ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 109

A tenant taking a transfer of a lease from an existing tenant is unlikely to have the opportunity to negotiate the terms of the lease but will have to take it on its existing terms. An original tenant or a tenant who takes a transfer of a lease originally granted before 1 January 1996 is likely to have to remain liable under its terms for the remainder of the lease period, even though it subsequently transfers it to a new tenant, if there is a subsequent default. An original tenant or a tenant who takes a transfer of a lease granted on or after 1 January 1996 is likely to have to guarantee any new tenant to whom it transfers the lease for the period that that particular tenant remains the tenant, but its guarantee will cease if the new tenant later transfers the lease to another party. 7. Ownership structure The choice of ownership structure is often tax driven. We look at tax in the next section but here we focus on the non-tax facets of different types of ownership. Personal ownership / Directly held Advantages: Simple and cost effective. There is no structure to maintain and no annual running costs. Disadvantages: Details of land ownership are held on a central, searchable register at the Land Registry. If owned through a nominee (be they a corporate entity or trustees of a bare trust), only the nominee’s details appear on the title, but UK corporate nominees have had to disclose their ultimate beneficial owner on a separate public register (see below) since June 2016 and non-UK corporate nominees will also have to do so with effect from 2021 (precise date not yet confirmed). A UK Will and UK Property and Financial Affairs Lasting Power of

Attorney should be considered, to avoid a loss of control over the property in the event of death or incapacity. The asset will be exposed to claims from creditors and potentially also on divorce or relationship breakdown. Company registered in UK Advantages: Annual running costs are usually less than for offshore registered companies where corporate fiduciaries located in offshore jurisdictions often provide the directors. The company affords limited liability. Disadvantages: Since June 2016, those owning more than 25% of the ultimate beneficial ownership of a company must appear on a publicly searchable register held at the UK’s Companies House. Corporate governance documentation, such as company articles and possibly shareholders’ agreements, in addition to a Will (a UK Will may not be the most appropriate one in the circumstances) and a UK Property and Financial Affairs Lasting Power of Attorney, may be required in order to regulate who controls the company in the event of death, divorce or incapacity. The shares owned by the ultimate beneficial owner of the company will still be considered in the event of financial claims but pre-emption rights in the company’s articles may prevent the shares being transferred to satisfy creditors. Company registered offshore (i.e. outside UK) Advantages: The jurisdiction may not have introduced public registers of ultimate beneficial owners. The use of a nominee to hold shares may prevent the identity of the ultimate beneficial owner being disclosed. Disadvantages: Annual running costs can be high. Provisions requiring the disclosure of ultimate beneficial ownership, similar to the rules that apply to UK companies, will be introduced in 2021. As with a UK company, local corporate governance documentation and

ILN Real Estate Group – Buying and Selling Real Estate Series

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