Overseas Investors Thinking Of Investing In UK Real Estate

• Published date: 08 June 2023
• Subject Matter: Finance and Banking, Wealth Management, Real Estate and Construction, Tax, Fund Management/ REITs, Wealth & Asset Management, Real Estate, Landlord & Tenant - Leases, Income Tax
• Law Firm: Dixcart UK
• Author: Ms Anne-Marie Pavitt LLB (Hons) LLM

CAN ANYONE INVEST IN UK REAL ESTATE EVEN WITHOUT A UK PASSPORT?

Yes. Foreign individuals (over the age of 18) and corporate entities (subject to being registered at Companies House) may purchase or invest in UK real estate.

WHAT TYPES OF INVESTMENT CAN BE MADE?

There are many ways to invest in UK real estate. Some of the more conventional routes in England and Wales include:

• Ownership of a legal "estate" in land to realise capital appreciation

An estate is an abstract entity carried on from medieval times and used to describe nothing more than time in the land. The most common forms of estate ownership are freehold (owning land in perpetuity or "forever") and leasehold (owning land for a number of years). Generally a term of years in a lease of property will be born out of a freehold estate or a leasehold estate for a term longer than the one in question. The owner of a term of years in a leasehold interest will be a tenant.

• Buy to let investments

A purchaser can acquire a freehold or leasehold interest (as above) specifically to rent it out to reap the rewards of a rental income. An investor will be looking closely for high net yields when deciding what to invest in and where.

• Real Estate Investment Trust (or REIT)

Providing an easier and lower cost way to invest in property, a UK REIT (often holding a portfolio of property) provides a way to invest in buy-to-let property without having to buy property directly. UK REITs benefit from an exemption from UK tax on both rental income and gains relating to their property investment business allowing them to redistribute up to 90% of rental income to their shareholders.

• Property development

This can take many forms. You might wish to buy land and sell it onto a developer having secured planning permission over it; buy an existing commercial building and apply for planning to convert it into residential property, convert adjoining houses into one large property and letting it out as a house with multiple occupation and so on.

YOU HAVE IDENTIFIED A PROPERTY, WHAT NEXT?

Let the buyer beware

In the UK, a seller of land has limited duties of disclosure to a purchaser because of the principle of caveat emptor (let the buyer beware). In effect, a purchaser buys at its own risk. It is therefore important to instruct a property solicitor to carry out the usual pre-contract investigations on "title", apply for the relevant searches...