Register of Controlled Interest In Land – Who Calls the Shots?
A new piece of legislation has recently been passed which will confer an obligation on landowners (including tenants under long leases of over 20 years) to not only disclose who owns the property, but also whether there is anyone in the background who has an influence over what happens to the property. The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021 will come into force on 1 April 2022 and, following a grace period of one year, non-compliance can result in a criminal penalty of up to £5,000 and a criminal conviction.
Notification will need to be made to the Keeper of the Registers of Scotland as to whether, in addition to the “Registered Person (RP)”, i.e. the registered owner of the property, there is also an Associate with a controlling interest in the property. The idea behind the legislation is to promote transparency on land ownership in Scotland and to ensure that, whether intentional or not, control of decision making is not obscured.
Who will this affect?
The good news is, the majority of properties won’t be affected, for two reasons.
Firstly, for the majority of properties, the person registered in the Land Register (or General Register of Sasines) is not only the owner, but also the decision maker when it comes to the property. If you and your partner own a house together then, without getting into the ins and outs of who is the “boss” in your household, you and your partner are not only the registered owners of the property, you also are the only people who make decisions regarding the house. Therefore, there is no need to make a notification under the RCI Regime.
Secondly, to avoid duplication, many entities are exempt from the RCI regime as they are already subject to other registers which offer transparency on who the decision makers are. The four main exempt entities are:
(i) Charitable incorporated organisations (CIOs and SCIOs);
(ii) UK-incorporated companies;
(iii) Public authorities; and
(iv) Limited partnerships and LLPs.
However, you are likely to be affected by the RCI Regime if you:
(i) Have a contractual or other relationship with someone which means, despite not owning the property, they have a controlling interest;
(ii) Are part of a general partnership or trust;
(iii) Are part of an unincorporated body; or
(iv) Are part of an overseas entity.
In these instances, any time there is a change in those involved in the business (e.g. a new partner or trustee is assumed) then the list of people having control in the business has changed, and so too should the information recorded on the RCI.
The RCI will also be retrospective, meaning any controlled interests in land existing prior to 1 April 2022 will need to be registered. The duty rests with the land owner (the RP) to inform the Keeper of any Associates (within 60 days of the relationship forming) and then in turn to inform the Associate that the Keeper has been informed of their involvement (within 7 days of the Keeper being notified). The type of information required will differ depending on whether the Associate is an individual or a non-natural person, but generally it will include their name, address and information as to how the relationship between the RP and the Associate was formed. So far, the Keeper has not introduced any fee for updating the RCI.
What does this mean for you?
This may sound complicated and daunting, and admittedly it will take some getting used to. However, generally the most important thing for you as clients is to make your solicitor fully aware of any person or people “behind” the ownership of your property (or if you are a tenant under a long lease). Every time there is a change in the governance of your organisation, you need to consider whether the Land Register accurately reflects who actually exercises control or whether a change in Associates needs to be notified, whether that be due to being a nominee, or being one of the types of bodies mentioned above. If you are in any doubt at all, a member of our team will be more than happy to offer advice.
Still unsure? We have included a basic example below.
Mr A, Mrs B and Miss C form a partnership known as the Firm of Alphabets. As their business grows, they purchase a property from which to run their business. The Land Registered title shows the ownership as “Mr A, Mrs B and Miss C as partners and trustees for the Firm of Alphabets”. Several happy years pass and the business grows. Struggling to cope with the workload, Mr A, Mrs B and Miss C take on a new partner, Dr D. At the point Dr D is assumed into the partnership, he assumes a controlling interest in both the partnership and the partnership’s property. Within 60 days of Dr D’s assumption, Mr A, Mrs B and Miss C will need to notify the Keeper that they are RPs and that Dr D is an Associate. More happy years pass and, as the business grows, the partners decide to sell the property and find somewhere bigger. When checking to see who owns the property, the prospective purchaser, E Limited, can not only look in the Land Register and see the registered owners as Mr A, Mrs B and Miss C, they then can check the RCI to see that, since the property was purchased, controlling ownership has changed so that the current decision makers are in fact Mr A, Mrs B, Miss C and Dr D, thus making ownership of the property much more transparent and accurate.
If you are looking for help and advice contact the Corporate and Commercial Team at Macleod and MacCallum on 01463 239393 or email: firstname.lastname@example.org
Author: Yasmin Myles