The Scottish Parliament has approved an important element of the Scottish Government's land reform framework, seeking to improve transparency of ownership and control of property.
The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021 will set up a new register – the Register of Persons Holding a Controlled Interest in Land (the RCI). The RCI will become operational on 1 April 2022 and will be maintained by Registers of Scotland.
According to the Scottish Government, the RCI's primary aim is to improve transparency when it comes to land ownership in Scotland by making information on who makes decisions and has control of land available to the public.
What will the RCI contain?
The Land Register and Sasines Register contain the names of the owners and tenants of long leases (over 20 years' duration) of properties. The RCI will go one step further in cases where the named owner or tenant does not control or make decisions relating to the property. It will contain the details of the persons who truly have control over the property.
The RCI will introduce some new terms for those involved in the property:
- The owner or tenant who does not control the property will own or lease a 'controlled interest' in the property;
- The owner or tenant with a controlled interest will be known as the 'recorded person'; and
- The person who has the right to control dealings with the property will be an 'associate'.
What is control?
The Regulations refer to the associate as the person who "has the right to exercise, or actually exercises, significant influence or control over the recorded person's dealings".
Control refers to directing the activities of another. Significant influence refers to being able to ensure that another person will typically adopt the approach that the first person desires. Dealings refers to disposing, leasing, creating real rights over, or changing the use of, the land.
The effect of a controlled interest
From 1 April 2022, if the ownership or tenant's interest in a long lease of any property registered in the Sasines or Land Registers is a controlled interest, then (subject to some exceptions) the recorded person will have to provide their details, details of the land, and details of the associate(s) exercising control, all to be held on the RCI.
The details of an associate include name, address and date of birth for an individual; for corporate bodies, it will include name, registered office address and any registered number. There are protections in place for persons who may be placed in danger if their details were made public and dates of birth will not form part of the RCI entry.
Each associate will be allocated a unique reference number by the RCI and it will be possible to search the RCI by that reference number.
Details will need to be provided to the RCI within 60 days of a person gaining a controlled interest. For controlled interests existing at 1 April 2022 there will be a period of 12 months in which to register.
Who is affected?
A recorded person may be an individual or a partnership, trust, unincorporated body or overseas entity, or a person who owns/tenants the land on behalf of any of these, including a partner of a partnership or trustee of a trust.
So, for example, associates holding the controlling interest in properties could include general partners of a partnership and trustees of a trust, where they are not already named on the title.
The duty to disclose information for the RCI will apply to a wide range of landowners and tenants. It is anticipated that those with property in rural areas, such as farms and estates, will be particularly impacted as these are commonly owned and/or tenanted by partnership and trust structures.
Are there any exemptions?
In order to avoid duplication of disclosures, owner and tenant entities subject to other transparency regimes (such as the Persons with Significant Control rules), including Limited Liability Partnerships, Limited Companies and Public Authorities, are excluded from the duty to disclose associates.
Paid professional advisers such as solicitors or accountants will not be treated as associates.
What are the consequences of non-compliance?
Failure on the part of the recorded owner or tenant to comply with the duty to disclose information, or the provision of false or misleading information, will be a criminal offence, with the penalty being a fine of up to £5,000.
There will be an initial grace period of 12 months in which the offences do not apply, to give recorded persons an opportunity to make their applications to the RCI. It is anticipated that there will be a significant awareness-raising exercise in advance of, and throughout, that grace period.
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