The countdown is on for overseas owners of property in the UK to comply with the tightened register regime following the government's clampdown on economic crime
Following the passing of the Economic Crime (Transparency and Enforcement) Act 2022 (the Act) in March of this year, the register of overseas entities that own property in the UK has opened for registrations. It is early days in terms of the new regime, but the clock has now started ticking on the six-month transitional period (expiring on 31 January 2023) by which existing overseas owners of UK property must have achieved registration at Companies House.
By way of a reminder, the intention of the register is to identify the ultimate beneficial owners of the entity that owns the property in the UK. Broadly speaking, a beneficial owner is a person who directly or indirectly holds 25% or more of the shares or voting rights of the overseas entity or who otherwise has the right to exercise significant influence and control over it. Accordingly, the Act requires any overseas entity owning UK property to identify its beneficial owners, arrange for independent verification of the relevant information about their beneficial owners, and submit these details to Companies House as part of their registration. A failure to register by an overseas entity already owning property in the UK will constitute a criminal offence punishable by fine or imprisonment for the directors of the defaulting entity.
Moreover, the Land Registry will place a restriction on the title of the property owned by the overseas entity, preventing it from dealing with the property (for example, selling or leasing the property or granting a legal charge over it) unless it can prove it has satisfactorily registered at Companies House. Meanwhile, the entity will also need to demonstrate it has complied with its annual updating obligations as to maintain its registered status. Where an overseas entity already owns land in the UK, that restriction will not take effect until the transitional period. However, for any overseas entity acquiring property now and onwards, achieving registration as the proprietor of the property at the Land Registry will not be possible until they have registered at Companies House.
Given the common use of overseas companies to acquire and hold UK property, many of our clients now need to familiarise themselves with the new registration regime if their property interests are owned by overseas entities, or if they intend to acquire any such property-owning entities. In this briefing, we examine the impact the new registration regime will have on transactions involving real estate, be it the acquisition or disposal of real assets or the financing of any such transactions.