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Sanctions Ensnare Roman Abramovich Rent Payments to Queen Elizabeth

These sanctions are designed to block oligarchs from making money in the West—to exact financial pain on those close to President

Vladimir Putin.

But they have also spawned a raft of rules that upend more routine transactions related to properties and businesses they own. These include ground rent payments to the monarchy. 

Mr. Abramovich paid $140 million for a 15-bedroom home in 2011 just down the street from Kensington Palace, home to Prince William. While he owns the 1848-built mansion— complete with the skylit underground pool he built beneath expansive gardens—the land beneath is owned by the Crown Estate, an entity created by Parliament that oversees a roughly $18 billion portfolio of land and other assets on behalf of the British crown

Under the terms of a 125-year ground lease, Mr. Abramovich must make modest lease payments—which start at £10,000 a year and go up to £160,000 over the term of the lease—to the Crown Estate, according to land records.

A spokeswoman for Crown Estates said the organization was examining its portfolio and doing all it can “to comply swiftly with the introduction of sanctions or other directions that may apply.” She declined to comment on specific properties or Mr. Abramovich.

A spokeswoman for Mr. Abramovich didn’t respond to requests for comment. 

Sanctions under U.K. law bar any U.K. companies or individuals from receiving, paying or moving any money tied to a sanctioned individual. Based on the law, sanctioned oligarchs need to apply for exceptions for any payments in the form of special licenses from the Office of Financial Sanction Implementation. 

That means that while sanctioned oligarchs would be able to keep their U.K. houses, without a license, they can’t pay gardeners, pay a utility bill or make pension payments for their staff, attorneys said. They can’t even pay lawyers to sort through the new sanctions bureaucracy, according to the Office of Financial Sanction Implementation, though the lawyers may provide legal advice and not be paid. 

“It’s extremely restrictive,” said Paul Feldberg, a London-based partner at Jenner & Block who works on sanctions. While the government is likely to grant some leniency on basic expenses,” You’re not going to be able to get a license to increase your personal wealth.”

Under the terms of a 125-year ground lease, Roman Abramovich must make modest lease payments to the Crown Estate.



Photo:

Martin Meissner/Associated Press

The U.K. government was quick to offer Mr. Abramovich a license to allow his Chelsea Football Club to keep running, although it is highly restrictive, preventing the soccer team from basic business tasks like selling jerseys or burgers at games. 

A U.K. Treasury spokesman said any payment outside of the Chelsea license would require a license of its own.

To keep his homes in good condition, Mr. Abramovich would likely need a “basic needs“ license, which would allow the sanctioned individual the right to make payments like mortgages, pensions for employees and insurance premiums. Sanctions attorneys said Mr. Abramovich should qualify for such a license, although processing can be lengthy—and just what is included is up to U.K. officials. 

What happens if he isn’t able to pay or get a license for his rent? The Crown Estate spokeswoman declined to comment. 

Shams Rahman, a litigator at law firm Edwin Coe, has worked on a case involving a neighboring property with a similar lease to Mr. Abramovich’s. He said that in theory, if the Crown Estate isn’t paid, it could begin the process of taking possession of the property. 

But it would be a long road that could be contested, he said, adding that the rights given to property owners in the U.K. mean Mr. Abramovich and any other oligarchs are unlikely to see their real estate seized soon. 

Corrections & Amplifications
Under the terms of a 125-year ground lease, Mr. Abramovich must make modest lease payments. An earlier version of this article misspelled Mr. Abramovich’s last name as Ambrovich.

Write to Eliot Brown at Eliot.Brown@wsj.com

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