New Registration Requirements for Overseas Entities Buying Land in the UK
For several years, the UK government has sought to cut property fraud and money laundering activity in the UK. One key element they have focused on is making the ownership of property in the UK more transparent. Overseas entities have sought to invest in property in UK, but the ultimate beneficial owners of these overseas entities are often not known. The proposals for an overseas entities register were put forward in a government bill in 2018, but have now been passed into law under the Economic Crime (Transparency and Enforcement) Act 2022 (“the Act”).
The Act, (which, for the main part, is not yet in force) creates a new registration requirement at Companies House for any overseas entity who:
- Is buying a freehold property or a lease (with a term of more than 7 years) in the UK; or
- Owns a freehold property or a lease (with a term of more than 7 years) in the UK, which was purchased on or after 01 January 1999.
Once the relevant provisions of the Act are in force, an overseas entity will be required to register at Companies House and provide the required information about their beneficial owners.
A beneficial owner is anyone who holds:
- More than 25% of the shares or voting rights in the overseas entity;
- Has the right to exercise, or actually exercises, significant influence or control over the overseas entity;
- Holds the right to appoint or remove a majority of the board of directors of the overseas entity.
This works on the same principle as the PSC register (people with significant control).
Once registered at Companies House, the overseas entity will be issued an overseas entity ID number. This ID will then be provided to HM Land Registry to enable land transactions to be registered.
There will be a six month transitional period from the date the Act commences for overseas entities to register at Companies House.
During this six month window, HM Land Registry will register a restriction on the registered title of land owned by an overseas entity. This restriction will limit the overseas entity’s ability to transfer, let (for more than 7 years) or charge the property unless they have complied with the registration requirements. Some exceptions will apply, but these are beyond the scope of this post.
There is a further obligation on overseas entities to ensure that the register at Companies House is up-to-date, and they will be required to update this information annually.
Failing to comply with the registration requirements under the Act can result in a criminal offence, with the penalties for non-compliance of the Act including fines and imprisonment.
We will continue to monitor this and update our portfolios if and when necessary, once the implementation dates are known and if any supporting legislation is passed following the Act receiving Royal Assent.