With the continuing state of uncertainty with politics and the economy generally, there has been a slowdown in the volume of investment into the UK real estate sector by overseas investors. Nevertheless, many have remained active given the lower value of sterling, and others will be poised to resume their interest once there is greater clarity on the UK’s political future.

There are, however, new regulatory challenges ahead. Among these is the UK government's commitment to bring forward legislation to implement its proposal for a register requiring overseas companies that hold or acquire UK property to provide details of ultimate ownership, with a view to implementation by early 2021. Under the new regime, an entity registered outside the United Kingdom would be required to file details of its controllers and beneficial owners in a public registry. The requirement would apply if the overseas entity intends to acquire, own or dispose of land or participate in a public tender in the UK. This new regime would be based on the UK’s current persons with significant control regime, under which UK entities must maintain a register of all persons who exercise significant influence or control over them.

Following its consideration of a draft Registration of Overseas Entities Bill published last summer, a Parliamentary Joint Select Committee made a number of recommendations for changes to be made to the original proposals, to which the government recently published its response.

The use of trust structures to circumvent the obligation to register was a particular point of concern, but the government’s view is that the provisions of the Bill as currently drafted, together with other related measures, will be adequate to guard against this. The government will also be looking at the possibility of additional requirements for entities to update information in the new register prior to any disposition of property (rather than limiting this only to an annual updating obligation).

Whatever the final details, there will clearly be significant challenges for overseas entities who, for legitimate commercial reasons, may prefer not to have their internal corporate arrangements and ownership structures laid open to public scrutiny. However, it does appear that from 2021, this is likely to become a necessary requirement for continuing to invest in UK real estate. The impact that this may have on the volume of inward investment of overseas money will be something to watch, going forward.