This new register, known as the Register of Controlled Interest, includes information that, up until now, may not have been publicly transparent elsewhere. Owners and tenants (for more than 20 years) have until 01 April 2024 to register, and, unless they are exempt, they would be well advised to do so, because a failure to comply is a criminal offence, and can result in a hefty fine. For the first time in Scotland, the Registers of Scotland now operate a Register of Persons Holding a Controlled Interest in Land: a new way of seeking transparency of ownership and control of property in Scotland. The Scottish Parliament has recently introduced a development that seeks to improve public transparency in relation to those individuals who have a degree of control regarding decision-making and land. Regulation 3 of the Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021/85, which came into force on 1 April 2022, established a new register: the Register of Persons Holding a Controlled Interest in Land (the Register of CI for short). This new register should offer some significant improvements in terms of transparency and public access to information regarding control of land.
Land Register and Sasines Register vs. The Register of CI
In Scotland, there are two public registers that can be used to identify the owner of land: (i) the Land Register; and (ii) the General Register of Sasines. By contrast, the purpose of the Register of CI is not to record ownership, but rather to record who acting behind the scenes. The Register of CI is not concerned with ‘beneficial’ nor ‘economic’ ownership but instead, shifts focus onto those cases where the owner or tenant of the land does not have significant control or chooses not to exercise their decision-making powers.
Recorded Person vs. Associate
The roles of ‘recorded person’ and ‘associate’ are of great significance in the Register of CI. A person who is registered as owner or tenant in the Land Register or General Register of Sasines, and also registered in the Register of CI as having an associate, is considered a ‘recorded person’. An ‘associate’ is a person who has some degree of power in directing what happens to the property. The Regulations state that the associate has the right to exercise (or actually exercises) significant influence or control over the recorded person’s dealings with the land.
Notifying the Keeper
The owner or tenant (for more than 20 years) must supply the Keeper of the Registers with details of the associate within 60 days, and an entry must be made into the Register of CI. The recorded person must also notify the associate must of their status within 7 days of the notification to the Keeper, in order that the associate can fulfil ongoing obligations. The Register of CI is available for all to access and there is no fee for searching the regime, or for making notifications to the Keeper.
Who has capacity to be a recorded person or an associate?
Schedule 1 of the Regulations contain five categories of recorded persons and provides examples of where the Register of CI regime will apply. Whilst the examples do not all use the expression ‘associate’ in the same sense, they do share some commonalities: a recorded person may be an individual; a partnership; a trust; an unincorporated body; an overseas entity; or an individual who owns or is the tenant of land on behalf of any of the aforementioned. This covers multiple scenarios. For example, if A is a trustee but is not named in the title sheet of the property as one of the joint owners, as an off-register trustee, A is an associate and is therefore registerable, despite the fact A has no economic interest in the property owned by the trust. The Register of CI is engaged if someone other than the recorded person has either (1) more than 25% of the shares or (2) more than 25% of the voting rights. Where the owners of a property make all decisions in relation to the land, the Register of CI is not engaged.
Significant influence and control
The Regulations use the expression ‘significant influence and control’ when defining the role of an associate. They state that the test applies where the associate has the right so to act or, does, in fact, so act. Three out of the five categories listed in Schedule 1 lay down examples of significant influence and control relevant to instances involving nominees, partnerships, trusts and overseas entities but these examples are non-exhaustive.
Whilst the benefits of the new register should not be overlooked, a failure to comply with the Register of CI can have serious consequences. If owners, tenants (for more than 20 years) and/or associates fail comply with their duties, it constitutes a criminal offence and will result in criminal action and a fine currently set at £5,000. There is a two-year grace period to allow for compliance however, as from 1 April 2024, underestimating the importance of the obligation to register will result in serious penalties.
Schedule 1 of the Regulations lists five types of situations where an ‘associate’ may be identified and Schedule 2, demonstrates exceptions where the Register of CI is not engaged. To avoid the issue of duplication of records, exceptions exist however, the scope of the exceptions is limited and they primarily focus on preventing double registration (this occurs where another transparency regime under UK law applies to the recorded person). Further exemptions apply if the registered owner or tenant is a UK Company, Limited Liability Partnership, Limited Company or a Public Authority. There is no doubt that the Register of CI will provide a solution in respect of the on-going difficulties surrounding the lack of transparency of ownership and control of property. Landowners and those with a controlled interest must ensure that they cultivate a positive attitude to the recent developments and accept that registration in the Register of CI must now be considered a top priority.