As the economic climate becomes more challenging, the appointment of IPs over UK real estate is increasing. This trend is likely to persist in the medium term, if not longer. In many cases, real estate will be held by overseas entities (OEs) prompting the need for all parties to consider those provisions of ECTEA which require OEs that own or buy land in the UK* to have registered on the Register of Overseas Entities (OE Register).

What is the OE Register?

The purpose of the OE Register is to increase transparency around land ownership and prevent criminals from using UK property to launder money or hide assets. It is a public register maintained by Companies House. To register, an OE must disclose details both about itself and also its registrable beneficial owners.

Why is it important to register?

Failure to register on the OE Register (and comply with the ongoing duties to update and to comply with any notices pursuant to section 1092A of the Companies Act 2006) will, among other things, result in significant restrictions on the OE's ability to dispose of its UK land interests. This is because title to properties owned by OEs within scope are subject to a restriction preventing major dispositions (e.g. sale, lease for more than seven years or a charge) unless either: (i) the OE is registered on the OE Register (and compliant with the ongoing duties); or (ii) an exception applies. Breach of that restriction is a criminal offence and will prevent buyers securing good title to the property. Consequently compliance is a significant issue for all parties, including IPs seeking to enforce security against property owned by OEs.

Are there any exceptions that benefit IPs?

Luckily, there are two exceptions of direct relevance to IPs, namely those relating to dispositions made:

• in the exercise of a power of sale or leasing conferred on the proprietor of a registered charge or a receiver appointed by such a proprietor – this should assist receivers and mortgagees; and
• dispositions made by a specified IP in specified circumstances – while this was likely intended to benefit liquidators and administrators, it is not currently available as we await the secondary legislation clarifying the terms "specified IP" and "specified circumstances".

What can administrators and liquidators do?

Pending the introduction of the relevant secondary legislation, best practice for administrators and liquidators may be to: (i) ensure that any relevant OE is registered on the OE Register before transacting (and to seek where possible the assistance of the company directors/officers to achieve this); or (ii) take advantage of the first exception noted above by structuring the transaction so that the lender appoints a receiver to dispose of the asset or the mortgagee itself executes the property transfer.

Conclusion

Given the prevalence of OE ownership of UK land and the serious consequences arising from breach, all IPs need to be aware of the issues posed by ECTEA and the OE Register.

This post only considers the position in England and Wales.