Prime Central London (PCL) Property

As London faces a continuing shortage of homes for residents, there does not appear to be a lack of properties that are empty, these are often referred to as ‘ghost mansions’. It was reported in 2015 that Kensington had 941 empty properties in their borough. It was also reported earlier this year that the government put the figure at 1,399 homes that are essentially vacant in Kensington & Chelsea, a most recent review actually puts the figure at 1,652.

So, who owns these vacant properties? Property data obtained by the Guardian shows that there are two groups that own a substantial portion of these homes: the wealthy and firms of unknown owners registered to offshore firms.

Those homes owned by the wealthy are either second or third homes and can they afford to leave the properties unused and were perhaps bought as an investment during London’s property boom. An ‘empty homes tax’ has been introduced over the years imposed by the Treasury to act as a type of punishment for absentee owners. The owners are financially able to handle any increase in their council tax, usually a few hundred pounds, so the properties remain vacant. Additionally property valuations have not been reset since 1991 so the tax does not meet the actual value of the property. There have been calls for ‘land value tax’ that would set the tax rate on the current value of the homes location.

What is interesting about Kensington & Chelsea is that it has been a prime location for offshore buyers and investors. In a map by Private Eyes, the British reference site for offshore ownership property, shows large portions of the borough especially in the exclusive Hans Town ward have 100 properties that are vacant and are owned by offshore firms.

Two offshore locations for company registrations are Jersey and the British Virgin Islands, both known for low taxes and the ability to keep their ownership information private.

This summer, the National Crime Agency warned:

“The purchase of property in the UK, in particular within the London property market, through offshore companies presents a significant money laundering risk”.

It is unknown which homes in Kensington & Chelsea are owned by firms or individuals engaging in what might be termed ‘dodgy’ circumstances due to the lack of transparency by the property owners.

One idea is for the records of the Land Registry to publish the locations of these empty homes and the names of the owners and their foreign locations.

Unexplained Wealth

A bill called The Criminal Finances Bill has been put forward to find the illegal funds that are being used for the property and other market sectors. It is estimated that £10 billion to £100 billion in illegal money is being laundered each year.

The bill would first allow authorities to impose an ‘unexplained wealth order’ on property owners who have low salaries but have had the ability to buy multi-million pound properties. If they are unable to comply with the order the property would be seized.

The next part of the bill allows the government to seize property and other assets of those who are found guilty of human rights abuses regardless of in what country in the world and revocation of their UK visa.

One provision in the bill that was removed from the final draft of the legislation was for a public register of British offshore territories such as Jersey and the British Virgin Islands.

Labour MP Dame Margaret Hodge is quoted as saying:

“We are winning the argument but it’s an incredible struggle every time.”

“Particularly now in the UK post Brexit there is a reluctance to offend anybody. Even the BVI [British Virgin Islands] in case we can get some trade out of them … it’s a nonsense. We should not be defending corruption, money laundering, evasion and avoidance of criminal activity in the name of trade.”

Kleptocrats

Roman Borisovich, founder of The Committee for Legislation Against Money Laundering in Properties by Kelptocrats (ClampK) has said that London is the money laundering capital of the world and supports The Criminal Finances Bill.

In his documentary film called From Russia With Cash, Borisovich went undercover as a Russian MP and exposed the ease in using state funds to buy properties and exposing how real estate agents did not investigate or ask about the source of funds for the deals.

An average of ten ‘unexplained wealth orders’ could be ordered according to UK Home Secretary Amber Rudd. Transparency International claims that close to 2000 properties in central London need reviewing. It is estimated that one in 10 properties in the City of Westminster are owned by offshore companies.

The Guardian report quoted well known journalist Luke Harding, who did a recent report on global money laundering called ‘The Laundromat’ he said:

“There’s a whole tier of people, lawyers, agents, real estate people who have got very rich from basically servicing kleptocratic cash. Ifind it depressing and I find it vaguely shameful, actually, that we’re in this situation.”

Miami and Beyond

Across the ocean in south Florida, US Federal Regulators are looking into property transactions in the high-priced areas of the city.

The U.S. Treasury Department recently announced it was going to expand what had been a temporary review to uncover criminals laundering money through real estate. The investigation started in January of 2016 in to the expansion in the property market and is now reviewing the local luxury condominium market. There are now seven major markets that Federal Regulators are investigating including the South Florida counties of Miami-Dade, Broward and Palm Beach; all five boroughs of New York City; San Antonio, Texas; Honolulu and in California; Los Angeles, San Diego and San Francisco.

By Kevin Murphy: www.kevinmurphy.london

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