Register of overseas entities in force on 1 August: how property lawyers can comply
On 12 July 2022, the government announced that the new register of overseas entities (ROE) created under the Economic Crime (Transparency and Enforcement) Act 2022 will come into force on 1 August 2022.
It’s important for you to recognise that verification for ROE purposes is a very different task to the risk-based approach to client due diligence under the money laundering regulations. It's probably, in the main, not for property lawyers to provide this.
Who will it apply to?
Your clients are likely to be impacted if you’re acting in property transactions involving overseas entities.
If you’re acting for overseas entities
You should encourage your clients to:
- collect the information required by Companies House in relation to the beneficial owners of the entities
- decide which third party they’ll use to provide the required verification statement to Companies House and obtain their agreement to do this
- obtain the required confirmations from the beneficial owners
This should reduce delays in completing the ROE registration and enable the application to HM Land Registry to be made in time.
If you’re acting for clients who are not overseas entities but are buying from, or leasing to, an overseas entity
You and your clients will become involved in the new regime.
Some of the possible outcomes include:
- the overseas entity not being able to obtain the ID from the ROE at Companies House. They will not be able to register their interest at HM Land Registry so your client, the seller, will remain the legal owner
- a restriction may appear on the title register after exchange. If the completion date falls after the transitional period ends in January 2023, registration of the transaction will not be possible without compliance with the restriction
- if the seller transfers the property to the buyer in breach of the act (where the seller is an overseas entity not registered in the ROE at Companies House), then this is a criminal offence by the seller and the completion money may be the proceeds of crime
What if I don’t comply?
Failure to comply is potentially a criminal offence both for the entity and its officers, (subject to mitigation and transitional provisions) punishable by a fine and/or imprisonment.
What happens now?
The aim of this note is to alert those currently acting in property transactions involving overseas entities about the changes that are being introduced.
We understand that HM Land Registry will not be expecting applications to register affected properties containing an overseas entity ID number until 5 September.
There are some transitional provisions to allow for registration in ROE at Companies House up to the end of January 2023, where the overseas entity already holds property registered at HM Land Registry.