Teal blue header image

Overseas companies and UK property - all change in 2021

At the end of July, the Draft Registration of Overseas Entities Bill was published. The intention is that, from 2021, overseas entities wanting  to deal in certain UK property will have to register in the overseas entities register (OER).

Why will overseas entities have to register?

This legislation follows on from the introduction of the 'People with Significant Control' (PSC) regime, which was introduced for UK companies in 2016. Essentially this aims to find out who controls, or has significant influence over, a company.

The new requirements for overseas entities that hold UK property are part of the battle against the use of UK property as a vehicle for money laundering. It is hoped that, by requiring overseas entities to register information about the parties that control them, UK property will not be seen as an attractive prospect for those with illegitimate intentions.

Which overseas entities will have to register?

Importantly, it is not just overseas companies. It is defined to also capture, partnerships, governments and public authorities -  and any other entity which has its own legal personality under the law in which it is governed.  An entity might be exempt in limited circumstances, largely relating to how transparent they are already required to be e.g. if they are listed on a particular stock exchange,

If your overseas entity has no person exercising significant control or influence, it will still need to register – you will just need to file a "nil" return.

What will overseas entities have to do?

The government intends that the register will be operational in 2021.

Overseas entities will need to submit prescribed information with the Registrar of Companies for England and Wales.  If an application is successful, the Registrar will note the overseas entity on the OER and issue it with a unique overseas identity ID number.  This ID number will be key to that entity being able to deal with land in the future. 

There are transitional provisions for those overseas entities that already own UK property. However, what an overseas entity needs to do during that period will depend on whether the land is held in England & Wales, in Scotland or in Northern Ireland.

In England & Wales, there will be a grace period of 18 months for the overseas entity to register any freehold property, or leasehold interest of more than seven years, of which it became the registered proprietor on or after 1 January 1999.

In Scotland, by the end of the 18 month grace period, the overseas entity must have registered any properties (that it owns or holds under a tenancy) in respect of which it became registered on or after 8 December 2014.

In Northern Ireland, the requirement for registration will only apply to new purchases by overseas entities; there will be no obligation to register properties already owned at the date on which the legislation comes into force.

Once an overseas entity has registered, is there a continuing duty?

Yes, the overseas entity must confirm/update its information annually.

What if they do not comply?

A failure to register is an offence, punishable by a fine or imprisonment (or both). Failing to keep details updated is also an offence, for which a fine can be imposed.

Additionally, an overseas entity not registered on the OER will be unable to register a property that it purchases, or sell property to a third party (see below for more detail).

How will an overseas entity be prevented from buying and selling UK property?

This will be controlled via the land registration systems of each of the UK jurisdictions. In England & Wales, a restriction will be placed on the title register of the property.

Where a disposition is made by an overseas entity that should be registered on the OER, but is not, that disposition will not be registered at the Land Registry. That entity will therefore not have legal title to the property  - an issue for both it as a seller and any prospective purchaser.

Breaching the legislation by disposing of a property that is subject to a restriction, or making a disposition of property when the entity should be registered (but is not) is an offence.  The penalty is imprisonment (for a term of up to 5 years) or a fine, or both.

A party buying property from an overseas entity will need to carry out detailed due diligence to ensure that the overseas entity has complied with the requirements of the legislation. Where a restriction has been put on the title, this will be clear to see. However, if there is no restriction, the purchaser cannot just assume that all is in order. Whilst the draft Bill provides that a disposition in breach of the legislation will not affect the validity of the disposition, this will not be of much comfort to a purchaser who cannot register its purchase at the Land Registry.

There are limited circumstances in which a disposition by an overseas entity that has not complied with the registration requirements can be registered. These include where it is made in pursuance of a contract made before the overseas entity became entitled to be registered, and where the disposition is made in the exercise of a power of sale conferred on the proprietor of a registered charge or a receiver.

In Northern Ireland, the provisions reflect those applicable to England & Wales. An inhibition will be registered against the title of the registered owner where that owner is an overseas entity and became registered as owner after the legislation came into force. Unlike with a standard inhibition, the draft Bill suggests that no fee will be charged for registration of an overseas entity inhibition.

Where an overseas entity inhibition has been registered, no transfer, grant of a registrable leasehold title (being a lease for more than 21 years), or creation of a charge on the land can be registered unless the owner is a registered overseas entity at the time of disposition, or one of the other exceptions applies. Those exceptions are the same in NI as in England & Wales.

In Scotland, there is no equivalent to a restriction or inhibition on title. Instead, it is the responsibility of the Keeper of the Scottish Land Register to monitor applications to register title from overseas entities and reject all applications unless the owner is a registered overseas entity or an exempt overseas entity. This applies to all whose interest was registered on or after 8 December 2014.

Again, in specified circumstances,  the application will not be rejected. These are broadly similar to those in England and Wales, and Northern Ireland.

The Bill is still in draft form, and views are being sought on how it will work in practice, so we may see some changes in the autumn. However, it is clear that careful due diligence by anyone purchasing from overseas entities will be crucial.

TLT have a presence across the UK, which means we can advise in the three UK legal jurisdictions of England & Wales, Scotland and Northern Ireland.

Contributor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Insights & events View all