On 15 March 2022, the Economic Crime (Transparency and Enforcement) Act 2022 came into force. In this article, we consider the impact of this Act on property transactions in Northern Ireland.
In short, from 5 September 2022 any overseas entity wishing to deal with registrable land and property in Northern Ireland must register with the Register of Overseas Entities at Companies House. Those acquiring land and property from an overseas entity will also need to be alive to the new requirements to ensure that they receive good and marketable title on completion of a purchase.
The “Register of Overseas Entities” or “ROE” was established at Companies House by the Economic Crime (Transparency and Enforcement) Act 2022 on 1 August 2022. Overseas entities and their beneficial owners now need to be added to the ROE if they wish to buy, sell, transfer, lease or charge a freehold or registrable leasehold (i.e a lease for a term of more than 21 years) estate in property in Northern Ireland.
What is an overseas entity?
An overseas entity is any legal entity which is governed by the law of a country or territory outside the UK. This includes companies, partnerships and any type of entity that has legal personality under the law by which it is governed.
For the purposes of the ROE, the Republic of Ireland is an overseas jurisdiction. Offshore jurisdictions such as Jersey, Guernsey and the Isle of Man may also be required to registered on the ROE. Clarity is awaited.
What are overseas entities required to do?
Overseas entities wishing to deal with registrable land or property in Northern Ireland need to confirm that they have taken reasonable steps to identify and register their beneficial owners at Companies House. This includes providing a statement that:
- the entity has identified one or more registrable beneficial owners, it has no reasonable cause to believe there are others, and it is able to provide the required information about such beneficial owners;
- the entity has no reasonable cause to believe that it has any registrable beneficial owners; or
- the entity has reasonable cause to believe that there is at least one registrable beneficial owner that it has not identified and it is not able to provide the required information about such beneficial owners.
In the case of 2) and 3) above, information about the managing officers of the entity will be required.
Overseas entities will also need to obtain third party verification of the registrable beneficial owners and provide a statement detailing any relevant dispositions of property since 28 February 2022.
It is worth noting that overseas entities are required to update the information provided to the ROE within 14 days of each anniversary of the initial date of registration.
What is a registrable beneficial owner?
A registrable beneficial owner is any individual, legal entity or government/ public authority who:
- directly or indirectly holds more than 25% of the shares in the overseas entity;
- directly or indirectly holds more than 25% of the voting rights in the overseas entity;
- directly or indirectly holds the right to appoint or remove a majority of the board of directors of the overseas entity; or
- has the right to exercise, or actually exercises, significant influence or control over the overseas entity.
Overseas entities should serve information notices on those believed to be registrable beneficial owners.
What does this mean for NI property transactions?
Applications to register an overseas entity as the owner of a freehold estate or registrable leasehold estate at the Land Registry will be rejected unless the overseas entity is registered on the ROE.
Once an overseas entity has registered with Companies House, it will be allocated a unique Overseas Entity ID (“OEID”) which must be provided to the Land Registry when buying, selling, transferring, leasing, or charging property or land in Northern Ireland.
Where the registered owner of a freehold estate or registrable leasehold estate is an overseas entity, the Land Registry will enter a restriction, called an “overseas entity inhibition”, against the title. Once this inhibition has been entered, the registered owner will be prohibited from:
- transferring its estate;
- granting a leasehold estate for a term exceeding 21 years; and
- creating a charge on the land
- the registered owner is registered on the ROE at the time of the disposition;
- the disposition is made in pursuance of a statutory obligation, court order, or by operation of law;
- the disposition is made in accordance with a contract made before the inhibition is entered;
- the disposition is made in exercise of a power of sale or leasing conferred on the owner of a registered charge or a receiver appointed by the owner of a registered charge; or
- the disposition is made by a specified insolvency practitioner in specified circumstances.
What dates should overseas entities be aware of?
In Northern Ireland, the ROE applies to any overseas entities that have disposed of land since 28 February 2022 and/or acquired land on or after 1 August 2022.
What are the consequences of failing to register an overseas entity on the ROE?
In addition to being unable to dispose of registrable land and property and being unable to be registered as the owner of registrable land and property, overseas entities could face an initial fine, daily default fines and imprisonment of up to 5 years.
How should overseas entities prepare for property transactions?
If you are an overseas entity that is considering buying, selling, transferring, leasing or charging a freehold or registrable leasehold estate in land or property in Northern Ireland you should apply for registration on the ROE as early as possible. This is to ensure that you have obtained your OEID ahead of any potential completion and in turn, ensure that the registration of the property transaction at the Land Registry can proceed.
How should those acquiring land or property from an overseas entity prepare for the property transaction?
If you are purchasing land or property from an overseas entity, it is essential that you know the OEID will be available ahead of completion. This is to ensure that you will receive good and marketable title on completion of the transaction. You may wish to consider including contractual provisions that require the overseas entity to provide their OEID at a specified time before completion or make the provision of the OEID a pre-condition for completion.
While we have focused on the impact of the Economic Crime (Transparency and Enforcement) Act 2022 on property transactions in Northern Ireland, it should be noted that this Act also has a strict application for property transactions in England, Wales and Scotland.
If you have any queries about buying, selling or leasing property in the UK or Ireland please do not hesitate to contact our Commercial Property team. Visit our Real Estate page for more information https://www.tughans.com/legal-areas/real-estate