The Economic Crime (Transparency and Enforcement) Act 2022 received Royal Assent on Tuesday following an expedited passage through Parliament

Key points for our real estate investor clients to be aware of:

  • A new Register of Overseas Entities will be created to record the beneficial ownership of all overseas entities (i.e. non-UK registered companies and other corporate bodies with a separate legal identity) owning certain types of property in the U.K.
  • The provisions will also apply to individuals who have significant influence or control over the overseas entity i.e., they hold 25% or more of the shares, or voting rights.
  • Penalties for failing to register, or provide accurate details to Companies House will include fines, or even imprisonment of the officers of the overseas entity.  There will also be a requirement for details to be updated annually from the registration date (and within a 14 day period each year) and breach of these requirements will attract further penalties.
  • The requirement to register will also apply retrospectively to 'qualifying property' (which includes freehold titles and leases granted for a term of seven years or more acquired by the overseas entity in England and Wales from January 1999).  Different provisions will apply to Scotland and Northern Ireland.  The overseas entity will have six months from the date the provisions came into force to become a registered overseas entity (or dispose of the qualifying estate).
  • Companies House is beginning work to implement the register in order that it can issue ID numbers to overseas entities on completion of registration.  Delays with this process are anticipated.
  • Restrictions will be included by the Land Registry in the title register for qualifying property, to prohibit the registration of a disposition of the property without evidence that the entity complied with the registration requirements of the Act, or that the provisions of the Act do not apply (i.e. they can establish either that they acquired the property before January 1999, or that an exemption exists).
  • Exemption to the registration requirements will be limited, to (1) being in the interests of national security, or (2) for the purposes of preventing or detecting serious crime.  Exemptions will be granted by written notice from the Secretary of State.
  • Overseas entities looking to sell, or grant/assign leases of relevant property will be required to submit their details to Companies House, declare beneficial ownership and provide additional information about all 'relevant dispositions' of land (i.e. all dispositions on or after 28 February 2022). Buyersenants will not be able to acquire legal title to qualifying property from overseas entities unless the provisions are complied with.
  • Overseas entities acquiring qualifying UK property will have to provide evidence they are registered overseas entities, when applying to register title at the Land Registry.  If not, Land Registry will not be able complete the application for registration, and the seller/landlord will hold the legal title on trust for the overseas entity.
  • Lenders providing funding for the purchase/lease of relevant UK property will need to ensure that the relevant requirements of the Act are complied with if the seller/landlord or borrower is an overseas entity, otherwise they risk not being able to take a legal charge over the property.
Further information can be found in this government press release. Freeths will also be publishing further posts on this topic.
If you would like to discuss a particular transaction or circumstance you think might be affected by the new Act, please reach out to your usual Freeths contact, or Alice Dockar & Paul Tomkins who will be happy to help.

 

The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.

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