There are just 7 months left to report to the Register of Persons Holding a Controlled Interest in Land (the RCI). Failure to comply by 31 March 2023 can lead to a criminal offence, punishable by a fine of up to £5,000.

Throughout this blog, when we refer to an "Organisation(s)" we mean a charity or third sector organisation whose legal form is either a trust or an unincorporated organisation.

In the context of the cost-of-living crisis, this reporting obligation may be dropping down the list of pressing matters. However, we are urging those in charge of Organisations to act now to ensure compliance and avoid unwelcome consequences which could include a fine of up to £5,000.

Background

The RCI is a register which holds information about people who control or influence what the owners or tenants of Scottish land and buildings do with their properties. The requirement to report to the RCI only applies to certain types of owner/tenant, in certain circumstances. If own (or lease for more than 20 years) a Scottish property, they may potentially require to report to the RCI. They should take steps now to understand whether or not they need to register.

The legislation underpinning the RCI is The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021. The RCI was made available from 1 April 2022 and is maintained by Registers of Scotland. It is a criminal offence, punishable by a fine of up to £5,000, to fail to comply with the Regulations. However, registerable entities have been given a grace period of 12 months to get to grips with the RCI. 

Organisations that are obliged to report to the RCI should do so by 31 March 2023, to avoid committing a criminal offence and incurring penalties.

What is the RCI's purpose?

The Scottish Government's new register is aimed at improving transparency of who controls land and buildings across Scotland. The current property registers in Scotland, comprised of the Land Register of Scotland and the older Sasines Register, note the owners or tenants (for any lease over 20 years) of the property. However, the information in the property registers does not always reflect who is really in control of decisions made about the property - particularly if (a) the owners or tenants are trustees or (b) there is someone behind the registered owner/tenant who is pulling the strings.

What type of Organisations need to consider an RCI submission?

Broadly speaking, if your the legal form of an Organisation is a trust or an unincorporated association with a qualifying interest in a Scottish property, your board will need to get to grips with this new compliance regime if there is someone who holds a 'controlling interest', i.e:

- Where the Organisation is a trust: if there is someone who is not noted on the property registers but who:

- is a trustee of the trust, and/or

- has (or has the right to exercise) significant influence or control over the the trust or the other trustees. For example, that could be someone with the right to appoint or remove a trustee or someone with the right to amend the deed of trust.

- Where the Organisation is an unincorporated association: if there is someone who is not noted on the property registers but who is responsible for the general control and management of the unincorporated assocation (e.g. an office-bearer such as a chair, treasurer, secretary etc).

    The person with the controlling interest is known as an 'associate' for the purposes of the RCI.

    However, if the owner/tenant of the property is one of the following types of charity, they will be exempt from the requirement to make an RCI submission:

    - Scottish Charitable Incorporated Organisation (SCIO);

    -Charitable Incorporated Organisation (CIO – the SCIO's English relative); or

    - Charitable company limited by guarantee.

      This is because these types of legal vehicle are already covered by other transparency regimes. SCIOs and CIOs (the latter likely to be dual registered with the Charity Commission and OSCR) are regulated by OSCR and companies limited by guarantee fall within the Persons of Significant Control reporting regime via Companies House.

      What information do Organisations need to report to the RCI?

      If an Organisation needs to report to the RCI, the following information must be submitted:

      1. The owner(s)/tenant(s) of the property, including their name, address, any registered number and the capacity in which they hold the property (e.g. as a trustee);

      2. The property, including the address and any title number; and

      3. The associate(s), including their name and address, any registered number, their date of birth if an individual (although this will not be published), the associate's unique reference number (if they have one) and the date their association with the owner/tenant started.

        The submission is done online and there is no charge for filing a submission. The submission can be made by the owner/tenant themselves (via a Registers of Scotland RCI webpage) or by an agent on their behalf (e.g. a solicitor). The owner/tenant must first have taken reasonable steps to verify the information with the associate, and to notify the associate of their rights and duties under the RCI regulations. If any of the submitted information changes in future, the RCI must be updated.

        The RCI is freely searchable by the public and can also be searched by a solicitor acting on your behalf.

        As far as personal information is concerned, there is no general exemption from the RCI on grounds of confidentiality or privacy. There is however a right to be excluded from the RCI if disclosure of such information would put the associate at serious risk or threat of violence, abuse or intimidation. We would be very happy to discuss this in more detail with you if your organisation has any particular concerns.

        What happens if an Organisation does not comply with the RCI Regulations?

        It is a criminal offence, punishable by a fine of up to £5,000, to fail to provide the required information to the RCI, or to provide false or misleading information.

        Individuals within an organisation may be found personally culpable if they hold a controlling position in the organisation and have consented to or conspired in an offence, or where their lack of care caused such an offence.

        With the 12-month grace period until 31 March 2023, penalties will not apply until after 31 March 2023 so there is still time to assess whether a RCI submission needs to be made.

        In addition, it is a defence if the relevant party can prove that it took all reasonable precautions or exercised all due diligence to avoid committing an offence. There are also no civil sanctions for non-compliance. For example, a failure to submit information to the RCI does not prevent a property from being sold and title being registered.

        Brodies has developed a helpful FAQ resource to help you navigate the remit of the RCI, which can be accessed here.

        Our Charities & Third Sector team will be very happy to speak with you about whether or not your charity needs to consider a RCI submission. Please get in touch with your usual Brodies contact to find out more or email Rebekah Leviston on [email protected]

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