Earlier this year the Government issued a series of proposals around beneficial ownership. This is partly motivated by changes to money laundering regulations due to the passing of the EU Fourth Money Laundering Directive as well as efforts to improve the transparency of ownership of companies and property.
The proposals follow on from last year’s publicly accessible people with significant control (“PSC”) register of beneficial owners of UK companies. The PSC rules require UK companies and LLPs to gather, maintain and provide Companies House with certain personal details of any person who either directly or indirectly holds (or controls) more than 25% of the shares of the company or LLP.
The new proposals would apply to the ownership of property in a very similar way to the PSC register. This would apply both to those who already hold as well as those seeking to purchase UK property. In summary, the regime would:
- be applicable to all legal entities, i.e. individual and not just companies;
- apply to freehold ownership of property as well as to long leases over 21 years;
- require registration of beneficial ownership at Companies House in order to buy or sell UK property; and
- for overseas ownership of UK real estate, require that the entity supply the beneficial ownership information within a 12-month transition period, after which any sale or any mortgage will be prohibited by way of a restriction on the Land Registry title until the owner has complied.
The information to be submitted will be similar to that required by the PSC regime for companies, including name, home address and date of birth of the beneficial owner(s). An overseas entity will also be required to provide information about itself including; its name, contact details, registered office, country of incorporation and any national registration number.
Failure to provide the beneficial ownership information and to update it every two years will result in a restriction placed on the title of the property which will prevent the sale, purchase or granting of new mortgages by the owner. Anyone considering buying, leasing or taking a charge over the relevant property will be alerted by this notation. Criminal sanctions for failing to comply with the new regime are still being considered.
Comment
It is worth noting that this only applies where there is an ownership of more than 25% of the property. Therefore, a trust arrangement with five people each owning 20% of the property will not trigger the reporting requirement.
The Government’s rationale for the register is to improve transparency to foster confidence and trust in the UK market. The Government is no doubt also keen on ensuring that such a register will help combat money laundering in the UK property market. So whilst it is too soon to discuss the benefits of the PSC register and thus any possible benefits with this new regime, there is no doubt that people will prefer to do business with people they can actually identify.
