Proposed New UK Register for Overseas Entities Which Own UK Property

England and Wales Law

The UK government is planning to create a new register of beneficial ownership information for overseas legal entities which:-

  1. Own property in the UK;
  2. Intend to acquire property in the UK; or
  3. Intend to make a bid for UK government contracts.

The proposal is that any such overseas entity will have to provide details of its beneficial owners to the UK Companies House in order to obtain a registration number. This number will be required by the Land Registry prior to registering any (i) purchase of a freehold or long leasehold interest (more than 21 years) in UK property or (ii) any sale, long lease or mortgage of UK property which is already in the ownership of an overseas entity.

A consultation process commenced in the UK and the deadline for submission of comments on the proposals to the UK government was 15 May 2017.  A link to the consultation paper is set out below. (Scotland has already completed its consultation process on a proposed similar regime but with some differences, namely, the Scottish consultation refers to ‘controlling interests’ and the UK consultation refers to ‘beneficial interests’.) https://www.gov.uk/government/consultations/property-ownership-and-public-contracting-by-overseas-companies-and-legal-entities-beneficial-ownership-register

Objective of the new regime
The purpose of the new register is to act as a deterrent to criminal activity and it is felt that the greater degree of transparency of property ownership will reduce the opportunity for money laundering in the UK by overseas entities.

Sanctions for non-compliance
An overseas entity which does not provide the required information to the UK’s Companies House (and update it every two years) will not be able to buy or sell property in the UK. The Land Registry will not register the entity as owner of a UK property without evidence that it has complied with the proposed requirements.  Where an entity already owns a UK property, it will be given a period of one year within which to comply with the requirement. In the event of non-compliance, the Land Registry will place a note on the title of the property which will prevent the registration of any sale, lease or mortgage of the property. Likewise, a non-complaint entity will be excluded from tendering for UK government contracts.

In addition to the above, the government is consulting on whether criminal sanctions should apply for failure to comply with the proposed regime.

European Fourth Anti-Money Laundering Directive
Article 30(1) of the Fourth Money Laundering Directive came into operation in Ireland on the 15 November 2016 under the EU (Anti-Money Laundering: Beneficial Ownership of Corporate Entities) Regulations 2016 (the “Regulations”). These Regulations provide, inter alia, for a central register of company beneficial ownership information and this is expected to be introduced shortly. The UK already has this system in place since June 2016. The proposed new requirement for a beneficial register which is industry specific and which relates to overseas entities is thought to be the first of its kind in the world.

Conclusion
Whilst the UK government wishes to improve transparency and reduce the opportunity for criminal activity via overseas entitles investing in the UK property market, it is hoped that the proposed regime will not hinder legitimate commercial transactions, particularly between Ireland and the UK and particularly at a time when there is a large degree of uncertainty  surrounding Brexit.

For more information on the new register contact Nicola Walsh, Head of Property.