The Government launched a call for evidence in April 2017 seeking views on proposals to establish a register to show the legal entities that own or control overseas companies that own UK property. The response to the call for evidence has now been published. The response sets out how the Government intend to implement the new register, and incorporates a number of changes to key areas as a result of the responses received.
The legislation required to introduce the register will be published for consultation this Summer and it is intended that the register will be operational in 2021.
- The register will be held at Companies House and will be open to public view without charge.
- Overseas entities that own or wish to acquire UK property will be required to supply beneficial ownership information to Companies House and apply for a registration number. It will not be possible to register the legal title to the property without that number.
- The registration requirements will apply to all forms of overseas legal entities that can hold property. Trusts will not be subject to the regime.
- The registration requirements will apply to freehold property and registerable leasehold property (broadly leases of more than 7 years). This replaces and extends the initial proposal that the registration requirement would only apply to leasehold terms exceeding 21 years.
- Overseas entities that already own UK property will have a transitional period within which to obtain a registration number. The Government has accepted that the 12 month period initially proposed may be impractical, and has confirmed that it will consider extending this period to give those entities with existing UK property interests a longer period to complete the registration process.
- Overseas entities that do not already own UK property will be required to have a valid registration in place before purchasing a UK property. Proposals to prevent the transfer of the beneficial interest of a property and "void" the transfer where a valid registration is not in place have been dropped due to concerns that they would not be workable within current land law and could have an adverse impact on third parties. The intended new regime will therefore allow the transfer of the beneficial interest, but not the legal title, to pass to an overseas entity that does not have a valid registration number at the completion date.
- Compliance will be enforced by the introduction of new criminal offences and a system of statutory restrictions and notices that may be placed on the Land Registry title to a property to prevent an entity without a valid registration from selling, letting or mortgaging its interest in the property.
- The information that will be required for the register will mirror that required under the current regime that applies under the existing Persons with Significant Control (PSC) regime. Further consideration will be given to the possible protection of residential addresses of named individuals.
- The position of lenders seeking to repossess and dispose of a property that is subject to a restriction remains unclear. The Government concerned that a loophole could be created to avoid the registration requirements, has confirmed that it would be impractical to define and implement the concept of a "legitimate" lender and this would suggest that the forthcoming legislation is unlikely to include any exemption for lenders.
It is essential that the legislation required to introduce the new registration regime strikes a balance between the need to ensure that the UK property market is open and transparent and deters criminal activity and the need to encourage investment. It is therefore encouraging that the Government response includes a clear acknowledgement of the potential economic impact stating: "The Government will take account of the impacts described by the respondents in the further development of the policy and has commissioned research on the new register on overseas investment in the UK market property."