The Economic Crime (Transparency and Enforcement) Act 2022 creates a public register detailing the beneficial ownership of overseas entities which own UK property.
What is the Economic Crime (Transparency and Enforcement) Act 2022?
Part One of the Act has created the new public Register of Overseas Entities (ROE), which is managed by Companies House. Essentially, the register is a list of Overseas Entities that have acquired lease and freehold properties within the UK, with information about their beneficial owners.
The register was opened on 1 August 2022, but overseas entities do not need to take any Action until the 5 September 2022, with the transition period ending on 31 January 2023.
The Act has been put in place in order to promote transparency and trust regarding overseas entities that have properties within the UK, as well as combating money laundering within UK properties. The Act will have a retrospective effect with all freehold and leasehold properties acquired in:
- England and Wales after January 1999,
- Scotland after the 8th of December 2014,
- Northern Ireland after the 1st of August 2022
requiring registration.
What will it affect?
Freehold properties or leasehold exceeding seven years from the date of grant. Under the new Act, overseas entities are prevented from registering with the Land Registry unless they are registered on the ROE (or exempt).
From 5 September 2022, where an overseas entity is registered as proprietor of a freehold interest or lease exceeding seven years, and has failed to register on the ROE, a restriction will be added to the title preventing the future sale, letting or charging of the title unless the overseas entity is compliant at the time of the disposition.
What new obligations have been put on overseas entities?
Overseas entities (any legal entity governed by the laws of a non-UK country or territory) must disclose information about beneficial owners and directors. This information must be reported truthfully, honestly and updated annually in order to avoid sanctions such as imprisonment, fines or both.
How do overseas entities report this to Companies House?
Overseas entities that already own land within the UK will need to identify, verify and confirm all beneficial ownership information, then submit this information online to Companies House before 31 January 2023. Companies House will then issue an overseas identity ID number, appearing next to the title on the ROE. After the transitional period, and once ID is obtained, overseas entities are able to register dispositions (actions that vary ownership of the property, such as letting out) of their property, as long as they had ID at the time of the disposition.
Overseas entities that do not own land in the UK, but are considering purchase must identity, verify and confirm beneficial ownership, submit this information to Companies House who will allocate them an ID number. Once ID is obtained, the overseas entity may supply this to the Land Registry, and subsequently register dispositions.
It is worth noting that the Secretary of State can exempt certain entities from purchasing UK land in the interest of national security and crime prevention.
What are the sanctions for non-compliance, what powers of restrictions does the Land Registry have?
Failure to report necessary information to the ROE, report misleading or false information, or failure to update the necessary information annually will not only affect the entities’ ability to buy or lease the land, but is also a criminal offence which includes fines, imprisonment (for all related officers) or both.
If you might be affected by the act, and would like to know more, please contact a member of our Corporate Team.
