An initial transitional period under the Economic Crime (Transparency and Enforcement) Act 2022 came to an end on 31 January 2023. See section 41(10) EC(TAE)A 2022 which sets out the duration of the transitional period – a period of 6 months beginning with the day on which section 3(1) of the Act came fully into force (1 August 2022).
Offences now being committed?
The transitional period operated to give a corporate overseas owner time to become registered as an overseas entity at Companies House. It operates for those overseas entities who became registered as proprietors of a registered estates at the Land Registry pursuant to applications for registration made on or after January 1999. Under paragraph 5, Schedule 3, EC(TAE)A 2022, an overseas entity who was not yet registered on the Register of Overseas Entities at Companies House but who was the owner of a registered title (and who became registered pursuant to an application made on or after 1 January 1999) was given six months to register at Companies House. An offence is committed if, by the end of the transitional period, the entity is not so registered. Clients may therefore start to commit a criminal offence. In addition, even if an overseas entity is no longer the owner of a registered title, and might therefore appear to be outside the scope of requirements to register, if at any time since 28 February 2022 the entity has made a relevant disposition of land (as defined in section 41(4) EC(TAE)A 2022), there is a requirement to notify Companies House of the disposal(s) before the end of the transitional period. See section 42 EC(TAE)A 2022. Again, criminal offences may be committed.
Transitional restrictions fully bite.
An overseas entity owning registered land (and who became registered pursuant to an application made on or after 1 January 1999) became subject to a restriction is in the following form:
“After 31 January 2023 no disposition within section 27(2)(a), (b)(i) or (f) of the Land Registration Act 2002 is to be completed by registration unless one of the provisions in paragraph 3(2)(a)-(f) of Schedule 4A to that Act applies”.
A large number of titles are affected by this form of restriction. As is apparent from its wording, the restriction will have effect from 1 February 2023. Under the restriction, no transfer, lease for a term of more than seven years, or legal charge is to be registered unless one of the provisions in paragraph 3(2)(a) to (f) of Schedule 4A Land Registration Act 2002 apply. These are that:
- The entity is a registered overseas entity, or an exempt overseas entity at the time of the disposition;
- The disposition is made pursuant to a statutory obligation, court order or is made by operation of law;
- The disposition is made pursuant to a contract entered into before the restriction was entered in the register;
- The disposition is made under a power of sale or by an insolvency practitioner; or
- Consent of the Secretary of State is obtained.
Compliance with the restriction will involve the entity having a valid Overseas Entity ID or, in the case of an exempt entity or other dispositions excepted above, will involve the provision of a conveyancer’s certificate. Appendix 2 of Land Registry Practice Guide 78 sets out forms of certificate to enable a conveyancer to provide an exception or exemption under Schedule 4A LRA 2002.
Dealing with old applications now cancelled?
It is possible that an application to register a transfer or lease from an overseas entity, lodged many months ago, is now subject to cancellation (e.g. where there is an inability to satisfy a requisition). When the application is lodged a second time, assuming the overseas entity became registered after 1 January 1999, the restriction mentioned above will apply. The applicant’s conveyancer will either need to find an available exception that can be certified (e.g. was the transfer/lease made pursuant to an order of court; was the transfer/lease made pursuant a contract entered into before the restriction was entered in the register?) or alternatively apply to the Secretary of State for consent to register. Where registration of a disposition would otherwise be prohibited, the Secretary of State may give its consent to the registration of the disposition if satisfied that, at the time of the disposition, the person to whom it was made did not know, and could not reasonably have been expected to know, of the prohibition, and that in all the circumstances it would be unjust for the disposition not to be registered. See paragraph 5, Schedule 4A LRA 2002.