With just over 3 months to go until the registration deadline, time is running out for overseas entities that own property in the UK to register on the Register of Overseas Entities (ROE).
When is the registration deadline?
Foreign companies that currently own residential or commercial property in the UK or who are tenants in a lease of more than 7 years in length must be listed on the Companies House Register of Overseas Entities by 1st February 2023 if they are to avoid severe penalties and possible criminal sanctions.
What are the penalties for failing to register?
Under the ROE, officers of the overseas entity are expected to take reasonable steps to identify all registrable beneficial owners. Failure to comply will attract a penalty fine of up to £2,500 per day or a prison sentence of up to five years. Reckless or false statements by officers can result in similar penalties. Failure to keep the register up to date and provide an annual update to Companies House is also a criminal offence and may result in a penalty fine of up to £2,500 per day.
Furthermore, if registration is not concluded by this date, the overseas corporation would be prohibited from purchasing or selling the property.
How will property transactions be affected?
Foreign companies that purchase property in the UK after 5 September 2022 will not be permitted to register the legal title at the Land Registry or do any other business with the property unless they are listed on the Register of Overseas Entities. Where overseas entities have previously made a relevant disposition of property (e.g. transfers, grants of leases for more than seven years, legal charges) on or after 28th February 2022, details of beneficial owners or managing officers at the time of the disposition must be registered.
This legislation effectively introduces a new restriction on the acquisition and disposal of registered property at the Land Registry, as it will be necessary on any future registered or registrable disposition to satisfy this requirement. Registrable dispositions generally comprise freehold estates in land and leasehold estates for a term exceeding 7 years.
Why was the Register of Overseas Entities created?
The Register of Overseas Entities is held at Companies House and is part of the new Economic Crime (Transparency and Enforcement) Act 2022. The Register forms part of the UK government’s strategy to combat economic crime. It seeks to tackle the increasing flow of unlawful money invested in the UK real estate market, whereby the true beneficiaries or owners are often hidden by the use of overseas companies based in foreign jurisdictions. The Register launched on the 1st of August 2022.
To whom does the Register apply?
The Register requires all overseas entities that own UK land or property to declare their beneficial owners or managing officers. Those who do not comply face severe sanctions, including restrictions on buying, selling, transferring, leasing, or charging their land or property in the UK.
An overseas entity is within the scope of the ROE if it owns land or property purchased:
- a) in England and Wales on or after 1 January 1999;
- b) in Scotland on or after 8 December 2014; and
- c) in Northern Ireland on or after 1 August 2022.
What information is required for the Registry?
The name, country of incorporation, and registered office of the foreign entity as well as the birthdate, nationality, residential address, and service address of each beneficial owner (as well as, in some cases, the managing officers) is required for registration. All information supplied must be verified by a UK-supervised “relevant person” such as 3CS, who are registered verification agents.
There must also be confirmation of which condition of beneficial ownership applies to the individual and whether the individual is a trustee (along with details of the trust) as well as if the individual is subject to financial sanctions under the Sanctions and Anti-Money Laundering Act 2018.
Once registered, an overseas entity receives an overseas entity ID number and is obligated to update the data on the Register of Overseas Entities annually. The data in the registry will be accessible to the general public (excluding certain personal information).
What should foreign companies be doing now?
Foreign companies that haven't yet registered with Companies House should take immediate action to identify any UK property they own or want to buy, and where necessary, begin the registration procedure. The complexity of the registration will vary by company, depending upon its structure, and the quantity and accessibility of the information required. To avoid unnecessary delays as the deadline approaches, companies are urged to act now.
The steps required are summarised below:
- Review your property portfolio to determine if you have a qualifying estate
- Identify all beneficial owners
- Verify the information for submission with an authorised agent such as 3CS
- Examine any property transactions since 28th February 2022
- Register now at Companies House and update annually
How 3CS can help
3CS is happy to advise on how the rules apply, the necessary steps to register, and the potential impact of the Act on any pending property transactions. Our experienced London-based team can assist with registration and the verification process required for compliance. Note that demand is increasing rapidly, due to the impending deadline. Urgent action is required.
For further legal help and advice on any commercial or residential property matter, please get in touch with your usual 3CS contact.