The Register of Overseas Entities and the impact on property transactions

As the deadline for registering registerable overseas entities with Companies House has now passed, we will now take a look at how the legislation affects different property transactions.

Existing owners

• Registerable overseas entities should have registered online with Companies House by 31 January 2023.
  Failure to comply is a criminal offence, potentially subjecting the overseas entity and its officers to a fine or imprisonment. Current guidance says fines could be up to £2,500 per day, or a prison sentence of up to five years.
• An annual update must also be submitted to Companies House and failure to comply is also a criminal offence.
• Registerable overseas entities will have a restriction entered on the title deed. This will prevent them entering into a transfer, the grant of a lease for a term of more than seven years or granting a legal charge over the property, unless they have obtained an overseas identity number (OEID) from Companies House or statutory exceptions applies.

Recent sales/lettings/charges

• A registerable overseas entity should have, by now, notified Companies House of any disposals that it has made between 28 February 2022 and 31 January 2023 (inclusive) if this results in the overseas entity no longer owning any UK property.
• The notification was via a paper application and as with the online registration, the submission deadline was 31 January 2023.

Overseas entity sellers

• Where a property was sold between 28 February 2022 and 31 January 2023 and the overseas entity seller is still named as the registered proprietor on 1 February 2023 then it will be subject to the requirement to register on the ROE.
• Failure to comply is a criminal offence and this situation could arise where there are delays in completing the Land Registry application to transfer ownership.
• An overseas entity will be obliged to provide an update if it remains named as the registered proprietor by the due date in respect of ongoing annual filings and failure to update is also a criminal offence.

Overseas entity buyers

• Overseas entities that acquire a qualifying estate must have an Overseas Entity ID (OEID) before they apply to the Land Registry to become the registered proprietor of the property.
• In the case of a legal charge, the overseas entity will need to have the OEID before executing the charge.
• Whenever the overseas entity transfers, grants a lease for more than seven years or grants a legal charge after acquiring the property but before it has been registered as the proprietor at the Land Registry, it must also register on the ROE.

Overseas entity borrowers

• The legislation only applies to borrowers, not lenders.
• Where an overseas entity buyer is obtaining finance to fund the purchase, the overseas entity must have an overseas entity ID before completing the charge.

Leases

• This applies to the grant or assignment of any lease that was originally granted for a term of more than seven years. Please note, this will also apply to landlords and tenants.
• Although it will not apply to leases granted for a term of seven years or less, the parties involved should consider some of the wider consequences of a failure to comply e.g. If the landlord should have and has not registered on the ROE.

Considerations

• It is very important that the legislation is considered carefully in relation to overseas entities and property transactions in the future (and whether it affects previous transactions).
• Overseas entities do not have to own an existing interest in UK property in order to register. Any overseas entity that is planning on acquiring UK property should think about registering early.

If you would like any further information or advice on the requirement to register or the annual updates, please contact our International Tax Team today.