Potential impact of National Security and Investment Act 2021 on Registered Providers of social housing
On 4 January 2022, the NSIA came into force increasing the government's powers to review and intervene in certain transactions on national security grounds. These powers are exercised by the Department for Business, Energy and Industrial (BEIS) through its Investment Security Unit (ISU) and are retrospective for affected transactions that completed after 11 November 2020. The ISU can call in a transaction for up to six months after becoming aware of it, but there is a long stop date of five years from completion of the transaction. The NSIA does not distinguish between UK and overseas companies.
Share transactions that involve a third party "gaining control" of a company operating in sectors deemed to be high risk (including defence, energy, civil nuclear and transport) are subject to mandatory prior notification to the ISU in order to obtain its prior approval, otherwise they are void.
Asset transactions (such as a freehold purchase or sale) are not subject to mandatory notification to the ISU, but rather a voluntary notification procedure under which the ISU has 30 working days from notification to issues its clearance or call in for further review. Where a voluntary application has been made it is expected that in the contract completion of a transaction will be made conditional upon ISU clearance. Either party or all parties to a transaction can submit a voluntary notification to the ISU.
Current guidance from BEIS is that a land transaction is more likely to be considered to be a national security interest where "it is or is proximate to a sensitive site" with examples of such sites given as national infrastructure and government buildings. The same guidance confirms both that call in powers are rarely expected to be exercised for land transactions compared to share transactions and that buying a property for residential use next to a military site is generally considered to be a low risk to national security given the protection measures commonly in place at military sites.
If however a RP has national security concerns about land transactions involving or near to sensitive sites and potentially the other parties to those transactions, then the ISU has an informal pre-application service so that the views of the ISU can be sought in advance.
For further information and an assessment of the potential risks, please contact Alison Chivers or Mark Churchman.