UK: Identifying Decision-Makers Behind Land Ownership In Scotland

Last Updated: 2 August 2019
Article by Graeme Myles, Lisa Cruickshank and Allan Cairns

Land reform is high on the Scottish Government's agenda, and transparency of land ownership is one of the main areas of focus. The Scottish Government believes that as a matter of public policy it is important to know who controls and benefits from Scottish land. The legal owner of land or buildings can be ascertained by looking at the property registers. However, at present those registers do not necessarily show who actually controls and makes decisions about the land or buildings. For example, if the legal owner is an overseas entity, a trust or a partnership, you cannot tell from looking at the existing property registers who is in control of the legal owner.  

Draft regulations (Regulations) were introduced by the Scottish Government last summer to implement the creation of a new public Scottish register: the Register of Persons Holding a Controlled Interest in Land (RCI). A consultation on the Regulations took place last year, a parliamentary committee report on the Regulations was published in November 2018, and in April 2019 the Scottish Government published an analysis of the consultation responses. This article summarises the main provisions of the Regulations, mentions proposals for a UK-wide Register of Overseas Entities and highlights key concerns about the Regulations, as raised both in the parliamentary committee report and in responses to the consultation.

The regulations

The new register 

The RCI is proposed to become operational in April 2021 and is to contain details of the individuals who control or influence decision-making in respect of Scottish land and buildings. These individuals are known in the Regulations as "Associates".

The Regulations seek to address two main scenarios where there is currently a lack of transparency:

  • where an owner or tenant is an "opaque legal entity" (i.e. a partnership, unincorporated body or overseas company); and
  • where a title or lease is held in an arrangement which is not necessarily apparent from looking at the Land Register (i.e. a trust arrangement, or contractual arrangement such as where property is held on a nomination or agency basis). 

In both such scenarios, the legal owner or tenant will be required to submit to the RCI information which identifies the relevant Associates. Note that in the case of leases/tenants, only registrable leases of Scottish land and buildings are caught by the Regulations (i.e. leases exceeding 20 years in duration).

Associate information

Information about each Associate must be submitted to the RCI by the owner/tenant within 60 days of the association between the owner/tenant and the Associate first starting. The required information includes the date on which the association started and the Associate's name, address and month/year of birth if a natural person, or the Associate's name, registered number and registered/contact address if a non-natural person. If an Associate in respect of a property is a non-natural person, then the individuals who control that entity will also be Associates in respect of that property (and so on, where there are complex ownership structures). The Regulations aim to drill down through the layers of ownership to highlight the ultimate parties in control of land. 

Prior to the owner/tenant submitting the Associate's details to the RCI, the owner/tenant must have taken reasonable steps to verify the accuracy of the Associate's details with the Associate, and to notify the Associate about their rights and duties under the Regulations. If the Associate does not receive this notification within 60 days of the association starting, the onus is then placed on the Associate to inform the owner/tenant that they are an Associate and to provide the relevant details. 

Once the information has been submitted to the RCI, the owner/tenant must notify the Associate that this has been done.  

Timing

The duty to register does not only arise on a change of ownership of relevant land/buildings. It will also arise:

  • for existing owners/tenants of relevant land/buildings, immediately when the Regulations come into force; and 
  • whenever there is a change of control in the ownership of the entity that owns or leases the relevant land/buildings, such as a change in the trustees of a trust.  

It will be important for existing owners/tenants to be prepared to submit the required information as soon as the RCI becomes operational. However, there is to be a grace period (currently proposed as six months from when the RCI becomes operational) during which penalties for failure to comply will not be charged.  

Exceptions to duty to disclose Associate information

Duplication: There is an exception to the duty to disclose associate information to the RCI if the Associate is already subject to other transparency regimes. This is known as the Duplication Exclusion. Its rationale is to avoid double-reporting of information which is either already publicly available or which can be accessed via a request under freedom of information (FOI) legislation. It results in the exclusion of an extensive range of Associates from the scope of the RCI, for example: 

  • UK companies, limited liability partnerships and eligible Scottish partnerships (on the basis that they are covered by the UK-wide People with Significant Control Register (PSC) which was established in June 2016 under the Companies Act 2006);
  • mutual and public authorities (on the basis that they are subject to the FOI regime); and
  • overseas entities (once the UK Register of Overseas Entities is up and running – see below). 

Protection: There is no general exemption on grounds of confidentiality or privacy, but there is a right to be excluded from the RCI where the information to be disclosed would put the relevant person at serious risk of violence, abuse, threat of violence/abuse or intimidation (e.g. in the case of domestic abuse).  

Certain relationships: It appears that the Regulations are not intended to catch the relationships which owners/tenants may have with creditors, administrators, paid professional advisers or landlords, even though those relationships may involve an element of control/influence.  

Enforcement of duties under the Regulations  

It is to be a criminal offence, punishable by a fine of up to £5,000, to fail to provide the required information to the RCI, to provide false or misleading information, or to fail to comply with various other requirements. The Scottish Government has suggested that fines might be reapplied if non-compliance continues for a period of time.

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. 

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. As mentioned above, there is to be a grace period (currently proposed as six months from when the RCI is intended to become operational, on 1 April 2021) during which penalties for failure to comply will not be charged.  

Unlike the proposals for a UK Register of Overseas Entities (described below), the Regulations do not impose any civil sanctions in the event of failure to provide the required information.

UK Register - overseas entities owning UK land

We cannot talk about the RCI proposals without also mentioning draft legislation which has been published by the UK government to create a register of beneficial owners of overseas entities which own UK land (UK Register of Overseas Entities). Like the RCI, it aims to identify the people who actually control land. However, as the name suggests, it is restricted only to overseas entities.

The UK Register of Overseas Entities is also intended to launch in 2021. Its main motivation is to "create a hostile environment for money launderers who want to use the UK property market to hide unlawful funds". Overseas entities will be required to annually submit updated information or confirm that the existing information is still correct.

Criminal sanctions will apply in the event of non-compliance, and in addition there is to be a civil sanction in the form of a bar on registration of title in the property registers until the required information has been submitted to the UK Register of Overseas Entities. 

It is still to be confirmed how the UK Register of Overseas Entities and the RCI will interact.

Responses to the Regulations

Returning to the Regulations, various concerns were raised in a report published by the Environment, Climate Change and Land Reform Scottish Parliamentary committee (Committee) in November 2018 and in an analysis of consultation responses published by the Scottish Government in April 2019. 

Concerns regarding Duplication Exclusion

Much of Scotland's land would not fall within the scope of the Regulations due to the Duplication Exclusion. The Committee believes that it is in the public interest for all Associate information to be included in the RCI, even where it would duplicate other registers, and that the administrative inconvenience of double-reporting is not a sufficient justification for excluding this information. There might otherwise be a fragmentation of information, making it difficult for the general public to find out who controls Scottish land. Other transparency regimes/registers might not require exactly the same type/level of detail as the Regulations, which could create a loophole for certain Associates. The Committee believes that potential FOI request information should be included in the RCI, as it would otherwise not meet the "aspirations of a transparent and accessible system". Various consultation participants raised similar concerns.

Concerns regarding enforcement

The Committee is concerned that the proposed level of fine is not sufficient to deter breaches. It suggests that certain Associates might think this a price worth paying for anonymity. Comparable regimes such as the PSC and the proposed UK Register of Overseas Entities have more stringent sanctions, such as higher fines (e.g. £10,000) and even imprisonment. The Committee recommends that the Scottish Government raises the level of fine and also considers civil sanctions, such as a bar on registration of title in the property registers. The consultation participants were divided on this point, with some favouring stronger sanctions, whilst others do not want criminal sanctions at all on the basis that people may inadvertently fail to comply with the Regulations.

Other concerns

The Committee and several of the consultation participants make calls for various other changes to the Regulations, such as:

  • clarification of various points in the Regulations and accompanying explanatory notes, e.g. precisely which entities are exempt from the Regulations; exactly what constitutes "control" and "influence"; and the extent of the powers to make and amend entries in the RCI;
  • that the grace period (during which penalties will not be charged for non-compliance) should be longer than six months;
  • that more information should be provided about how the RCI will be accessed (and why it is proposed to be accessible free of charge when most other public registers are not) and what the plans are to publicise the Regulations to ensure that people do not inadvertently fail to comply;
  • in the event of a breach of the Regulations, the relevant individual to be given notification of their breach and a period of time within which to comply, prior to imposition of a penalty; and
  • proper consideration of data validation and verification procedures.

In contrast to the UK Register of Overseas Entities, which is proposed to be administered by Companies House, the RCI is proposed to be administered by Registers of Scotland. The Committee and the consultation participants are concerned about the likely additional work and cost which establishing and maintaining the RCI would involve for Registers of Scotland, as well as for the Lands Tribunal for Scotland and Police Scotland, and they question how this is to be resourced.

It is worth noting that the draft legislation creating the UK Register of Overseas Entities has also been subject to criticism. A pre-legislative scrutiny report published in May 2019 raised various concerns about the draft legislation, many (unsurprisingly) involving the same issues that surround the RCI, such as exemptions, clarity and enforcement. The UK government published a response to the report on 18 July 2019, agreeing with some of the report’s recommendations but rejecting various others.

Conclusion

Identifying decision-makers behind land ownership in Scotland is a contentious issue among stakeholders. The Regulations go some way to implementing the Scottish Government's requirement for a register of decision-makers, and it will be important for owners/tenants to be ready to submit the required information once the RCI becomes operational. However, significant concerns have been expressed that the Regulations do not go far enough to meet the aims of the Scottish Government's land reform programme. It is now for the Scottish Government to respond to these concerns. It remains to be seen how much this will change the current proposals, so watch this (transparent) space…

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions