Scotland’s land ownership – double the transparency?
Register of Persons Holding a Controlled Interest in Land (“RCI”)
The RCI was launched in Scotland on 1 April 2022 and is intended to show who has significant influence or control over the owner or tenant (under a lease of more than 20 years) of land in Scotland where this information is not already available under other transparency regimes. The Regulations behind the RCI (The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021 (“the Regulations”)) use two key terms - “Recorded Person” and “Associate”. A “Recorded Person” is the owner or tenant (under a lease of more than 20 years) of land in Scotland who does not fall within the list of exemptions and who has an Associate. An “Associate” is an individual or entity who, in terms of the Regulations, has significant influence or control over a Recorded Person and/or their dealings with the land. Individuals, trusts, certain partnerships and overseas entities will be the most likely to be caught as a “Recorded Person”, with entities such as UK companies being out of scope due to being covered by the PSC regime. However, any individual or entity may be caught as an Associate. In particular those individuals or entities who have significant influence or control - by virtue of a corporate structure or a contractual, or other arrangement, with individuals, trusts, partnerships or overseas entities owning land in Scotland - may be caught. The Regulations place obligations on both the Recorded Person and their Associates and carry criminal sanctions for non-compliance. We have prepared a client guide to the new Regulations which can be accessed here.
The Register of Overseas Entities (“ROE”)
The Economic Crime (Transparency and Enforcement) Act 2022 (“the Act”) will establish a new UK wide Companies House Register to be known as the Register of Overseas Entities. While the provisions in the Act relating to the ROE are not yet in force, and the final details and commencement date are awaited, it is anticipated these will come into force in the next few months. The ROE will include information on the beneficial owners of all overseas entities who own land in the UK, subject to very limited scope for the Secretary of State to issue exemptions in the interest of national security, or to prevent serious crime.
The Act includes look-back provisions to ensure any land owned by overseas entities on or after 28 February 2022 is caught, even where this is disposed of before the ROE provisions of the Act commence. When the ROE comes into force, there will be a six-month transitional period to allow all overseas entities caught by the provisions to register themselves in the ROE or risk facing criminal sanctions (registration before the end of the transitional period may be required in the event of an intended sale, lease, assignation or grant of a Standard Security during that period). The key triggers for registration during the transitional period, as far as land located in Scotland is concerned, are as follows:
Where the overseas entity sells, charges, leases (for more than 20 years) or assigns its property registered in the Land Register within the period commencing on 28 February 2022 and ending at the end of the transitional period.
Where the overseas entity is the registered proprietor (or tenant under a long lease) of land which was registered in the Land Register of Scotland on or after 8 December 2014.
From the date the ROE comes into force, overseas entities will require to register themselves before they can buy, lease, or take an assignation of a long lease of land in Scotland. Many provisions in the Act carry criminal sanctions and the Land Register of Scotland will be bound to reject applications for registration of Dispositions, Leases, Assignations of Leases, Notices of Title and Voluntary Registrations where the new proprietor would be an overseas entity who has not duly registered in the ROE.
More information on the ROE and the Act generally can be found using the following links Real estate changes in Economic Crime (Transparency and Enforcement) Act 2022 (cms-lawnow.com), The Economic Crime (Transparency and Enforcement) Act – what this will mean for real estate lenders (cms-lawnow.com) and Focusing on Funds - New Register for overseas legal entities and their owners holding UK real estate (cms-lawnow.com).
With the UK-wide ROE on the horizon, it remains to be seen whether the Scottish Government will decide to amend their Regulations to exclude from the RCI scope those requiring to be registered in the ROE. This would be a helpful outcome in that it would avoid administrative duplication. However, with the Scottish RCI net potentially catching a wider group of individuals and entities who influence decision making in relation to land, this amendment is by no means a certainty.