A substantial number of properties owned in London and particularly Mayfair are owned by foreign investors or companies who are now at risk due to planned changes to prevent corruption and money-laundering. Mayfair has always been a hotspot and a very attractive end destination for those wishing to purchase valuable assets from their illicit gains and fraudulent activities.
However, the Government now plans to crack down on money laundering and corruption which the Central London property market has greatly benefitted from as a result of this hot money pouring in over the years.
The UK Government has now confirmed its intention to proceed with a register of overseas companies owning property in the UK through its publishing of the draft Registration of Overseas Entities Bill. If passed, this Bill will outright ban any overseas company from being registered as the proprietor of UK land or buildings, unless they have registered the details of its beneficial owners in the new Register. However, many owners of valuable London properties wish to hide the true identity of the beneficial owner by registering properties at the Land Registry in the names of offshore trusts et cetera, with Jersey the Cayman Islands and the British Virgin Islands being commonly used.
The draft Registration of Overseas Entities Bill sets out provisions to establish a new beneficial ownership register of overseas entities that own UK property. This follows the commitment made by the UK Government at the Anti-Corruption Summit in 2016 to combat money laundering and achieve greater transparency in the UK property market.
To join the public Register, an overseas company must apply to the Registrar of Companies and give them details of its registrable beneficial owners. Once registration has taken place, the overseas entity will need to confirm this information annually, in the same manner that UK companies already do.
The consequences of not registering will essentially be that the non-compliant overseas company will be unable to mortgage, sell, or lease land that it owns! This is of critical importance to property owners with property in the UK in the name of special purpose vehicles (SPVs) or trusts. Moreover, not only will owners lose their property, there will also be further criminal penalties for non-compliance with the new framework, meaning these new rules cannot be ignored.
The Government is currently accepting comments on the draft Bill by 17 September 2018, with the Bill being estimated to come into force in 2021, and therefore urgent specialist advice should be sought in relation to these new incoming changes. No doubt, those who cannot provide details of the true beneficial owners may wish to sell properties resulting in the top end market falling, coupled with Brexit uncertainty. Legitimate investors may wish to take advantage of this especially if they are using overseas funds to take advantage of the low exchange rate of sterling.
