Transparency of ownership of property in the UK

Johane Murray
Brodies, Glasgow
johane.murray@brodies.com

The UK has introduced reporting requirements for overseas entities which own or lease property in the UK in recent years. The UK Register of Overseas Entities (ROE) and the Scottish Register of Persons Holding a Controlled Interest in Land (RCI) aim to increase transparency of ownership and uncover who truly controls property in the UK.

The drive for transparency

Back in 2016, the then Prime Minister of the UK, David Cameron, announced the introduction of a public beneficial ownership register for UK property. A draft bill followed but was sidelined until concerns were raised about illicit money in the UK originating from Russia following the invasion of Ukraine. The legislation was then fast-tracked through the UK Parliament in March 2022 and the ROE was introduced on 1 August 2022.

The aim of the ROE is to prevent and combat the use of UK property by overseas entities for laundering money or investing illicit funds, by increasing transparency in overseas entities engaged in land ownership across the UK. In a similar vein, the Scottish Government launched the RCI in April 2022 to increase public transparency in relation to individuals who control decision-making in relation to land in Scotland.

Transparency in operation

The ROE is held and operated by Companies House and is aimed solely at overseas entities which are bodies corporate, partnerships or other entities with legal personality in the jurisdiction in which they are constituted. Trusts will not have the necessary legal personality in most jurisdictions, but their details may still have to be disclosed if they are within the ownership chain of an overseas entity.

Overseas entities must register in the ROE if they are the freeholders/owners or tenants under a long lease of land anywhere in the UK and their interest in the land has been or will be registered in the Land Registry of England and Wales from 1 January 1999, the Land Registry of Northern Ireland from 5 September 2022 or the Land Register of Scotland from 8 December 2014 (‘ROE Property’).

Whilst the overseas entity must own or lease property in the UK to be in scope of the ROE, the ROE requires details of the registrable beneficial owners of the entity itself and not the beneficial ownership of the property. A registrable beneficial owner may be an individual, a government or public authority, or a legal entity (but only if the legal entity is a trustee or is subject to disclosure requirements such as the UK’s persons with significant control (PSC) regime).

Ascertaining who is a registrable beneficial owner involves a similar exercise to that used to ascertain a person with significant control for the purposes of the UK’s PSC Register. The rules are complex and expert advice should be taken but in short, it is a person or entity who:

• holds more than 25 per cent of the shares or voting rights in the overseas entity;
• has the right to remove or appoint a majority of the board of directors;
• has the right to exercise or actually exercises significant influence or control over the overseas entity;
• has the right to exercise or actually exercises significant influence or control over an entity which is not a legal person under the law of that jurisdiction (eg, a trust, partnership or unincorporated association) and which meets any of the tests above; or
• holds the property as nominee for the overseas entity or for an entity which is a beneficial owner of the overseas entity.

If there is no registrable beneficial owner, the overseas entity must still register in the ROE and provide details of its managing officers.

Before the required information can be submitted to the ROE, it must be independently verified by an approved UK regulated agent. Other than dates of birth, home and email addresses, most of the information submitted to the ROE is publicly available.

When an overseas entity registers in the ROE, Companies House issues an Overseas Entity ID Number which is required when the overseas entity registers dealings with ROE Property at the property registers. To retain its ROE status, overseas entities must submit an annual update statement to the ROE, even if no changes have occurred. Failure to submit the update or to respond to certain notices from Companies House will result in the overseas entity being deemed to be unregistered in the ROE, which could result in penalties being imposed and will have implications for dealings with ROE property.

In addition to ROE, overseas entities may also have to comply with the requirements of the Scottish RCI. The RCI, held and operated by Registers of Scotland applies to all Scottish property regardless of the date of registration in the property registers. However, registration in the RCI is only required if there is a person or entity (other than the registered owner/tenant) who holds a ‘controlling interest’ in a property owned or held on a long lease (over 20 years) by overseas entities, trusts, partnerships, unincorporated bodies and individuals.

The details of anyone holding a controlling interest (known as an ‘associate’) must be submitted to the RCI. The rules for determining who is an associate are complex and specific to the type of owner or tenant but essentially, it boils down to who has significant influence or control over what happens to the land. For trusts and partnerships, associates may include trustees and partners who do not appear on the registered title. With regard to overseas entities, the criteria for identifying associates are similar to that used for ROE.

Unlike the ROE, there is no requirement for information to be independently verified by regulated agents before submission and there is no annual updating requirement for the RCI. Updating is only required when changes to the controlled interest, associate or owner/tenant of the land have occurred.

The transparency implications for land transactions

If an overseas entity has not complied with ROE requirements, it will not be possible to register in the property registers certain types of transaction relating to ROE Property which it already owns or leases. The overseas entity will also be unable to register in the property registers a title to, long lease of or charge over any new UK property that it acquires. So in effect, a non-compliant overseas entity is barred from selling, leasing or granting a charge over its existing ROE Property and from buying, taking a long lease or granting a charge over any new UK property. The ROE does not apply to UK entities granting a charge over their UK property to an overseas lender.

In contrast to the ROE, failure to register in or update the Scottish RCI does not block the registration of transactions in the property registers. Note, however, that registration in the RCI will not save an overseas entity from the ROE block on property registration if the overseas entity has not complied with ROE requirements.

Criminal penalties for non-compliance

There are also criminal penalties for non-compliance with the ROE and RCI rules, including fines and potential jail terms.

It is just over one year since the initial deadline of 1 April 2024 for registration in the RCI and so far, there have been over 17,500 entries published. However, there are no official figures or confirmation on whether any fines for non-compliance have been imposed.

The initial deadline for registration in the ROE was 31 January 2023. Companies House confirmed that over 28,000 entities had registered by June 2023. As far as fines are concerned, the Financial Times has reported that only £700,000 has been collected from a total £22.99m levied in ROE fines. This points to the anticipated difficulties in enforcing the ROE rules against overseas entities and it may well be that the real teeth of the ROE legislation is the blocking of dealings with the legal title to land.

Conclusion

Reporting requirements have become commonplace in many jurisdictions, each with their own idiosyncrasies, and the UK is one of those, not least because it has two registers for interests in land.

There are overlaps between the ROE and RCI for overseas entities. In the past, the Scottish government has undertaken to review the double reporting requirements for overseas entities in Scotland but so far, there have been no major changes to RCI requirements.

There have been changes to the ROE since its introduction, most of which have increased the level of transparency it demands and accessibility of the information it holds. From 31 August 2025, members of the public will be able to apply to Companies House for access to trust information which is held in a private section of the ROE. Certain information will not be disclosed and persons affected by potential disclosures can apply for protection of their information, but the direction of travel is clear.

The introduction of the registers, and the changes since, all point to the drive to increase transparency and the accessibility of information relating to overseas interests in land in the UK. Overseas entities considering dealing with current interests or acquiring new interests in land in the UK should be cognisant of the transparency rules and consider which type of vehicle or entity may suit their business and privacy requirements.