New beneficial ownership register for overseas owners of UK real estate
The much anticipated Economic Crime (Transparency and Enforcement) Act 2022 was passed on 15 March 2022. It was rushed through Parliament in just over two weeks in response to the war in Ukraine and pressure to crack down on Russian oligarchs and (amongst other measures) introduces:
- a new Register of Overseas Entities to be set up and operated by Companies House and;
- an obligation on “overseas entities” who currently own or wish to buy UK real estate to disclose details of their beneficial owners.
An Overseas Entity is defined as a legal entity that is governed by the law of a country or territory outside of the UK (this would therefore include entities formed in the Channel Islands).
The Act imposes an obligation on overseas entities that acquired a freehold or leasehold interest of over 7 years in land in England and Wales after 1 January 1999 or that acquire it in the future to be registered on the Register of Overseas Entities (there are corresponding provisions in Scotland and Northern Ireland). Once the regime comes into force, no overseas entity can be registered at the UK Land Registry as the proprietor of a legal estate in UK land unless it has first been registered on the new beneficial ownership register at Companies House or is exempt from registration. It will therefore be critical to ensure that all registration formalities have been complied with before committing to completion of a purchase or lease.
Overseas entities who are already owners of UK land will have a restriction put on their Land Registry title. This will prevent them from dealing (buying, charging or granting a lease of seven years or longer) unless they are registered on the beneficial ownership register at Companies House or are exempt from registration.
Anyone purchasing land or taking a lease for seven years or longer from an overseas entity will need to ensure that the seller/landlord’s beneficial ownership registration is up-to-date before they commit to a purchase or lease. If not, the purchaser or tenant will be unable to register their own interest due to the restriction on the overseas owner’s title prohibiting dealings.