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Legal Update

Are Overseas Entities in the UK ready for the latest changes in UK property law?

On 1 August 2022, the Register of Overseas Entities (the ‘Register’) launched under the new Economic Crime (Transparency and Enforcement) Act 2022 (the ‘Act’).

The Act has significant implications for property transactions where a party involved is an Overseas Entity and failure to comply will have serious consequences.

The Register has been introduced to address concerns about the lack of transparency in the foreign ownership of UK property, as well as to prevent money-laundering and tax evasion.

So, who does the Act apply to?

The Register applies to:

“Overseas Entities” which are defined as legal entities governed by the law of a country or territory outside the UK. This includes non-UK incorporated companies, LLPs, foreign foundations, and non-UK partnerships with legal personality.

If you are an Overseas Entity and you fall into one of the categories below then this new Register regime will apply to you:

  • you currently own a freehold property within the UK.
  • you currently have a lease of UK property s granted for a term of more than 7 years.
  • you owned a freehold property within the UK but sold the property on or after 28 February 2022.
  • you had a lease of UK property granted for a term of more than 7 years, but assigned or ended the lease on or after 28 February 2022.
  • you currently own a freehold property within the UK and sell before 1 February 2023.
  • you currently have a lease of UK property granted for a term of more than 7 years, but assign or end the lease before 1 February 2023; or
  • you apply to the Land Registry on or after 5 September 2022 to register your acquisition of a freehold property within the UK, or a lease of UK property granted for a term of more than 7 years.

What to do next

An Overseas Entity must provide information about the entity itself, its beneficial owners, and its managing officers to Companies House.

That information must first be independently verified by a UK supervised ‘relevant person’ such as a professionals and Conveyancers who are obliged by the Money Laundry Regulations and can be sent to Companies House electronically.

Once successfully registered, the entity will receive an ‘Overseas Entity ID’ from Companies House. Overseas Entities are required to update the records at Companies House at least annually, and all information will be available to the public.

What if I fail to comply?

A failure to comply can land you in very hot water.

HM Land Registry will, from the 5 September 2022, have the option to enter a restriction on the title to your property to prevent you from selling, mortgaging, or granting a lease of the property, until you have provided the required information.

In addition, if an Overseas Entity fails to comply with the registration and reporting obligations that entity and their officers (directors and secretaries) commit a criminal offence.

If the Overseas Entity proceeds to enter a property transaction in breach of these restrictions, it could face daily fines and potential imprisonment.

What does this mean for you or your business, and what do you need to be doing now?

If you are an Overseas Entity involved in a property transaction you need to act now

If you would like guidance on complying with the new registration process, please contact Paul Engelbrecht or a member of BPE’s Commercial Property team for practical advice.

 

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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