Under new rules announced by the Government on the 12 May, foreign companies that already own property in the UK will have to make public the beneficial ownership of that property. The new rules will also apply to any foreign company that wants to buy UK property or bid for central government contracts. Before buying UK property or entering in to such contracts, the foreign company will have to join a new public register of beneficial ownership information.
The Prime Minister’s office said that the register would mean that "corrupt individuals and countries will no longer be able to move, launder and hide illicit funds through London's property market, and will not benefit from our public funds".
The Government also said that 40 jurisdictions, including a number of overseas territories and Crown dependencies with major financial centres, have signed up to an international deal to automatically share their beneficial ownership registers with other countries and the police.
According to Property Week, £263bn was invested by offshore companies in around 100,000 properties in England and Wales between 2000 and 2015, more than 44,000 of which were in London.
Matthew Hancock, Cabinet Office Minister, told the BBC: "It does not matter where in the world your company is registered if you own property in London or sell things to government, as part of government procurement, then you have to declare the beneficial ownership, in other words the ultimate ownership of the company."
Plans were also announced for a new anti-corruption co-ordination centre in London and a wider corporate offence for executives who fail to prevent fraud or money laundering inside their companies.
Commenting on the announcement, Peter McElligott, head of real estate at Penningtons Manches, said: “Transparency issues are clearly high on the Government’s agenda and it makes sense for there to be a level playing field between UK companies (who are already subject to transparency disclosure requirements) and their foreign counterparts. However, while a transparency register sounds good in theory, we will have to wait and see exactly how it will work in practice. Some indication of what is envisaged was given in the BIS consultation that closed at the beginning of April but full details of the new register are awaited.
“One area of concern is the retrospective nature of the new rules coupled with the proposed sanctions (a restriction on the ability to charge or sell existing property was put forward in the consultation). This could have adverse implications for third parties. For example, if land already owned by a foreign company is charged to a lender, that lender could be adversely affected. They could find themselves unable to sell the land simply because the foreign landowner fails to comply with the registration requirements. It is hoped that there will be some exemptions to cover such situations. Let’s hope that there are no other unintended consequences.”