Livy Twiss offers a round-up of HM Land Registry requirements under the Economic Crime and Transparency Act 2022.
Do you have a client that is an overseas entity? Has it owned property in the UK since 1 January 1999? Has it registered as an overseas entity with Companies House? Are you dealing with a seller or a landlord that is an overseas entity?
If the answer to any of these questions is “yes”, it is important to be fully aware of the HM Land Registry requirements to ensure that you stay on the right side of the Economic Crime and Transparency Act 2022.
Overseas entities and qualifying estates
The 2022 Act’s purpose is to reduce economic crime by imposing strict disclosure requirements on overseas entities that own land in the UK. These include providing information about the entity’s beneficial owners and managing officers.
The Register of Overseas Entities — created by the 2022 Act — requires organisations that have legal personality and are governed by the law of a country or territory outside the UK (including the Channel Islands, Isle of Man and Republic of Ireland) that own or intend to acquire UK property to register with Companies House, unless they are exempt. Companies House will then allocate an overseas entity ID.
If the overseas entity being registered disposed of any UK property since 28 February 2022 — the date that the Economic Crime (Transparency and Enforcement) Bill was introduced in parliament — the following will be needed:
- deed or title number of the property;
- date the property was disposed of; and
- details of additional beneficial owners or managing officers at the time the property was disposed of.
In England and Wales, the 2022 Act only applies to overseas entities that are proprietors of a “qualifying estate” (a freehold estate in land or leasehold estate in land granted for a term of more than seven years from the date of the grant) and that were registered as such at HMLR on or after 1 January 1999.
This prevents HMLR from registering an overseas entity as proprietor unless it has obtained an OEID. This applies retrospectively and overseas entities had to register with Companies House by 31 January 2023.
Exceptions and exemptions
Registration of any disposition within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 — being a transfer, grant of a lease for more than seven years or legal charge — is prohibited unless one of the exceptions in paragraphs 3(2) or 4(2) of Schedule 4A of the 2002 Act applies.
If an application is being made without an OEID — and there is reliance on an exception — the statement “Not required” should be entered on the application/depositionary form and either a certificate OE1 (certificate to comply with a restriction) or OE2 (certificate to support an application to register a disposition) should be submitted, along with the further information requested. Certificate OE1 or OE2 must be provided by a conveyancer certifying which exception applies.
The exceptions in paragraphs 3(2) or 4(2) of Schedule 4A to LRA 2002 are:
- The entity is a registered overseas entity or an exempt overseas entity at the time of the disposition.
- The disposition is made in pursuance of a statutory obligation, court order or occurs by operation of law.
- The disposition is made in pursuance of a contract made before the overseas entity became entitled to be registered.
- The disposition is made in the exercise of a power of sale or leasing conferred on the proprietor of a registered charge or a receiver appointed by such a proprietor.
- The secretary of state gives consent under paragraph 5 of the 2002 Act to the registration of the disposition.
- The disposition is made by a specified insolvency practitioner in specified circumstances.
You can submit an application stating “Not required” in various circumstances, including:
- A disposition that falls outside section 27(2)(a), (b)(i) or (f) of the 2002 Act.
- An exception in paragraph 3(2) or 4(2) of Schedule 4A to the 2002 Act applies and a certificate OE1 or OE2 is being submitted.
- The application does not apply to a qualifying estate.
- The registered proprietor is an overseas entity registered at HMLR prior to 1 January 1999.
The overseas entity is not the registered proprietor or the applicant.
Applications caught by the 2022 Act include:
- Transfers of a qualifying estate to an overseas entity.
- Transfers of a qualifying estate by an overseas entity.
- Registrable leases for a term of more than seven years from the date of grant to an overseas entity which are granted out of a qualifying estate.
- Registrable leases for a term of more than seven years from the date of grant by an overseas entity which are granted out of a qualifying estate.
- Registrable charges by an overseas entity.
- Applications for first registration of a qualifying estate where the applicant is an overseas entity.
- Adverse possession applications to register an overseas entity as proprietor of a qualifying estate.
The OEID must be valid at the time of application to HMLR. If a valid OEID is not submitted, the application will be rejected.
Restrictions on registers relating to overseas entities
A restriction will be entered in the proprietorship registers at HMLR for all overseas entities who apply to be registered as proprietor (of land) in the following form: “No disposition within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 is to be completed by registration unless one of the provisions in paragraph 3(2)(a)-(f) of Schedule 4A to that Act applies.”
The below restriction was entered in registers for all qualifying estates where an overseas entity was a registered proprietor due to an application made on or after 1 January 1999: “After 31 January 2023 no disposition within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 is to be completed by registration unless one of the provisions in paragraph 3(2)(a)-(f) of Schedule 4A to that Act applies.”
HMLR requirements
When an overseas entity makes an application to HMLR, evidence will be required as to the company’s corporate status (including its powers of holding and land dealings).
Evidence should be either a:
(1) Form 7 certificate (this must be completed by a qualified, practising lawyer in the territory of the overseas entity); or
(2) certified copy of the charter, rules, statute, memorandum and articles of association or other constitutional document of the company.
Legal opinion letters may only be accepted (instead of the above) in the case of an application made by an overseas limited liability partnership; HMLR will also require (in addition to that referred to above) evidence supporting the LLP having its own legal personality.
Conclusion
If your client currently owns a qualifying estate and became the registered proprietor at HMLR of that qualifying estate pursuant to an application for registration made on or after 1 January 1999, it must register as an overseas entity (if it hasn’t already done so). Any such entity will be in breach of the 2022 Act until it registers at Companies House.
If your client is an overseas entity and wants to acquire a qualifying estate — and no exception in paragraph 3(2) or 4(2) of Schedule 4A to the 2002 Act applies — it must first register as an overseas entity.
If your client is a prospective tenant and negotiating a lease with a landlord that is an overseas entity, it’s imperative that you check the landlord has complied with the 2022 Act requirements. This can be confirmed by carrying out an advanced company search on Companies House and selecting “overseas entity” as the company type.
Consequences of not registering an overseas entity or complying with the updating duty
- Restrictions – entities that fail to register with Companies House or fail to comply with the updating duty will have restrictions on selling, leasing and charging the property.
- Prosecution – can be considered for the most serious cases.
- Civil financial penalties – a fixed penalty, daily rate penalty or combination of both. If a penalty is not paid within 28 days, the Registrar of Companies for England and Wales can enforce the debt through the courts and a charge can be placed on the property. Interest at 8% per annum will be applied to any penalty unpaid after 28 days. Continued non-compliance after a financial penalty has been issued allows the registrar to issue further penalties
Offences
- If a registered overseas entity fails to update its property register(s), an offence is committed by the entity and by every officer of the entity who is in default. A person found guilty could be fined and — for continued contravention — be subject to a daily default fine.
- If an overseas entity fails to register by 31 January 2023, the entity and every officer of the entity commits an offence. A person found guilty could receive a prison sentence, fine or both.
- If an overseas entity disposed of land between 28 February 2022 and 31 January 2023 — and by 31 January 2023, the entity had not complied with the requirements — then an offence has been committed by the entity and every officer of the entity who is in default
Livy Twiss is an associate in the property team at Brabners
