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National Security and Investments Act 2021 – now it’s in force, what do you do on property deals?


The National Security and Investment Act (‘NSI Act’) came into force on 4 January 2022. This legislation is aimed at sectors sensitive to national security but can also catch land transactions. The property sector needs to be alert to its implications. It applies to deals done since 11 November 2020.

The government can screen or ‘call-in’ retrospectively and, if necessary, intervene in, acquisitions of land it considers a ‘threat to national security’ – a concept that is deliberately not defined. Such acquisitions are known as ‘qualifying acquisitions’

A qualifying acquisition could be directly of land or through acquiring a level of control of a ‘qualifying entity’ (i.e. companies, bodies corporate, LLPs, partnerships, trusts, unincorporated associations) that itself owns land.  It may catch corporate reorganisations where corporate entities holding land become controlled by a different entity in the same group even though the ultimate beneficial owner of the group will not change.

The government expects to use these call-in powers ‘rarely’. Most likely where perceived hostile actors acquire sites close to, or which are, sites where sensitive activities are carried out. The NSI Act prescribes 17 sensitive sectors of the economy (listed below) which are viewed as relevant to national security. M&A deals in these sectors require mandatory notification to the Department of Business, Energy and Industrial Strategy (BEIS) (and are beyond the scope of this article).

The NSI Act affects the property sector simply because sensitive activities are always carried out on land. While land transactions per se do not need to be notified, they remain at risk of being ‘called in’ if government thinks there could be a ‘threat to national security’. Buyers, sellers and owners of land may opt under the NSI Act to make a voluntary notification to BEIS which can essentially pre-clear a transaction and avoid it being called in.

The uncertainty created by the NSI Act

The call-in powers will be used by the Secretary of State in accordance with a statement – known as the Section 3 Statement

The Section 3 Statement is very high-level.  For land transactions, the Secretary of State says he intends to use his powers ‘rarely’ compared with transactions in sectors which require mandatory notification. But with new regulations there is no track record of calling-in that allows us to judge what this means. The Government has published its first annual report (which covers January to March 2022). None of the transactions subject to voluntary notification related to real estate acquisitions.

An acquirer’s main concern is the government’s ability to call in an acquisition within the earlier of 5 years of it occurring (on or after 12 November 2020) and 6 months of it becoming aware of the transaction if it reasonably suspects it may give rise to a national security risk.

You can’t rely on your own common sense on this. Only the government decides if a land transaction is a threat to national security. If it does it could unwind it after it has happened or impose conditions on it which could be costly. It is not clear how any costs would be met or the extent to which compensation will be available for the effects of such intervention. If the Secretary of State calls in a transaction retrospectively, he will judge the national security risk at the time of the call-in rather than the time of the original transaction.

The Section 3 Statement lacks enough guidance for land transactions to enable buyers, sellers or owners of land to make a value judgment for anything other than the most straightforward of circumstances.  Where there could be an issue, many buyers or sellers of land will want to avoid the uncertainty and ‘pre-clear’ potentially affected transactions under the NSI Act through voluntary notification to BEIS. Indeed, their secured lenders and financers may insist on it to ensure the transaction will complete and not be upset down the line. Once pre-cleared, the transaction cannot afterwards then be called in.

The risks to look out for when considering a voluntary notification

The Section 3 Statement sets out three risk factors the Secretary of State will take into account when assessing a threat to national security: target risk, acquirer risk and control risk. These risk factors are assessed together as one will often depend on another.

Target risk – this is the risk inherent in the ‘target’ i.e. the land being acquired – the most obvious elements of target risk are the land’s ‘use’ and ‘location’.


What is the land currently used for, what could it be used for and what does the acquirer intend to use it for? Could any of these uses raise a risk to national security? The use of land is already governed by the UK planning regime, but it appears that the NSI Act regime operates separately from this so the grant of planning permission gives no comfort to an acquirer that its actual or intended use will not be a national security risk.


Location of the land ‘near a sensitive site’ is mentioned in the Section 3 Statement but no definition of ‘near’ is given. ‘Critical national infrastructure sites or government buildings’ are mentioned, but that’s it, no further guidance. No guidance at all on what the position is with land where sensitive activities are actually carried on. The sectors that require mandatory notification under the NSI Act indicate what might be considered sensitive activities (although this could be any part of the UK economy). These are:

  • advanced materials
  • advanced robotics
  • artificial intelligence
  • civil nuclear
  • communications
  • computing hardware
  • critical suppliers to government
  • cryptographic authentication
  • data infrastructure
  • defence
  • energy
  • military and dual-use
  • quantum technologies
  • satellite and space technologies
  • suppliers to the emergency services
  • synthetic biology
  • transport

The list is not exclusive, and national security concerns could arise in any sector of the economy. Current ‘hot’ areas might include the mining of rare earth minerals, food and fuel logistics and the manufacture and distribution of vaccines.

Acquirer risk – likely to be the biggest factor in the Secretary of State’s consideration of national security. The Section 3 Statement says:

‘This concerns whether the acquirer has characteristics that suggest there is, or may be, a risk to national security from the acquirer having control of the target.

Characteristics of the acquirer such as the sector(s) of activity, technological capabilities and links to entities which may seek to undermine or threaten the national security of the UK, are likely to be considered in order to understand the level of risk the acquirer may pose.

Some characteristics, such as a history of passive or long-term investments, may indicate low or no acquirer risk. The Secretary of State does not regard state-owned entities, sovereign wealth funds or other entities affiliated with foreign states, as being inherently more likely to pose a national security risk

In assessing an acquirer, the Secretary of State may consider several factors, including:

  1. the ultimate controller of an acquirer, or if the acquirer can be readily exploited;
  2. whether the acquirer may pose a risk to national security in the light of their pre-existing holdings;
  3. whether the acquirer, or their ultimate controller, has committed, or is linked to, criminal or illicit activities that are related to national security, or activities that have given rise to or may give rise to a risk to national security

If an acquirer has links to entities which may seek to undermine or threaten the national security of the UK, this does not automatically mean that the acquisition will be called in.

The Secretary of State will not make judgements based solely on an acquirer’s country of origin. However, an acquirer’s ties or allegiance to a state or organisation which is hostile to the UK will be considered when assessing whether their qualifying acquisition has given, or may give, rise to a risk to the UK’s national security.’

This is clearly aimed at acquirers having strong links to countries deemed to be a threat to national security. This may include criminals who have a strong link to a country. Countries often stated to be a threat to the national security of the UK and its allies include Russia, Belarus, China and Iran.

Control risk – the level of control, that will be acquired. The Section 3 Statement says:

‘The control risk refers to the amount of control the acquirer gains of an entity’s activities or strategy. It also concerns the amount of control over an asset, which includes controlling or directing its use, as well as using it.

The Secretary of State will consider the control that has been or will be acquired through the qualifying acquisition. A greater degree of control may increase the possibility of a target being used to harm national security. Additionally, a large amount of control may enable parties to reduce the diversity of a market, or influence the market’s behaviour, in a way that may give rise to a risk to national security. In such cases, the acquisition is more likely to be called in.

The control risk will be assessed alongside the target and acquirer risk. This is because when the target and/or acquirer risk is low, the level of control acquired is less likely to give rise to a risk to national security and so the Secretary of State is less likely to call in that acquisition’

It is the extent of the control that is key when assessing a risk to national security. With the direct ownership of property itself, the level of control is absolute if freehold and will vary depending on the terms, if a leasehold interest.

If the land is held through a qualifying entity with one or more stakeholders, it will depend on the acquirer’s level of control of that entity.

The guidance above also points to a different element of control – control not just of the land itself but of the amount of land used for a particular purpose relevant to the land available elsewhere used for that purpose. Say a mine containing rare earth minerals: on national security grounds the government might wish to intervene where such a mine could fall into the hands of what is viewed as a hostile actor, especially where such resources are rare in the UK or key to an industry in the list of sensitive sectors.

It would need to be shown that the acquisition of the land interest and the ability to use, or direct or control the use of, the land could pose a threat to national security. This also applies where any existing ability to direct or control the use of the land is increased; say, where a person who previously owned a right of way near a sensitive site, then acquired the land over which the right of way existed. Loans secured on land are not of themselves expected to be the type of right which would be called in but then taking the land to satisfy the loan could be a qualifying acquisition. Where an investor increases its control rights in a qualifying entity that holds the land, this may become a qualifying acquisition.

Some examples

The Section 3 Statement contains a single example of how a property transaction might be dealt with. It is an example of a transaction that would not be called in:

‘Company A has bought Building B located in the UK for residential use. Building B is a house adjacent to a sensitive military site. Company A is an overseas pharmaceutical company that is known to the UK government with no evidence of ties to hostile activity in the UK.

The target risk is medium as there is a proximity risk as the target is close to a sensitive site. However, it is unlikely that owning the adjacent property for residential use could pose a risk to national security, given other security protections in place at the military site.

The acquirer risk is low as there is no evidence to suggest that the acquirer, Company A, is linked to hostile activity, so the possibility of the target being used to threaten the UK’s national security is low. Company A has also demonstrated that it intends to use the asset as a place of residence, which does not pose a national security risk.

As Company A has purchased the asset outright, enabling Company A to use or to control or direct Building B’s use, this represents a higher level of control risk.

Nonetheless, this acquisition is unlikely to be called in because of the levels of target and acquirer risk.’

The example suggests that ‘normal’ property acquisitions would not be called in but implies that an interested party should make a voluntary notification in relation to the transaction (because it was next to a military site) rather than take a view.

Contrast that with the acquisition by an individual, known to have close associations with a hostile state, of a residential property close to a Ministry of Defence establishment. Voluntary notification would seem obvious even though the stated intended use is residential. The acquirer risk seems to be high. The control risk is inherently high. The target risk would seem to be low until you assess what the property could be used for. What are the motivations of the acquirer? It is not unreasonable to assume that an acquirer with hostile intentions would not make a voluntary notification and would not care if the transaction were called in later. Spying is already a crime. The seller on the other hand may well want to make a voluntary notification. An interesting conundrum for advisers.

What about the ownership of an industrial estate which has units housing entities that carry on sensitive activities? It may have security systems that allow the monitoring of goods in and out as well as employees. But what about the ability to control the letting of or access to a void unit next door to a manufacturer of sensitive communications equipment and the ability to control access? It just makes sense that an acquirer of such an industrial estate would make a voluntary notification rather than take a view.

Note that ‘land’ is not defined for the purposes of the NSI Act. We have mentioned that this could be land used for mining including sub-surface, but it could also cover interests in land short of full ownership such as easements and rights of way. It could include land options which include provisions restricting the use of land. It might also cover any land which has key infrastructure under or over the surface such as power lines, fibre optic cables, gas pipes, and fuel pipes.

Data centres are now key infrastructure. These have different levels of security and redundancy built in, but they are reliant on an external power supply (even with UPS backup systems) and of course fibre optic connections. A buyer of property in the vicinity of a data centre (say, a significant amount of the Slough trading estate) will not know the extent to which that data centre (itself a business in one of the sensitive sectors) is carrying out data hosting for other entities which operate in the sensitive sectors or indeed as suppliers of services to government that are themselves sensitive. Data centres may also be supplying services to key infrastructure close by, such as airports or ports. Accordingly, the identity of an acquirer of land and/or its intended use near a data centre or key cables that it uses may be something that would be of interest to the Secretary of State.

Voluntary notification procedure

The NSI Act enables voluntary notification to the Investment and Security Unit (‘ISU’) of BEIS of transactions by acquirers, sellers or qualifying entities, being holders of the property. The process can take between 30 and 105 days after acceptance of the relevant form. Notification is via the web portal

Following the notification to ISU and acceptance of the form, the government has an assessment period of 30 days to decide whether or not to take further action and call in.

If it clears the transaction, the clearance can’t be reviewed unless false or misleading information was provided in the notification. This gives the acquirer and the seller the certainty they need that the transaction will not be unravelled. An acquirer can complete the transaction during the assessment period unless subject to an interim order preventing this; but will do so at its own risk.

If the transaction is called in after voluntary notification, then the process takes another 30 to 75 days and the final government decision will be to clear it, impose conditions or unwind it in whole or in part.

The voluntary notification process is set out in government regulations and guidance. There is a specified Form

The guidance can be found here and here.

The notification process is not straightforward, and the guidance contemplates that advisers such as solicitors will be needed to assist notifiers. The form requires a high level of detail and due diligence will be required before the form can be submitted to avoid the risk of it being rejected for not being in compliance with the requirements. The timetable for dealing with the voluntary notification only starts to run once the ISU has confirmed that the form has been accepted.

Advisers, such as solicitors may also make the notification on behalf of their clients. Winckworth Sherwood can help clients with their notifications.

Voluntary notifications may be made by acquirers, sellers and qualifying entities which hold the property, so it makes sense for the making of notifications to be coordinated between the notifying parties.

Certainly a funder, which may require the notification and clearance as a condition precedent to funding, will want the process to have been properly carried out to avoid the risk that the clearance can be set aside later on the grounds that not all relevant information was supplied at the time.

Of course, there may be circumstances where a seller may wish to make a notification, but an acquirer may not and vice versa. This does not prevent one or the other making the notification to ensure that the transaction cannot be unwound. It will be necessary to include in any contract NSI Act clearance as a condition to completion.

Due diligence

Before transactions can start, additional due diligence of the site and the land and activities carried on and around it will to become a standard part of a buyer’s preparation, adding to up-front transaction costs and extending the timetable. This will be needed to assess if a site is in voluntary notification ‘territory’.

Sellers will be interested in potential acquirers. In particular is it an entity or individual based in, born in, living in, connected with, controlled by or owned by a foreign state, that is viewed by the government as carrying out or likely to carry out activities that could harm the UK’s national security, or likewise an organisation or individual that could harm the UK’s national security?

Advisers will need to be prepared for their clients’ needs on this. In particular, assessing the level of control an acquirer may be getting is something that will need input from the lawyers at an earlier stage. Bear in mind that it may be necessary to look through contractual obligations and assess the actual control given by the status of the acquirer – somebody intent on harming national security would not be put off by contractual restrictions.


The NSI Act is going to affect certain land transactions in the future and the property sector needs to be aware.


  • a need for greater investigation into buyers and potential connections with hostile actors. It may also mean sellers choose buyers for reasons other than price, especially if the deal timetable is a factor
  • greater due diligence into the use of the land being acquired – does it include activities that fall within sensitive sectors (whether or not on the list)
  • greater awareness of the use of any land in the vicinity of or adjacent to the land being sold – again does it include activities that fall within the sensitive sectors (whether or not on the list)
  • buyers, their banks or sellers may include deal conditions which require voluntary notification and clearance of the land transaction
  • possible effect on land value where sensitive activities are carried out on that land or in the same proximity
  • additional time and professional resource being spent on any voluntary notification
  • overall increased costs and longer timetables

Finally, acquirers or sellers who have completed land transactions or conducted corporate reorganisations involving land owning subsidiaries since 11 November 2020 should review those transactions to see if they should make a voluntary notification. Their banks may also ask for this

For further help on this, please contact John Hiscock here at Winckworth Sherwood.

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