The move is part of the Government’s drive towards greater transparency in real estate ownership, to minimise the risk of it being used to shield the proceeds of crime.
The registration requirements will ultimately translate into an additional compliance burden on acquisition, and for existing holdings, for overseas entities holding/acquiring UK real estate. Given the use of offshore vehicles to hold UK real estate within traditional holding structures, it is critical that the proposals ultimately implemented are proportionate to the risks they seek to address and do not impose unnecessary burdens on those seeking to invest in the UK.
The proposals and their likely impact
The proposals will:
- potentially void a transfer of property to an overseas buyer who is not duly registered at the time of the transfer. This is the most draconian aspect of the proposals (and in light of representations made it seems this has been dropped though that has not yet been formally confirmed);
- require an overseas entity that wishes to acquire UK property to supply beneficial ownership information to Companies House and apply for a registration number. Registration of title to property will not be possible without that number. Even if supplied, the buyer will still be subject to a restriction on its title preventing a sale, legal charge or grant of a lease of over 21 years unless it can demonstrate continued compliance with the registration requirements. (Given the speed with which many transactions are executed, it will therefore be key that Companies House is able to offer a real time online registration service);
- affect an overseas occupier taking a lease of over 21 years. Since these are unlikely to have any capital value (which is what the proposals are aimed at) it is to be hoped the recommendations that we and various industry bodies have made will mean the requirements will not apply to market rent leases;
- be retrospective, after a 12 month transitional period. That means all overseas entities who currently own UK property must eventually register (and after the transitional period a restriction will be registered on their titles at Land Registry). That effectively gives a period of 12 months to existing overseas owners who do not wish to make beneficial ownership disclosure public in which to dispose of existing UK real estate they own. That could have a distorting effect on the market/valuation, if a number of forced sales result. Again, we and others have made representation on that to Government;
- impose restrictions on lenders who take security over UK property owned by a non-UK entity which will impact on loan terms/enforcement, ultimately.
The proposals make no distinction between residential and commercial so will affect all UK real estate owned or acquired by an overseas entity.
Failure to comply will be a criminal offence.
Should you have any question on the proposals as currently formulated or how they may affect you or your business please contact firstname.lastname@example.org.