This article updates our previous article which you can read here.
The Economic Crime (Transparency and Enforcement) Act 2022 finally received Royal Assent on 15 March, bringing in the register of overseas entities that own UK property which has been talked about for so long. It is not yet clear when the provisions setting up the register will come into force, but we expect this to happen once Companies House and the Land Registry have set up the necessary systems to deliver the Act's requirements.
Further changes were made by the House of Lords before the Bill was passed. These are the main points to note:
- Transitional period remains six months, but any overseas entity that disposes of property between 28 February 2022 and the end of the transitional period will be required to register or submit information on the sale
As explained in our previous update, the original draft Bill required overseas entities to apply to register as an overseas entity with 18 months of the date of commencement, but this period was reduced to 6 months during the Bill's passage through the House of Commons, to reduce the scope for overseas entities that already own property in the UK to sell up before the registration requirements come into effect. Some were still concerned that 6 months was too long. In response, the House of Lords introduced a new provision to address that concern from a different angle. Now, any overseas entity must state whether it has sold any property between 28 February 2022 and the end of the transitional period. If it has sold any property during that period, then it must provide:
- The date of sale and the relevant title number
- The same information as required when applying to register as an overseas entity
- A statement that all the information required has been included in the application.
This must be done within the 6 month transitional period either as part of the application for registration or separately if the entity does not need to register. If the requirements are not met then the overseas entity and every officer of the entity who is in default will commit an offence, unless by the end of the transitional period the overseas entity is exempt (details of "exempt" to be confirmed in regulations).
Regulations requiring the verification of identity before an entity can apply to be registered
The Secretary of State is required to make regulations requiring the verification of identity before an overseas entity can apply to be registered, comply with the updating duty or apply to be removed from the register. The House of Lords has added a requirement that the regulations must come into force before any registration application can be made. There is no sign of these regulations yet, but we would expect them to be issued urgently given that they are key to the register becoming operational.
HM Land Registry's duty to enter restrictions on titles owned by overseas entities at the date of commencement will now need to be performed sooner
The Act requires HM Land Registry to place a restriction on any title currently held by an overseas entity. Subject to some exceptions, the restriction will prevent sales, charges and leases of more than 7 years from being registered unless the entity is a registered overseas entity at the time of the transaction. The original Bill provided for the restriction to be entered within 12 months from the commencement, but not to take effect until 18 months from commencement. These provisions have been tightened up so the restriction must now be registered as soon as reasonably practicable and in any event before the end of the 6 month transitional period, and will take effect at the end of that transitional period.
- New information requirements relating to trusts
The draft Bill already required the overseas entity to confirm in its registration application whether any registrable beneficial owner is or was a trustee. Where the application reveals that to be the case, there is a new requirement to provide the same beneficial ownership information for the relevant trust, together with a statement as to whether the entity has any reasonable cause to believe that there is required information about the trust that it has been unable to obtain.
We will issue a further update once the commencement date for the provisions which will establish the register is known and when we see the regulations which will be critical to understanding how the register will work.
While equivalent provisions are proposed for Scotland and Northern Ireland, this article deals only with the proposals as they affect land owned by overseas entities in England and Wales.