Author: Richard Reuben
Historically there has been significant investment by overseas individuals and corporations in property in England and Wales and in particular in central London which is perceived as a safe haven for overseas investors.
Much of the recent overseas investment has been focussed on residential property, but there has also been substantial investment in commercial property.
The same property law applies to all properties in England and Wales, but it is not applicable to other parts of the United Kingdom, namely Scotland and Northern Ireland.
Title to property will probably be either:
Know your client (KYC)
The first part of the process with which we are involved is carrying out due diligence on the purchasing entity in order to comply with UK Money Laundering Regulations. The documents which we require will vary depending on the purchasing entity, but they need to establish the identity of the purchaser and its ultimate beneficial owner.
A major consideration for overseas investors will be tax.
The taxes which need to be considered include:
The inter-relation of each of these taxes and the formalities which need to be complied with are complex and careful consideration needs to be given to their application to the acquisition of any specified property.
The tax considerations relating to any proposed acquisition are likely to determine the structure of the acquisition and the nature of the vehicle to be used. The possible vehicles include:
Any of these entities will need to comply with both UK and any relevant overseas laws and regulations.
The process and funding
If funding is required, it is prudent to arrange this in principle before identifying a property to purchase.
After a suitable property has been identified and terms for its acquisition agreed (this will usually be done with the help of agents) the due diligence process will commence. We will investigate the title to the property and review the terms of any lease. We will also carry out all appropriate searches, including a search with the Local Authority and a desktop environmental search.
Due diligence will include investigating arrangements for managing the property and analysis of the service charge.
Compliance with planning and building regulation legislation also needs to be checked.
The condition of the property is not, however, a matter with which we are concerned and you are advised to obtain a building survey of any property.
The role of the surveyor and of the lawyer overlap, especially in the case of a newly constructed building where it may be appropriate to consider the terms of building contracts and of the appointment of the professional team.
It is important that your funder, if any, is also satisfied on all due diligence matters at this stage. This will include the banks valuation survey.
After the due diligence process has been completed, contracts can be exchanged. It is usual for the purchaser to pay a 10% deposit on exchange of contracts. Traditionally completion of the acquisition will take place four weeks after exchange of contracts, but the length of this period is negotiable.
It is likely that you will be responsible for insuring the property from exchange of contracts.
The balance of the purchase price will be payable on completion together with any SDLT (see above).
There are various post completion formalities which need to be handled e.g. registration at the Land Registry. We will advise you on these formalities and handle them on your behalf where appropriate.
In the case of investment property you will need to ensure that arrangements are in place to take over the property management with effect from completion. This may involve taking over employees.
No two property transactions are the same. It is, therefore, beneficial to involve experienced property advisors at an early stage in the transaction in order to ensure that all necessary steps to enable the transaction to complete without difficulty are commenced at the appropriate time.
Richard Reuben (email@example.com)