The invasion of Ukraine has shone a light on dirty money in the UK, much of which is banked in property. Could the government’s new economic crime law be the “silver bullet” needed to clean up our act?
The government said new measures introduced by the act will “tackle corrupt elites”, with a focus on Russian oligarchs with links to the Kremlin who launder their cash through London property. However, there is another aspect of the bill that will help the wider housing market, particularly leaseholders.
The Economic Crime (Transparency and Enforcement) Act will introduce a new register of overseas entities, requiring foreign owners of property to declare their identity. Companies who refuse to reveal their ultimate owners will face restrictions on selling the properties and rule-breakers could be fined up to £2,500 a day or face up to five years in prison.
Such a register was first announced by David Cameron, the former prime minister, but the bill was rushed through parliament after the invasion of Ukraine and it received royal assent last week. Any overseas companies selling property in the UK will have to reveal their owners from February 28, 2022, and existing foreign firms will have up to six months to provide this information.
The good news is that, in time, potentially hundreds of thousands of leaseholders will finally know who owns the freehold to their homes — and will be able to confront them over unfair lease terms, such as doubling ground rents, or potentially buy their freehold and truly own their own homes.
Corporate freeholders are often based offshore and hide behind complicated anonymous company structures. For years, housebuilders have been selling the freehold of the homes they have built to such “professional” freeholders or private equity firms, who treat charges imposed on leaseholders as a steady income stream.
The anonymity provided by offshore firms makes it almost impossible for leaseholders to communicate directly with their freeholders, who only get in touch to cash in through a process that Bill Esterson, the shadow business and industrial strategy minister, once described as “legalised extortion”.
Mary-Anne Bowring, the group managing director at Ringley, a property management company, says the bill is particularly important “so those can be held responsible for cladding remediation and fire safety changes”.
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