Hot on the heels of the introduction of the Register of Persons Holding a Controlled Interest in Land (the RCI), overseas entities that already own or lease property in Scotland or that wish to invest in property in Scotland have another new register to consider.
The Register of Overseas Entities (the ROE), which was introduced on 1 August 2022 as part of the Economic Crime (Transparency and Enforcement) Act 2022 (the Act), will hold information about the beneficial owners of overseas entities that own or lease property in the UK.
Launched in response to widespread concern about the lack of transparency around who ultimately owns land in the UK where land is registered to an overseas entity, one of the main objectives of the Act is to prevent and combat the use of UK land for money laundering purposes. Once established, the ROE will level the playing field with UK land holding companies that have, since 2016 (when the People with Significant Control Register was introduced), been required to provide information about their beneficial owners to Companies House.
Whilst the ROE affects overseas entities owning and acquiring property across the whole of the UK, this note focusses on those that own or are acquiring property interests in Scotland.
1 August 2022, when the ROE was brought into force, marked the start of a 6-month transitional period during which certain obligations arise.
Where an overseas entity already owns or leases a property and its title was registered in the Land Register of Scotland on or after 8 December 2014, it must register the required beneficial ownership information in the ROE by the end of the transitional period (by 31 January 2023). Overseas entities that fail to comply with this obligation may face criminal sanctions.
In addition, during the transitional period overseas entities need to provide Companies House with information about certain land transfers (together with details of any beneficial owners at the time of those transfers) made by them between 28 February 2022 and the end of the transitional period.
As overseas entities start to get to grips with their obligations under the Act, this week marks another significant stage in the introduction of the regime with the new land registration rules coming into force. The land registration rules are designed to compel overseas entities to comply with their obligations under the Act by affecting the ability of non-complying entities to acquire or dispose of property.
From 5 September 2022, overseas entities that acquire property or become a tenant under a long registrable lease in Scotland need to be registered in the ROE in order to be able to register their title in the Land Register. After this date, if an overseas entity is not registered in the ROE it will not be able to complete its title as owner or tenant.
After the end of the transitional period further land registration restrictions kick in. From 1 February 2023 a purchaser, tenant, assignee or creditor acquiring from an overseas entity (where the overseas entity's title was registered in the Land Register of Scotland on or after 8 December 2014) will not be able to register their disposition, lease, assignation of lease or standard security in the Land Register unless the overseas entity granter of that deed is ROE registered.
In addition, from 1 February 2023, it will be a criminal offence for an overseas entity to deliver such a disposition, lease, assignation of lease or standard security unless the overseas entity is registered in the ROE.
As the land registration restrictions take hold, it is imperative that any overseas entity that already owns or leases property in Scotland or that wishes to acquire property in Scotland understands and takes action to comply with its obligations under the Act.
It is important to note that these registration obligations are in addition to the obligations overseas entities investing in Scottish property already have under the RCI which we reported on in April. Registration in the RCI does not remove any duty on an overseas entity to register in the ROE and vice versa. Whilst the Scottish Government are currently considering the extent of duplication between the two registers and may amend the Scottish RCI Regulations in the future, for the moment overseas entities that own or lease property in Scotland have to consider their reporting obligations under both.
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