Attention: Overseas entities holding or intending to purchase UK real estate
What is happening?
In response to the recent events in Russia and Ukraine, the UK Government is currently fast-tracking the Economic Crime (Transparency and Enforcement) Bill (first introduced in 2018) (the Bill) in order to introduce the Register of Overseas Entities in short order (the Register).
According to the Bill, the purpose of the Register is to require overseas entities that hold land in the UK to identify their beneficial owner(s) and provide information about them and their managing officer(s) to Companies House and to update/maintain that information on an annual basis.
The introduction of the Register is part of the UK Government’s stated strategy "to combat economic crime while ensuring legitimate businesses continue to see the UK as a great place to invest”.
Who does it affect?
If you are a beneficial owner (an individual, legal entity, government or public authority who or which has significant influence or control over an entity) of an overseas entity (a company, partnership or other legal person governed by the law of a country or territory outside the UK) which (a) owns land; (b) is intending to purchase land; or has or proposes to take a lease over land for longer than seven years in the UK, you will now be required to provide identifying information to Companies House in the UK and to review/update that information by submitting an annual return.
Those who are involved in real estate transactions with overseas entities, such as lenders and those with the benefit of security granted over or in connection with land will also be affected. They will need to conduct an additional layer of due diligence into the property owner to ensure compliance with the Register.
When disclosure of information to the Register becomes law, it will have a retrospective effect and will apply to property bought in England since January 1999 and to property bought in Scotland since December 2014.
Each registered entity will be given an "overseas entity ID" and the Register will be made public.
What will it mean for dealings in UK property held by overseas entities?
The impact for overseas property owning entities will be considerable. There will be restrictions on the ability to register dealings in land held by an overseas entity where disclosure of beneficial ownership has not been made. There will also be potential criminal and financial sanctions for managing officers of entities who do not comply.
How we can help you
We are closely monitoring the progress of the Bill. Once the legislation is in place we will be able to help with the logistics of collating the data required to be submitted to Companies House and the more practical implications of any restrictions registered at the Land Registry.
Please do reach out to discuss your options with us. It may make sense to de-envelope your property, pass it to another generation in line with succession planning objectives or to transfer ownership to a UK company. We have a deep bench of knowledge and experience in these areas across our offices and we would be delighted to assist.
Look out for our Practically Speaking podcast episode on this topic coming soon.