In an attempt to make property ownership within the UK more transparent, the UK Government is proposing to create a new public register, recording information regarding the beneficial ownership of overseas entities that own UK property.
The Department of Business, Energy and Industrial Strategy announced a call for evidence on the nature and scope of such a register on 1 April 2017 with the call for evidence closing on 15 May 2017.
What is being proposed?
The Government is proposing that all beneficial owners of overseas entities owning UK real estate will need to publicly disclose their identity, in a similar way to how UK companies currently have to disclose ‘any persons with significant control (“PSC”)’ over them. The Government’s proposal is that the definition of beneficial owner will be comparable to that currently used for the PSC Register. This would broadly mean that any person:
1. directly or indirectly holding more than 25% of share or voting rights; or
2. having appointment or removal rights over a majority of directors; or
3. exercising or having significant influence or control over a company/trust/partnership, if that company/trust/partnership would be a disclosable beneficial owner,
would be classed as a beneficial owner of the overseas entity.
In order to be able to buy, sell, charge, or grant a long lease (over 21 years) of UK property, an overseas entity would need to first:
1. provide Companies House with information on the beneficial ownership of the overseas entity; and
2. apply for and receive a registration number from Companies House.
The proposed register is likely to cover all overseas entities not just companies, and would include partnerships and trusts.
What are the implications?
Any transaction purporting to purchase, sell, lease or charge UK property with or to an overseas entity will be void if that overseas entity does not have a valid registration number at the date of transfer/completion of the transaction. The registration of title to the UK property at HM Land Registry will be prohibited without the registration number.
Overseas entities that already own UK property would have a 12 month-transitional period within which to apply for and obtain a registration number. After this period, they would be prohibited from selling the property or granting a lease of over 21 years over it, or creating a legal charge over it, without registering.
The consultation also proposes that there will be an obligation for overseas entities to update the register every two years.
There may also be potential criminal sanctions for failing to update or for supplying false information.
Future and next steps
Although these are just proposals at this stage and the UK is going through a period of political uncertainty, it seems likely that the register will be introduced in some form in the future.
Overseas entities owning UK property should consider whether they would be able or indeed willing to comply with the proposed obligations and to provide this information to a public register, and once the proposals are finalised, should consider taking steps to make sure they comply with the obligation to register and update as necessary or alternatively look to make alternative arrangements where practical or possible.
In due course, Fox Williams will be offering a service to deal with the necessary statutory registration requirements whenever the register is introduced. If you would like to register to receive further information on fees and updates on the proposals and requirements please email Phillip Hope by clicking here, and we will contact you further once the proposals have been finalised.