The Economic Crime (Transparency and Enforcement) Act 2022 – the implications for real estate owners
In light of the current circumstances surrounding Russia’s invasion of Ukraine, The Economic Crime (Transparency and Enforcement) Act 2022 (the “Act”) was fast tracked and received royal assent on 15th March 2022. One of the aims of the Act is to crackdown on those individuals and businesses based overseas from using Real Estate in the UK to launder money. The government is hoping the Act will implement measures that will significantly dissuade economic crime whilst also maintaining the UK’s status as a global investment hub.
The Act requires ‘overseas entities’ that own or seek to own qualifying property in the UK to register themselves and details of their beneficial ownership at Companies House on a Register of Overseas Entities (the “Register”). That registration process will need to be completed (and updated annually) before any transfer, charge or lease of over 7 years in length can be registered at HM Land Registry. Once registered the entity will be supplied with a unique ID number which will enable the overseas entity to deal with its interest in the land.
There are limited exceptions, but the Act applies retrospectively to all overseas entities who have acquired qualifying property in England and Wales since 1st January 1999 and in Scotland since 8 December 2014.
If the Act applies, an overseas entity will have 6 months from the date the provisions come into force to either become a “registered overseas entity” or to dispose of its interest in the property. At the end of this period, the Land Registry will place a restriction on every title owned by an overseas entity which became the registered proprietor on or after the dates mentioned above. The restriction will prohibit any disposition of the qualifying property unless the overseas entity is registered or is exempt. Sanctions for non-compliance include financial penalties and / or a custodial sentence.
The Act will not only have implications for overseas entities owning qualifying property but also for anyone transacting with such entities. Tenants, lenders and buyers will all require evidence of compliance from the overseas entity to ensure their interest in the qualifying property can be properly registered at the Land Registry.
In summary, overseas entities will need to comply with the new rules and ensure that they are properly registered at Companies House to enable them to deal with their UK property and anyone transacting with such owners will need to see evidence of such compliance.
If you need any assistance or advice on the application of the Act, the registration process or its implications for your land transactions please do get in touch.