The new beneficial ownership register for overseas entities Implications for real estate
28 March 2022
28 March 2022
The Act defines an overseas entity as any legal entity which is governed by the law of a non-UK country or territory. This covers a corporate body, partnership or other entity that has a legal personality under the law by which it is governed. As a result a non UK trust will usually fall outside this regime as it has no legal personality.
However a non UK trust may be required to register with the UK Government Trust Registration Service (the TRS Register). However, the TRS Register is not open to public inspection.
Companies House will verify the information provided by the overseas entity and once verified the overseas entity will be issued with a unique identification code (ID). Without this ID the overseas entity will not be able to make an application to HM Land Registry to register itself as the legal owner of land in the UK.
Overseas entities which have acquired a qualifying estate in land in England and Wales on or after 1 January 1999 will be restricted from making a relevant disposal of that land (a transfer, a lease for more than 7 years or the grant of a legal charge) unless the overseas entity has registered its beneficial ownership on the OE Register and is compliant with its updating obligations.
HM Land Registry is required to place a restriction on the title register for the property which prevents the registration of a relevant disposal unless the overseas entity has a valid ID or the disposal of the property is exempt. Broadly speaking, an exempt disposal is one that is made pursuant to a statutory obligation or court order, by the exercise of a power of sale by a mortgagee, or pursuant to a contract made before the title restriction was placed on the title register.
Failure to comply with the OE Register obligations and restrictions of disposing on land can result in criminal liability for the overseas entity and its officers. In particular an offence is committed if the overseas entity makes a registrable disposition of a qualifying estate in breach of the terms of the restriction placed on the title register by HM Land Registry.
A breach can give rise to financial penalties (including a daily default rate of up to £2,500 a day) and up to five years in prison.
Overseas entities which have acquired a qualifying estate in land in England and Wales on or after 1 January 1999 will have 6 months from the date the legislation comes into force to comply with the registration and disclosure obligations under the Act. During the transitional period the overseas entity will not be caught by any restriction placed on the title register by HM Land Registry.
However, in order to catch land disposals by overseas entities before the legislation comes fully into force there are further transitional provisions which require overseas entities to disclose any disposal of a relevant interest in land between 28 February 2022 and the end of the transitional period. Before the expiry of the transitional period the overseas entity must disclose the land disposal and provide details of who the beneficial owners were immediately before the date of the disposal. These obligations apply whether or not the overseas entity retains any UK land at the end of the transitional period.
The OE Register targets corporate entities and their beneficial owners. The Government states that the purpose of the legislation is to increase transparency of overseas ownership of UK land. However this may not necessarily be the outcome where the land is held by a non-UK trust or a nominee.
An overseas corporate nominee which owns land as nominee for X will only be required to disclose any registrable beneficial owners of the nominee entity and will not need to disclose the identity of the beneficial owner of the land (i.e. X) on the OE Register except in circumstances where X exercises significant control over the nominee. If the arrangement is a bare trust then it may be necessary for the trust to be registered on the TRS Register.
A "registrable beneficial owner" can be an individual, a legal entity or a Government or public authority. Requirements for X to qualify as registrable beneficial owner of Y require one of the following conditions to be met: