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SPONSORED: Rural landowners must prepare for greater transparency in the new land reform framework

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The Scottish Parliament has approved a significant element of the Scottish Government’s land reform framework, seeking to improve transparency of ownership and control of property.

It will see the creation of a new register – the Register of Persons Holding a Controlled Interest in Land (the RCI) – which comes into force on 1 April 2022, and will be of particular relevance to many rural landowners and businesses.

According to the Scottish Government, the RCI’s primary aim is to improve transparency for land ownership in Scotland, by making information – on who makes decisions and has control of land – available to the public.

Going one step further than the current Land Register and Sasines Register, which contain the names of the owners and tenants of long property leases (over 20 years), the RCI will, in cases where the named owner or tenant does not control or make decisions relating to the property, include the details of those who truly have control over it.

As such, the RCI will introduce some new terms:

The owner or tenant who does not actually 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’;

The person who has the right to control dealings with the property will be an ‘associate’.

This is effectively trying to create a transparent link between the registered owner or tenant, and the person controlling that interest, even if they sit behind the property.

These new regulations will apply to trusts and partnerships which are widely used in the rural sector, often as routine business or family structures, and will become an element of regulatory compliance that cannot be ignored.

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 means 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 new regulations are aimed at not only overseas companies, but also trusts and partnerships, where control might not be immediately apparent from the registered title or lease. Depending on how these trusts and partnerships are structured, they may be caught up in the new regime.

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 (dependent on some exceptions, including owner and tenant entities subject to other transparency regimes, such as already applies to UK companies) the recorded person will have to provide their details, details of the land, and of the associate(s) exercising control, all to be held on the RCI.

The associate’s details include name, address and date of birth for an individual; for corporate bodies, it includes name, registered office address and any registered number. There are protections in place for those who may be placed in danger if their details were made public and dates of birth will not be made public.

Each associate will be allocated a unique reference number 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 those existing at 1 April 2022 there will be a 12-month period in which to register.

What are the consequences of non-compliance?

Failure by 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 a fine of up to £5,000.

There will be an initial 12-month grace period in which the offences do not apply, to provide an opportunity for applications to be made to the RCI. A significant awareness-raising exercise is anticipated in advance of, and throughout, that grace period.

On one level, the availability of information on who controls decision-making for land will be welcomed, but on others, the loss of privacy will not.  For many rural landowners, who have enjoyed a high degree of privacy in ownership and business structures, this will be unfamiliar territory.

All information provided by Clive Philips, a rural business partner at Brodies LLP.