02 Feb Register of Overseas Entities – The 5th September Deadline
From today, Monday 5 September 2022, HM Land Registry will start restricting registrations of land if an overseas entity is not on the Register of Overseas Entities. We are a UK-regulated agent and we’re dealing with a reasonable number of registrations at the moment. However, though we are seeing a lot of urgency from UK law firms, overseas entities seem less concerned despite many receiving letters from Companies House.
At the time of writing, there are around only 290 overseas entities that have obtained an overseas entity ID. By January 2023 this number needs to be 31,000, turning your mind to this too late is a recipe for disaster.
What happens after the 5th September?
The Register of Overseas Entities was launched on 1 August and the first key deadline is 5 September 2022.
HM Land Registry gave overseas entities a five-week transition period (ending 5 September) before the restrictions apply. However, on or shortly after the 5 September 2022, the transitional provisions will expire and HM Land Registry will be prevented from registering an overseas entity as a proprietor of a ‘qualifying estate’ unless the overseas entity had first obtained an overseas entity ID.
The transitional provisions will not apply to an overseas entity that registers the acquisition of a qualifying estate after 5 September 2022, even if they completed the acquisition prior to 5 September 2022.
The second deadline is 31 January 2023, at which point all overseas entities need to have registered on the Register of Overseas Entities or they will face a fine of up to £2,500 per day and potential criminal charges.
Should you have been registering?
The main category of entities that needed to register is any overseas entity that was looking to buy UK land or property. However, there is a much wider group of overseas entities that were or should have been considering this.
- Overseas Entities disposing of a qualifying estate: Although this type of disposition will not be restricted until 31 January 2023, the overseas entity is still required to register notwithstanding the disposal. Therefore, some buyers are insisting on this being done to ensure there is no risk of a compliance gap.
- Refinancing: We are seeing lenders start to insist that the overseas entity has an overseas entity ID prior to completing financing or refinancing.
- Overseas entities with complex trust structures: Where there is a trust in the ownership structure, the verification and registration process may be particularly complex. In some instances, it may be necessary to verify trustees who retired many years ago.
How long does it take?
When building this into your transaction timeline, it is important to understand how long it takes to obtain the overseas entity ID. At the moment, we are completing the register of overseas entities verification process for simple structure in 3-4 days, and it is only taking a few hours to complete the registration with Companies House.
However, as set out at the beginning of this article, the volumes are very low. The systems at Companies House still have a manual aspect. Similarly, if there is a complex structure, the verification process could well take longer.
Are you ready for 31 January 2023?
Of course, it’s too early to say for the second deadline. However, according to data from HM Land Registry, there are over 30,000 overseas entities that will need to register and be verified. Given that the UK has never had a system for verification by a UK-regulated agent before, this is a huge number of overseas entities to complete.
If everyone leaves the process to the last month, there could be a major backlog. We are scaling our systems and resources to handle a much larger volume closer to the deadline, as we assume are Companies House, but it is still a leap into the unknown.
This article was written by Nick Lindsay, a solicitor and director of Elemental CoSec. Elemental are a UK-regulated agent who are providing verification services for the register of overseas entities. For more information the register read our register of overseas entities guide.