The Register of Overseas Entities (“The Register”) came into effect on 1st August 2022 and will change the registration requirements for all foreign company owners of UK property. In this article Martin Pursall, Partner in the Commercial Property department at Berry Smith Lawyers, considers what these changes will be, the impact of these changes and key considerations to consider going forward.
What exactly Is the aim Overseas Entity Register?
The Register is the UK Government’s attempt to apply tighter restrictions to overseas companies and prevent any overseas companies using UK Property for money laundering purposes.
An ‘Overseas Entity’ is a company or Limited Liability Partnership (LLP) which is registered overseas. Note that for registration purposes, the Isle of Man and the Channel Islands are deemed to be overseas so it’s important to recognise this when dealing with companies registered here. Companies will need to be issued with an Overseas Entities ID.
So, what are the rules?
Overseas Entities who already own a qualifying estate (any property owned and registered as Proprietor after 1 January 1999) or who wish to own a qualifying estate must register as an Overseas Entity at Companies House and identify any beneficial owners of the Company. The information will need to be updated annually by the Overseas Entity until they apply to be removed from the Register. It is possible to obtain an exemption from registering as an Overseas Entity but these exemptions are limited unless the disposition is made via a court order, by operation of law, pursuant to a contract made before HM Land Registry enter a restriction in the register, by power of sale or the secretary of state gives consent.
A qualifying estate is any freehold estate or a leasehold estate granted for a period of more than 7 years. However, please note that a registered charge will not be classed as a qualifying estate.
We are currently within a transitional period which expires on 31 January 2023. After that date. Overseas Entities need to provide information on dispositions of land and register at Companies House. An offence will be committed should the Overseas Entity not be registered by the end of this transitional period. Therefore, it may be best practice for any business advisors who have clients or customers that are Overseas Entities check with them now that they will be registering with Companies House prior to 31 January 2023.
What will the Land Registry do?
HM Land Registry are required to enter a restriction on the Property register in relation to a qualifying estate if the following points are satisfied:
- An Overseas Entity is registered as the Proprietor of the Property and;
- The Overseas Entity became registered as the Proprietor of the property on or after 1 January 1999
The restriction will prohibit any disposition of the Property unless the Overseas Entity has registered as an Overseas Entity on the Register or one of the above mentioned exemptions apply. HM Land Registry will require the Overseas Entity ID when registering. However, if an exemption does apply, a certificate will need to be provided by a conveyancer confirming that one of the exceptions applies.
What happens if an Overseas Entity doesn’t register?
It is hugely important that an Overseas Entity registers on the Overseas Entity Register. Failure to register as an Overseas Entity creates various criminal offences and prohibits the Overseas Entity (and every defaulting officer of the entity) making any registrable disposition of a qualifying estate which could potentially delay transactions.
Similarly, failure to register with Companies House will prevent an Overseas Entity from acquiring any legal title as the Land Registry will refuse and reject any application to register the Overseas Entity as a proprietor of the estate.
Why does this affect me if my company is not an Overseas Entity?
This will affect any party buying, selling or leasing land or property to or from an Overseas Entity so your transaction could be delayed or fall through if the other party is an Overseas Entity and has not registered accordingly.
How should Land Transactions involving Overseas Entities be handled?
If you are advising an Overseas Entity or there is an Overseas Entity as a party you may want to consider the following:
If you are advising an Overseas Entity:
- You should ensure that your client/customer is registered as an Overseas Entity as part of your initial client care checks;
- You should advise your client to register as an Overseas Entity prior to the end of the transitional period.
If another party involved is an Overseas Entity:
- You should raise an enquiry and request confirmation and evidence that the Overseas Entity is registered
- You should consider including a provision in the Contract about registration of the Overseas Entity in the Register for example obliging the Overseas Entity to register or obliging them to provide evidence of registration prior to completion
So, with this new law change affecting all foreign company owners of UK property and affecting the way property transactions will be conducted going forward, it will be important to always check that any party in a property transaction which is not a UK registered company has been registered with an Overseas Entity ID or is exempt.
If you need to register as an Overseas Entity, we can put you in touch with a registration agent to arrange for an Overseas Entity ID to be obtained.