Economic Crime (Transparency and Enforcement) Act 2022 – property considerations
14th June, 2022
The Economic Crime (Transparency and Enforcement) Act 2022 ("the Act") received Royal Assent on 15 March 2022 and introduces measures to prevent the UK's property market from being used by foreign criminals to launder money.
The Act introduces a ‘Register of Overseas Entities’ which will require overseas companies owning property in the UK to identify their beneficial owners to ensure criminals cannot hide behind secretive chains of shell companies.
The date on which the new law comes into force has not yet been set, but some key provisions of the Act include:
- Creation of a new public register of the beneficial owners of overseas companies which own land and property in the UK. The register will be maintained by Companies House.
- Any overseas company owning a “Qualifying Estate” (meaning a freehold interest or leasehold interest of 7 years or more) must register. In England and Wales, the new rules will apply retrospectively, so that overseas companies will have to register where they have acquired Qualifying Estate on or after 1 January 1999.The only exemptions from the requirement to register are if it is in the interest of national security or to prevent or detect serious crime.
- There is a duty to update the information on the register annually. Failure to do so is a criminal offence by the company and all of its officers and may result in a fine.
- Overseas companies must take reasonable steps to identify beneficial owners and provide the required information for each beneficial owner. Providing false information is a criminal offence by the company and all of its officers and can result in a fine and/or imprisonment for up to two years.
- Overseas companies cannot register the purchase of a “Qualifying Estate” at the Land Registry unless they are registered at Companies House or exempt from registration.
- Where an overseas company has acquired land on or after 1 January 1999, there will be a six month window from commencement of the Act to get registered. In the meantime, the Land Registry have to place a restriction on the title register that will prevent registration of any transfer, lease or charge until the overseas entity is registered.
- The Act does not intend to penalise secured creditors as it permits dispositions made in exercise of a power of sale or leasing, by appointed receivers or dispositions made by other “specified insolvency practitioners”.
- The Act also applies to overseas LLPs and Partnerships.
Clearly, the Act will have a significant impact on overseas companies who already own or wish to purchase UK property. It means that they will have to be transparent in registering their beneficial owners otherwise they will be restricted from dealing with UK property.
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Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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