Overseas Entities and property transactions in the UK
The Register of Overseas Entities under the Economic Crime (Transparency and Enforcement) Act 2022 commenced on 1 August 2022, but the changes to the Land Registration Act 2002 were delayed until 5 September 2022.
This delay was implemented to allow those engaged in current transactions to comply with the new overseas entity registration requirements at Companies House and to obtain the necessary Overseas Entity ID.
The Economic Crime (Transparency and Enforcement) Act 2022 is designed to tackle the ongoing problem of money laundering and aid effective enforcement, whilst addressing concerns around a perceived lack of transparency surrounding property ownership in the UK.
In short, Overseas Entities with the ambition to own or deal with relevant property in the UK, will be affected by this new legislation and must take steps now to comply with the changes to ensure any property transactions can be undertaken without delay.
Who will be affected?
This Act requires any Overseas Entity to register and keep updated, the details of ‘beneficial owners’ of the entity, in the newly established Register of Overseas Entities which is held by Companies House.
An Overseas Entity is classed as any legal entity governed by the laws of countries or territories outside of the UK, which includes those entities formed in the Channel Islands. These entities will include those that:
- already own a freehold or leasehold estate of more than 7 years (acquired since 1/1/99)
- want to acquire a freehold or leasehold estate of more than 7 years
- want to dispose of (or have since 28/02/22) a freehold or leasehold estate of more than 7 years.
The Act does not apply to overseas individuals owning property in the UK themselves or through a UK entity.
When do the changes take effect?
We are currently in the transitional period of six months for Overseas Entities to comply with the registration requirements concerning the UK properties they own and the land registration provisions of the legislation came into force on 5 September 2022.
From now on, an Overseas Entity cannot become the legal owner of a freehold or leasehold interest of more than 7 years, without having first registered with and provided all necessary information to Companies House by the time of the Land Registry application.
What are the registration requirements?
Any Overseas Entity that needs to register must identify any of its beneficial owners and notify them of the position. Then the Overseas Entity will need to register with Companies House, providing the necessary information about itself and its registrable beneficial owners, if it has any.
The Overseas Entity must then confirm annually that the information on the Register is up to date, or update it if necessary.
The entire registration process can be handled in the UK, by lawyers well-versed in the process, which can be time-consuming and give rise to problems for those unfamiliar with what information is required and how to present it.
What are the penalties for non-compliance?
If the Overseas Entity fails in its duty to comply with the requirements of the Act, by failing to register, or missing the deadlines, not maintaining the register or by providing false information, the Overseas Entity and its executive officers could face criminal charges and significant fines.
Why talk to the experienced Commercial Property team at Taylor Walton?
The new legislation will have implications for the entire property market, as those looking to buy, sell or lease UK property to or from an Overseas Entity may have difficulties progressing the transaction, if the Overseas Entity has not complied with the detailed registration requirements.
Importantly, the information that must be submitted to Companies House to register an Overseas Entity, must be verified by a UK agent that is supervised under the 2017 Money Laundering Regulations, which includes the legal professionals within our Commercial Property team.
Companies House has indicated it will be quicker and easier for the UK agent to verify all the required information and register for the Overseas Entity, than if they try and complete the registration themselves.
So if you are an Overseas Entity planning on undertaking any property transactions in the UK, you need to be mindful of the new legislation and can talk to James Khakpour-Smith, a partner in the Commercial Property team here at Taylor Walton. You can contact James on 01727 845245 or email him at firstname.lastname@example.org.
Disclaimer: General Information Provided Only
Please note that the contents of this article are intended solely for general information purposes and should not be considered as legal advice. We cannot be held responsible for any loss resulting from actions or inactions taken based on this article.
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