own property in the UK received Royal Assent on 15 March 2022. This article explains some of the issues and the far-reaching implications of this new legislation for property in England and Wales which is owned by overseas entities.
The Economic Crime (Transparency and Enforcement) Act 2022 ("ECA") was passed on an expedited basis in response to the invasion of Ukraine. The ECA requires Companies House to establish and keep a register of overseas entities which own property in the UK, to include information about their beneficial owners ("register of overseas entities"). Unless an exemption applies, the ECA will require overseas entities to register if they already own UK property (and were registered as proprietor on or after 1 January 1999) or if they acquire UK property.
The register of overseas entities has two primary objectives: (1) to prevent and combat the use of land in the UK by overseas entities to launder money or invest in illicit funds; and (2) to increase transparency and public trust in overseas entities engaged in land ownership in the UK.
Companies House launched the register of overseas entities on 1 August 2022. This marks the start of the six month transitional period (the "transitional period"). The land registration provisions in the ECA will come into force on 5 September 2022.
During the transitional period overseas entities which own UK property must register on the register of overseas entities and notify Companies House of any dispositions which have occurred since 28 February 2022. Registration requires submission of details of the beneficial owners of the entity (or its managing officers if there are no beneficial owners) and there is an obligation to update this information annually. The process for identifying the relevant beneficial owners of the overseas entity will largely follow the PSC regime that has applied to UK companies since 2016.
The Land Registry in England and Wales will place a restriction on all registered titles owned by overseas entities, and these will take effect on expiry of the transitional period. However, acquisition of property by an overseas entity during the transitional period will only be registered at the Land Registry if the acquiring overseas entity is registered on the register of overseas entities.
After the transitional period, unless an exemption applies, the restrictions on title will mean that any dealing with UK property (sale, charge, or lease for a term of more than 7 years) by an overseas entity will only be registered at the Land Registry if the overseas entity has been properly registered on the register of overseas entities.
By the end of the transitional period on 31 January 2023 all overseas entities which own UK property must be registered on the register of overseas entities. Any overseas entity which has disposed of its interests in UK property since 28 February 2022 must notify Companies House of those dispositions by 31 January 2023. If a Land Registry application to register a disposition by an overseas entity has not been completed and the overseas entity will still be the legal registered proprietor of a UK property on 31 January 2023, the overseas entity will need to be registered on the register of overseas entities by then.
The new registration requirements have implications for overseas entities dealing with UK property and for UK entities if the counterparty to the property transaction is an overseas entity. Failure to comply will result in criminal penalties and may prevent the transaction from being registered at the Land Registry.
Overseas entities which own UK property should submit their application to Companies House for registration on the register of overseas entities as soon as possible and in any event, by the end of the transitional period.
Please contact Karl Bradford if you would like to discuss.