London (The Times Groupe)- Russian elites may soon be forced to sell their UK properties en masse, as result of the fast-growing anti-Russian rhetoric and policy triggered by Moscow’s ongoing invasion of Ukraine.
Various western sanctions have severely cut the Russian economy off from the global economy, reducing Russians’ liquidity and increasing fears that their assets might be frozen.
Some have claimed billionaire owner of Chelsea Football Club, Roman Abramovich, is looking for buyers for his £150m Kensington house and Chelsea flat.
Among the most active Russian elites in the UK property market over the past 15 years have been people such as Abramovich, with an overwhelmingly London-based focus.
Russians have billions of pounds worth of property, businesses, and other assets in the UK, of which £1.1bn is in London homes owned by 150,000 Russians. Invariably, the richest live in Belgravia, Knightsbridge, Chelsea, Hampstead and Highgate.
Despite two high-profile Russian purchases fell through in recent weeks, there are no signs of a buyer or owner exodus.
“Gary Hersham, founding director of Beauchamp Estates, says that despite the crisis with Russia and sanctions from the EU, none of his Russian clients have asked him to sell any of their London or Home Counties properties.
“People forget just how deeply embedded Russian investment is in London. Many Russians have been purchasing property in the capital since 2008, and most of their children and relatives have come to Britain for schooling, and now live here as British citizens [with money that is 100% legitimate].”
According to Hersham, his Russian clients are still looking to buy property in London, such as a £15 million purchase in central London that he is finalizing.
“But all the government announcements and media headlines are making my Russian clients want to keep a low profile right now,” he says. “For property tours, for example, they send a representative so as not to draw attention to themselves. There is a possibility that some Russians may decide to sell their London homes if sanctions and pressure increase. However, as long as their children and grandchildren live here, how can they justify doing so?”
Seizing oligarchs’ properties are no easy feat
Also, Hersham balks at the idea that the UK government could seize dozens of homes from Russian oligarchs.
To seize a mansion, townhouse or penthouse from a Russian owner in London, the British government must first issue them with an ‘unexplained wealth order’ – which is issued by a court on behalf of HM Revenue and Customs.
Hersham explains that the owner of a property must provide the court with evidence that the property was acquired with legal funds. Only if the court is not provided with legal paperwork can the government seize the property.
There have only ever been nine unexplained wealth orders issued – and only four have actually succeeded in proving that the properties were acquired using funds that did not have satisfactory documentation.
If the UK government wishes to seize Russian real estate, the courts must first be convinced there is a good chance that the case will succeed; more specifically, that the owner lacks the documentation to prove the legitimacy of the purchase.
A grand exodus from London doesn’t seem likely anytime soon, especially since much of Russia’s elite (oligarchic or not) is so deeply rooted there. However, new government legislation may give the aforementioned process greater, or special, teeth in light of the Ukraine invasion.