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This article was co-authored by Neha Gafur, Paralegal, London.
In June 2022, we reported on the introduction of the Economic Crime (Transparency and Enforcement) Act 2022 (the Act), which has now come into force as of 1 August 2022. The Act is part of the UK Government’s ongoing attempt to tackle money laundering and corruption and to make it more difficult for foreign criminals to launder money through UK property.
Further guidance has now been released in respect of the Act’s main feature which is to introduce the Register of Overseas Entities at Companies House (ROE). This is a public register that will detail the beneficial owners of overseas entities that own UK property.
Under the Act, an overseas entity will be required to identify its beneficial owners and register with Companies House if the entity:
- Owns property in the UK;
- Wishes to acquire freehold property or, in some cases, leasehold property in the UK; or
- Has recently disposed of UK property.
Additionally, there will be a requirement for the overseas entity to annually update the register. Failure to register with Companies House or to update the register annually will be a criminal offence punishable by a prison term and, in some cases, a fine.
If an overseas entity already owns a property (freehold or leasehold estate with a term of more than seven years) which was acquired on or after 1 January 1999 in England and Wales, they will be required to submit an application to register with Companies House by 31 January 2023 (the transitional period). The length of lease triggering an overseas entity to register with Companies House differs in the case of Scotland and Northern Ireland, being 20 and 21 years respectively, but the freehold requirement remains the same.
The Act prevents overseas entities being able to transact with UK property after this date unless they are registered on the ROE. The application to Companies House must include a statement that the entity has not made a disposition of property since 2 February 2022 or must include details of any disposition it has made.
The Land Registration elements of the Act come into force on 5 September 2022, meaning that if an overseas entity acquires a UK property (freehold or leasehold estate with a term of more than seven years in England, and 20 or 21 years in Scotland and Northern Ireland) they will be a required to register with Companies House before they are able to make an application to be registered as the legal owner of the property at the Land Registry.
Exceptions are extremely limited, although an overseas entity considering disposal of UK property may do so and effect a registration at the Land Registry within the transitional period even if the entity has not yet registered on the ROE. However, the entity will still be required to comply with the reporting obligations under the Act and ensure they are complete before the end of the transitional period.
Furthermore, where such registration at Companies House has not been effected, a restriction will be placed on the title to the land prohibiting its sale, lease or mortgage.
How do you register with Companies House?
In order to effect a registration, the overseas entity will need to provide certain information about itself, its beneficial owners and its managing officers. The Act provides that before the entity can apply for registration, it must first notify its beneficial owners and make enquiries about whether they remain beneficial owners and, if not, to provide the appropriate updates. Once this information has been obtained it must be independently verified by a UK supervised ‘relevant person’. The verification must be carried out by a UK based agent supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017.
In most cases, it is envisaged that an accountant or auditor will carry out the verification process on behalf of the overseas entity. The agent must provide an assurance code (essentially a digital signature) to confirm that the appropriate procedure under the Act has been followed.
Comment
If you are an overseas entity involved in a transaction to acquire or dispose of UK property, you will need to take immediate action. If you already hold UK property or have been party to a transaction disposing of that property at any time since 28 February 2022, you are still required to act. You and your advisors should now seek to compile the information required in order to effect registration.
If you require assistance with identifying properties caught by the Act or ascertaining whether your property portfolio will trigger a requirement to register under the Act, Kennedys are able to carry out searches at HM Land Registry to assist you and advise you on the outcome of the latter.
Please get in touch with us if you require any further information.
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