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The New Register of Overseas Entities
The Register of Overseas Entities (ROE) launched on 1 August 2022 under the new Economic Crime (Transparency & Enforcement) Act 2022 (ECTE Act). Its aim is to create greater transparency as to who the beneficial owners are of the land and property in the UK. The legislation may prevent sales and purchases, leases or charges until the entity is registered at Companies House.
What does it mean?
An overseas entity which is a legal entity such as a company or other organisation based outside the UK, (the definition includes the Channel Islands and Ireland), that holds or wishes to acquire property (freehold or leasehold (of more than 7 years)) in the UK, must register with Companies House and provide details of its “beneficial owners” and managing officers.
If an overseas entity already holds UK property and was registered as proprietor on or after 1 January 1999 but before 1 August 2022, they must register with Companies House within 6 months of 1 August 2022.
If the overseas entity wishes to sell, lease, transfer or charge a UK property from 28 February 2022 onwards (note the backdating), they will not be able to until they are registered at Companies House, unless they were registered as owners at the Land Registry before 1 January 1999.
Any overseas entity wishing to purchase or lease (over 7 years) property in the UK won’t be able to register that purchase or lease at the Land Registry after 5 September 2022 if they are not registered at Companies House.
The Register will be made public, and the registered entities will receive an overseas entity ID from Companies House. They will be required annually to ensure that all information on the Register is up to date.
Before an overseas entity can register their beneficial owners or managing officers at Companies House, they will need to have certain, very detailed information verified by a “relevant person” as stated in the ECTE Act. A UK based agent supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, must carry out the verification checks. If misleading or false information is submitted to Companies House, then the verifier could be liable to criminal charges.
What if overseas entities fail to comply?
Failure to comply with the registration, could mean that the overseas entity and their officers are committing a criminal offence. If the entity enters into a property transaction in breach of these restrictions, a fine of up to £2,500 per day and/or imprisonment of up to 5 years will be imposed.
From 5 September 2022 the Land Registry will register a restriction on the title that will prevent the entity from registering a sale, lease, or charge of the property. The restrictions will come into effect on 1 January 2023. Failure to comply will severely delay or even prevent transactions taking place.
Overseas Entities and managing officers with current or envisaged UK property transactions taking place should prioritise registration. It is thought that not many organisations will offer the verification service because of the risks involved. This could also delay the registration process. If this is delayed, it could jeopardise the whole transaction. Purchasers/tenants should check the status of the seller/landlord early in a transaction to ensure they are given the relevant information to enable them to register their transaction.
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Article from – TRENDS Real Estate No 9
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