Register of Controlled Interests: when will it apply?

1.1    The RCI will come into force on 1 April 2022.

1.2    The Regulations and accompanying explanatory document were passed by the Scottish Parliament on 17 February 2021.

1.3    The Regulations apply to specified categories of owners of land and tenants of registrable leases (that is, leases of over 20 years) where there is someone else with significant influence or control over the decision making in relation to that land.

1.4    Each entry in the Register will be specific to a piece of land in respect of which there is some sort of controlling interest over the owner or tenant of that land. An entry will contain information about the owner or tenant of the piece of land (the controlled entity) as well as information about the persons who are associated with the recorded person (the influencers or controllers).

The influencers or controllers are called the "Associates".

The controlled entity is called the "Recorded Person".

1.5    Associates are those who have significant influence or control over Recorded Persons by way of any of these types of association:

• 1.5.1    a contract or other arrangement to give the Associate influence or control over significant decisions relative to the relevant property where the owner/tenant is an individual;
• 1.5.2    a partnership (in which for Scottish partnerships at least one partner is an individual; or a general partnership governed by English law);
• 1.5.3    a trust;
• 1.5.4    an unincorporated association; or
• 1.5.5    an overseas entity.

1.6    Key to the Regulations are the concepts of "control" and "significant influence". In terms of regulation 2(2) for the purposes of the Regulations, a reference to:

• 1.6.1    control is a reference to where a person can direct the activities of another;
• 1.6.2    dealings with the land is a reference to disposing, creating real rights over, leasing or changing the use of the land; and
• 1.6.3    significant influence is a reference to where a person is able to ensure that another person will typically adopt the approach that the person desires.

1.7    It is the ability or right of a person to control or direct the decision-making of an individual or entity which owns or tenants land that determines whether they are an "Associate" for the purposes of the Regulations and Schedule 1 of the Regulations provides further detail and identifies who is an "Associate" for each category of individual or entity (noted at 1.5 above) to which the Regulations apply.

1.8    Schedule 2 to the Regulations sets out a list of entities that are subject to other transparency regimes and to which the duty in regulation 10 to provide details of controlled interests and Associates does not apply.

1.9    The purpose of this article is to identify when individuals and entities are required to provide details for inclusion in the RCI in certain common property holding structures and scenarios. It addresses specific questions and is not intended to provide full guidance on the ambit and scope of the Regulations. The article is divided into six sections, one for each category of entity to which the Regulations apply and one general section.

1.10    The following are key points to note:

• 1.10.1    Other than the specific circumstances detailed in the Regulations, the fact some information regarding Associates is contained in the Land Register or other public records will not of itself bring this out of scope of the Regulations and only those exceptions specifically detailed in the Regulations apply.
• 1.10.2    Where a Schedule 2 entity is a Recorded Person (for example a UK registered company), this means they fall outwith the scope of the Regulations. This is irrespective of the capacity in which they act. This means if, for example, a UK company is the Recorded Person the fact that they hold the property as a trustee, a partner or on behalf of a foreign entity will not bring them in scope of the Regulations.
• 1.10.3    The Recorded Person has a period of 60 days from the date the association started to send details of any Associates to the RCI.

2.1           Introduction

2.1.1    Part 1 of Schedule 1 concerns persons with contractual or other arrangements with an individual.

2.1.2    In relation to a Recorded Person who is an individual, the following persons will be Associates:

• 2.1.2.1    any person on whose behalf the Recorded Person owns or leases the property – this is unlikely to be very common as most often this would be some sort of trust arrangement (and therefore dealt with under Part 3 of Schedule 1 (see  below), but it could apply e.g. to a commercial "stalking horse" or "fronting" arrangement, designed to ensure that the person from whom the land was purchased or tenanted does not know the true identity of the person who wanted to obtain ownership (or control) or a lease of the property; and
• 2.1.2.2    any person who has the right, or actually exercises, significant influence or control over the Recorded Person's dealings with the property.

2.2           Scenarios

2.2.1    An individual is registered as the owner of a house and there are unconditional concluded missives for sale of the house to another individual.  Does the individual have to provide details to the RCI?

There is no duty to register details in the RCI as the specific scenario falls within the exception in paragraph 2(f) of Part 1 of Schedule 1: 

"the person's contract or arrangement with the individual is in the form of concluded missives for the sale of the land by the individual to the person where the title to the land has not been transferred to the person".

2.2.2    An individual is registered as the owner of a plot of land but has entered into a conditional missive or contract (conditional on planning permission being obtained) to sell the land to company X. Does the individual have to provide details to the RCI?

There are two separate points here. The exception in the regulations detailed at 2.2.1 above applies only to "missives", and says nothing about a contract formed in another manner. In addition, it is unclear whether the exception for concluded missives extends to conditional missives and due to the uncertainty it would be prudent to assume the Regulations may apply and reporting obligations may arise if the conditional missives amount to significant influence and control. 

2.2.3    An individual is registered as the owner of a plot of land but has entered into an option agreement^[1] with company X. Does the individual have to provide details to the RCI? 

An option agreement may amount to significant influence and control and each agreement will need to be considered on its own merits. While an option agreement may have the same legal effect as conditional missives, the Regulations do not carve these out. Bear in mind option agreements will be out of scope where the Recorded Person is listed in the Schedule 2 list of persons subject to other transparency regimes (for example a UK company).

2.2.4    An individual is registered as the owner of a plot of land but has entered into an exclusivity/lockout agreement^[2] with company X in relation to that plot and that individual undertakes not to encumber or deal with the title to the plot of land (except with company X) for a period of six months. Does the individual have to provide details to the RCI?

A normal exclusivity agreement of a duration required for diligence for the property in question would not appear to be in scope due to the temporary and specific nature of the agreement. This scenario is therefore unlikely to be in scope provided six months is a reasonable period for such diligence.

2.2.5    An individual is registered as owner of a number of residential properties. They have entered into a property management agreement with We Manage Property Ltd (a UK company) in terms of which the management company manages the various properties, collects rent, finds tenants and deals with everything that happens day to day. Does the individual have to provide details to the RCI?

There is no duty to register details in the RCI as this scenario falls within the exception in paragraph 2(b)(ii) of Part 1 of Schedule 1:

"the person's relationship to the individual is that of a paid professional advisor to the individual (such as a solicitor or an accountant)".

2.2.6    An individual grants a power of attorney in favour of their lawyer allowing their lawyer to sign certain documents relating to a property on their behalf. Does the individual have to provide details to the RCI?

No, in cases such as this (where the authority is given only for the purposes of execution), the individual granter of the power of attorney retains control of the decision making in relation to the property and the attorney remains accountable to the individual. The attorney does not have significant influence and control over the individual's dealings with the land.

There may be circumstances where a POA does amount to significant influence or control.

2.2.7    Paul owns a flat in Edinburgh which he shares with his girlfriend Lucy. Does Paul have to provide details to the RCI?

Arguably if Lucy has control or significant influence over the decisions Paul makes about the flat, this would fall within paragraph 1(b) of Part 1 of Schedule 1. However, there is no duty to register details in the RCI as this scenario falls within the exception in paragraph 2(m) of Part 1 of Schedule 1:

"the person's contract or arrangement with the individual is a cohabitation agreement (that is, an agreement between two persons living together as if they are spouses)". 

In addition, the Explanatory Notes provide that the Regulations are not intended to impact upon owner-occupier situations in which only one party is registered as the legal owner of the land, e.g. a couple where only one party is the legal owner.

If Lucy and Paul were married and have no other contractual or other relationship which gives control or influence, and title to the flat remained solely in Paul's name there would also be no need to register details for Lucy as this would be covered by the general exception at 2(p) of Part 1 of Schedule 1:

"the person possesses a right of occupation over land owned or tenanted by the individual without any form of payment or other consideration being required in return".

2.2.8    Mr Jones buys a flat for his daughter, Amy, to live in while she is at university. Title to the flat is taken in Amy's name; however Mr Jones pays the mortgage and in practice makes all the decisions in relation to the flat. Does Amy have to provide details to the RCI?

Where Mr Jones pays the mortgage and in practice makes decisions in relation to the flat, he may have significant influence and control and the individual circumstances of each case will need to be considered fully.

2.2.9    An individual is registered as owner of a property which he rents out to a company for a period of 15 years. Does the individual have to provide details to the RCI? Would it make a difference if it was a lease for a period of over 20 years?

Not normally, irrespective of the length of the lease.  Under a normal lease a tenant does not have significant influence or control over the landlord's interest in the property. The owner still makes the decisions about the land, albeit they have to take account of the fact that there is a tenant in place. This is not what is intended to be significant influence or control in terms of the Regulations.

^[1] An option agreement can contain a call option, a put option or both. A call option allows the option holder to call on the landowner to sell the property to it. The option may be exercisable at any time during the option period or only on the occurrence of certain events such as the obtaining of planning permission; however the decision whether or not to exercise the option rests with the option holder. A put option enables a landowner to give notice requiring the person granting the option to buy the property. The landowner may be able to give notice at any time during the option period or only when certain conditions precedent have been met. However with this type of option it is the landowner that decides whether or not to exercise the option.

^[2] In relation to property transactions, exclusivity agreements (also called lockout agreements) are agreements which try to ensure that the property owner negotiates solely with the other party for a period of time. They give a potential purchaser an exclusive opportunity to negotiate with the seller, carry out investigations into the property and commit to the transaction without competition from other parties.

3.1           Introduction

3.1.1    Part 2 of Schedule 1 concerns land held by, or on behalf of, partnerships.^[3]

3.1.2    In relation to a Recorded Person which is a partnership (or holds land on behalf of a partnership), the following persons will be Associates:

• 3.1.2.1    any general partner of the Recorded Person who is not registered as owning or leasing the property;
• 3.1.2.2    any general partner of another partnership which is (itself) a partner of the Recorded Person;
• 3.1.2.3    any individual who has significant influence or control over a relevant entity which is a partner of the Recorded Person;
• 3.1.2.4    any individual who has the right to exercise, or who actually exercises, significant control over (1) the Recorded Person or (2) a partnership in which the Recorded Person is a partner.

3.1.3    In the context of partnerships, persons with significant influence or control include those who:

• 3.1.3.1    have the right to unilaterally take or veto decisions about the governance or running of the partnership;
• 3.1.3.2    have the right to appoint or remove any of the partners; or
• 3.1.3.3    are able to influence the decision making of the partnership without holding a formal governance position within the partnership, particularly in respect of the partnership's dealings with land.

3.2           Scenarios

3.2.1    A Scottish limited partnership owns land. Which of the following scenarios would require information to be submitted to the RCI?

• 3.2.1.1    Title to the land is held in the name of the Scottish limited partnership itself.
  No disclosure would require to be made. Regulation 10(2) provides that the Regulations do not apply to any Recorded Person of a type listed in Schedule 2 (list of persons subject to other transparency regimes). Schedule 2, paragraph 4 includes "an eligible Scottish Partnership within the meaning of regulation 3(2) of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017". This includes Scottish limited partnerships.
• 3.2.1.2    Title to the land is held in the name of two individuals (who are general partners of the Scottish limited partnership) and the title sheet narrates that they are holding the property as trustees for the Scottish limited partnership. There are other general partners who are not registered as owning the property on the title.
  Regulation 10(2) provides that the Regulations do not apply to any Recorded Person of a type listed in Schedule 2 (list of persons subject to other transparency regimes). Schedule 2, paragraph 4 includes "an eligible Scottish partnership within the meaning of regulation 3(2) of the Scottish Partnerships (Register of People with Significant Control) Regulations 2017". Even though title is held in the name of the general partners as trustees on behalf of the Scottish limited partnership (rather than in the name of the partnership itself), there would be no need to provide relevant details to the RCI.
  The same would apply where the title is held by a foreign entity or entities (who are general partners of the Scottish limited partnership) and the title sheet narrates that they are holding the property as trustees for the Scottish limited partnership.
  Scottish limited partnerships are out of scope of the Regulations.  
• 3.2.1.3    As in 3.2.1.2 (title to the property is held in the name of two individuals as trustees for the Scottish limited partnership); however there is no reference to the partnership on the title.
  Disclosure would have to be made under Part 2 of Schedule 1 (Partnerships).

3.2.2    An English limited partnership owns land. Which of the following scenarios would require information to be submitted to the RCI? 

• 3.2.2.1    Title to the land is held in the name of two individuals (who are general partners of the English limited partnership) and the title sheet narrates that they are holding the property as trustees for the English limited partnership. There are other general partners who are not registered as owning the property on the title. 
  Disclosure would have to be made under Part 2 of Schedule 1 (Partnerships).
• 3.2.2.2    As in 3.2.2.1 (title to the property is held in the name of two individuals as trustees for the English limited partnership); however there is no reference to the partnership on the title.
  Disclosure would have to be made under Part 2 of Schedule 1 (Partnerships).
• 3.2.2.3    Title to the land is held in the name of two UK companies (who are general partners of the English limited partnership) and the title sheet narrates that they are holding the property as trustees for the English limited partnership. There are other general partners who are not registered as owning the property on the title. 
  While English limited partnerships are in scope for the Regulations, regulation 10(2) provides that regulation 10 (which sets out the Recorded Person's duties to provide information to the RCI) does not apply to any person subject to other transparency regimes listed in Schedule 2. Companies incorporated under the Companies Acts are listed in Schedule 2 (as they already have to provide information to the People with Significant Control Register) and so do not have to provide the information required by regulation 10.
  As the two companies holding title for the English limited partnership are UK companies and therefore Schedule 2 entities, they fall outwith the scope of the Regulations even though they hold the property as trustees for the English limited partnership.

3.2.3    Company A has title to a property which it holds on behalf of partnership B. The other general partners are UK company C and UK company D. Does company A have to provide information about the other general partners (UK company C and UK company D) to the RCI?

If company A is a UK company (and thus a Schedule 2 entity), it would fall outwith the scope of the Regulations, even though it holds the property on behalf of a partnership.

If company A was a foreign company (other than a European public limited-liability company (Societas Europaea)), the Regulations would apply and company A would have to report Associates both under Part 2 of Schedule 1 (Partnerships) (which would include UK company C and UK company D as general partners), and under Part 5 of Schedule 1 (Overseas entities).

3.2.4    Does "general partner" in paragraph 3(b)(i) and (ii) in Part 2 of Schedule 1 of the Regulations include all partners in Scottish partnerships?

Yes. The Explanatory Notes provide (at paragraph 107) that paragraph 5 sets out the definition of "general partner"; however there doesn't appear to be a definition of "general partner" in the Regulations.

The confusion arises as the term "general partner" tends to be used in the context of Scottish limited partnerships to distinguish between those partners who take a significant role in the management of the partnerships (the general partners) from "limited partners" who do not have such a role. It does not tend to be used to describe partners in other Scottish partnerships.

Despite this, the intention would appear to be that all partners in Scottish partnerships (who are not Recorded Persons) should be "Associates" for the purposes of the Regulations.

3.2.5    Individual A has title to a property which they hold on behalf of partnership Y. The other general partners are individual B, UK company C and Scottish partnership D (which is a Scottish limited partnership). Individuals E and F are the general partners of Scottish partnership D. Who are A's Associates?

Individual B, UK company C and Scottish partnership D are all Associates because of their positions as “general partners” of partnership Y. Individuals E and F will be registered as well because of their positions as general partners of Scottish partnership D.

3.2.6    A farming partnership (the partners in which are husband and wife) own land. Title to the land is held in the name of the husband and wife as individuals with no reference to the partnership on the title. There are no other partners or persons who have significant influence and control. The parents decide to bring their daughter into the partnership, and she is assumed as partner; however no change is made to the title. Should a disclosure be made to the RCI?

Initially no disclosure requires to be made to the RCI as at this point there are no "Associates" in terms of the Regulations. However when the daughter is assumed as a partner, this would trigger the requirement to disclose information to the RCI as the daughter is classed as an Associate under paragraph 3(b)(i) of Part 2 of Schedule 1. This must be done within 60 days of the day on which the daughter becomes a partner. Paragraph 2(a) of Part 1 of Schedule 1 determines that Part 1 of Schedule 1 is not applicable to this scenario and instead Part 2 of Schedule 1 must be applied.

3.2.7    Two individuals as partners of an English partnership are registered as owner of a property which they rent out to a company for a period of 15 years. Is the tenant an Associate? Would it make a difference if it was a lease for a period of over 20 years?

Not normally, irrespective of the length of the lease.  Under a normal lease a tenant does not have significant influence or control over the landlord's interest in the property. The owner still makes the decisions about the land, albeit they have to take account of the fact that there is a tenant in place. This is not what is intended to be significant influence or control in terms of the Regulations.

^[3] Remember, Scottish partnerships where all the partners are limited companies, SLPs and LLPs are all required to report information to the PSC Register and so where they are the Recorded Person (the owner or tenant of the property) there is no requirement to register details under the Regulations.

4.1           Introduction

4.1.1    Part 3 of Schedule 1 deals with land held by a person as a trustee of, or otherwise on behalf of, a trust.

4.1.2    In relation to a Recorded Person which is a trust (regardless of in what jurisdiction the trust may have been set up), the following persons will be Associates:

• 4.1.2.1    any trustee of the trust who is not among the trustees who are named in the title or lease;
• 4.1.2.2    any individual who has significant influence or control over a relevant entity which is a trustee of the Recorded Person;
• 4.1.2.3    any individual who has the right to exercise, or who actually exercises, significant influence or control over the Recorded Person or the trust.

4.1.3    In the context of trusts, persons with significant influence or control include those who:

• 4.1.3.1    have the right to appoint or remove a trustee (other than by application to court);
• 4.1.3.2    have the right to direct the distribution of assets or funds, or to direct investment decisions of the trust;
• 4.1.3.3    have the right to amend the trust deed;
• 4.1.3.4    have the right to revoke the trust; or
• 4.1.3.5    otherwise have significant influence or control over the decision-making of a trustee or trust, particularly in respect of the trustee's or trust's dealings with the land.

4.2           Scenarios

4.2.1    Company A (a UK registered company) holds a property as trustee for a trust. There are two other trustees (company B (a UK registered company)) and individual C; however company B and individual C are not registered as owners on the title sheet. 

Regulation 10(2) provides that regulation 10 (which sets out the Recorded Persons' duties to provide information to the RCI) does not apply to any person subject to other transparency regimes listed in Schedule 2. Companies incorporated under the Companies Acts are listed in Schedule 2 (as they already have to provide information to the People with Significant Control Register) and so do not have to provide the information required by regulation 10.

As company A is a Schedule 2 entity it falls outwith the scope of the Regulations even though it holds the property as a trustee.

4.2.2    Same scenario as 4.2.1; however individual C is also registered as owner on the title sheet. Company A (a UK registered company) and individual C hold a property as trustees for a trust. There is one other trustee company B (a UK registered company), however company B is not registered as owner on the title sheet.

As above, as Company A is a Schedule 2 entity they fall outwith the scope of the Regulations even though they hold the property as trustee.

Individual C however is a Recorded Person within scope and so would have to report Associates under Part 3 of Schedule 1 to the Regulations.

Company B is an Associate because of its position as trustees of the trust.

Paragraph 6(b)(iii) provides that an individual who has the right to exercise, or who actually exercises, significant influence or control over the Recorded Person (individual C) or the trust is an Associate. This paragraph is intended to catch any other individual who has significant influence or control but who is not a trustee. It is not intended to catch any individual within a Schedule 2 entity, disclosed as a trustee, who is already subject to another transparency regime as this would be a clear duplication. Individual C would need to tell the Keeper that company B falls within paragraph 2 of Schedule 2 and therefore they do not require to look further into control of that company.

4.2.3    Title to a property is held by company A (a foreign company) as a nominee. Behind the scene there is a declaration of trust by company A for the benefit of two Jersey companies as trustees of a JPUT. The unit holders are a collection of investors including a UK pension fund, other UK investment funds, and international investment funds. The UK pension fund has entered into a management contract with the trustees of the JPUT under which it manages the property and provides recommendations (e.g. as to the entering into of a lease transaction or whatever). The trustees then consider the recommendations and (invariably) proceed accordingly. 

Company A is the "Recorded Person".

Company A is a foreign company and so is itself caught by the Regulations and would have to record details of its Associates in accordance with Part 5 of Schedule 1 (e.g. any person who holds more than 25% of the voting rights in the nominee company).  

In addition, as that company holds the property as trustee for the benefit of the two Jersey trustee companies (as trustees of a JPUT), you also need to look at Part 3 of Schedule 1 which details who Associates are where the Recorded Person owns the land as trustee of, or otherwise on behalf of, a trust. In practice Associates under Part 3 and Part 5 can be included in the same submission and there will be no need to indicate whether they are caught because of Part 3 or Part 5.

This provides that where the Recorded Person owns the land as trustee of, or otherwise on behalf of, a trust the Associates are:

(i) any trustee of the trust who is not among the trustees who are named in the title: this doesn't apply as the nominee company is sole trustee holding the property in trust for the benefit of the two Jersey companies;

(ii) any individual who has significant influence or control over a relevant entity which is a trustee of the Recorded Person: this wouldn't apply as the nominee company is the sole trustee;

(iii) any individual who has the right to exercise, or who actually exercises, significant influence or control over the Recorded Person or the trust: the two Jersey trustee companies control what the nominee company does. So we would need to look at the individuals who control these trustee companies in the same way as for company A above.   

Asset managers at the UK pension fund who, in terms of the management agreement, provide paid professional advice to aid the decision making of the trustee companies would not be Associates as the ultimate power to make the decisions is retained by the Jersey trustee companies. Although the UK pension fund makes recommendations in relation to the properties which are generally followed, they do not have the power to make the decisions. The exceptions at paragraph 7(2)(a) of Part 3 of Schedule 1 and paragraph 13(i)(c) of Part 5 of Schedule 1 would apply.

The Explanatory Notes make clear that the Regulations do not require registration of beneficiaries as a matter of course and so the unit holders would not be Associates (unless they are engaged in the control or governance of the trust).

4.2.4    James buys a shop using his SIPP. Title is taken in the name of the pension provider (a UK registered company) as sole trustee for the benefit of the pension scheme.

Regulation 10(2) provides that regulation 10 (which sets out the Recorded Persons' duties to provide information to the RCI) does not apply to any person subject to other transparency regimes listed in Schedule 2. Companies incorporated under the Companies Acts are listed in Schedule 2 (as they already have to provide information to the People with Significant Control Register) and so do not have to provide the information required by regulation 10.

As the title is held by a UK registered company, it is a Schedule 2 entity that falls outwith the scope of the Regulations even though it holds the property as a trustee.

4.2.5    Individual A grants a disposition of a property with the usual trust clause in it. Does individual A have to register in the RCI as a Recorded Person (with the grantee the "Associate") until the grantee's title is registered?

No – from the date of application (contained in the acknowledgment of receipt from Registers of Scotland) individual A is no longer the owner of the property in terms of the Regulations (not being the person who is entered in the Land Register as the proprietor of the land).

If the application is rejected at a future date, any error which caused the rejection would generally be corrected and the application re-submitted to Registers of Scotland within the 60 day period allowed for registration in the RCI. Individual A should therefore not have to register in the RCI as a Recorded Person.  

4.2.6    Two individuals acting as trustees are registered as owner of a property which they rent out to a company for a period of 15 years. Is the tenant an associate? Would it make a difference if it was a lease for a period of over 20 years?

Not normally, irrespective of the length of the lease. Under a normal lease a tenant does not have significant influence or control over the landlord's interest in the property. The owner still makes the decisions about the land, albeit they have to take account of the fact that there is a tenant in place. This is not what is intended to be significant influence or control in terms of the Regulations.

5.1    Introduction

5.1.1    Part 4 of Schedule 1 concerns land held as a trustee of, or otherwise on behalf of, the members of an unincorporated association.

5.1.2    An unincorporated association is typically a small body that may be a charity or another voluntary or community group, e.g. village hall associations, sports clubs and faith and belief groups. As unincorporated bodies do not have legal personality, title or tenant's interests are usually held for them by trustees.

5.1.3    In relation to the person holding title (for the relevant unincorporated body) as owner or tenant, an Associate will be any person (not among the title or lease interest holders) who is responsible for the general control and management of the administration of the unincorporated body.

5.1.4    The Regulations provide that a person is responsible for the general control and management of the administration of the body if they hold an office or other official position in that regard (such as chair, treasurer or secretary).

5.2    Scenarios

5.2.1    Where, in the cases of land held by trustees or on behalf of unincorporated associations, due to the passage of time, the title showing in the Land Register or Register of Sasines lists, as owners or tenants of the land, persons who no longer have any legal connection to the property, does this mean there is no Recorded Person for the purposes of the Regulations?

No – by virtue of the Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Amendment Regulations 2021, a new regulation 23A is inserted into the original Regulations, which provides for cases where the land is held by trustees or on behalf of an unincorporated association and where, due to the passage of time, the Land Register or Register of Sasines lists as owner or tenants, only individuals who no longer have any legal connection with the property, with the result that there are no persons falling within the definition of owners or tenants in the original Regulations, then in such a case, the current trustees, or those holding on behalf of an unincorporated association, are treated as owners or tenants for the purposes of the original Regulations.

6.1    Part 5 of Schedule 1 concerns land in Scotland owned or leased by overseas entities.

6.1.1    It could apply to an overseas legal entity ("OLE") which owns land in Scotland and does not qualify as a Schedule 2 entity. It must register with the RCI if it has an Associate.

6.1.2    As Associate of an OLE will be a person who:

• 6.1.2.1    directly or indirectly holds more than 25% of the voting rights of the OLE;
• 6.1.2.2    directly or indirectly holds the power to appoint or remove a majority of the board of directors (or equivalent management body) of the OLE;
• 6.1.2.3    has the right to exercise, or actually exercises, significant influence or control over a partnership or unincorporated body which is not a legal entity or a trust, but in respect of which the above two paragraphs would apply if the relevant partnership, unincorporated body or trust was an individual; or
• 6.1.2.4    otherwise has the right to exercise, or actually exercises, significant influence or control over the decision making of the OLE, particularly in respect of its dealings with the property.

6.1.3    In the context of OLEs, persons with significant influence or control include:

• 6.1.3.1    a person who has absolute decision rights or absolute veto rights over decisions relating to the running of the business of the OLE;
• 6.1.3.2    a person whose recommendations are always or almost always followed by shareholders who hold the majority of voting rights in the OLE; and
• 6.1.3.3    a person who is significantly involved in the management and direction of the OLE.

6.2    Scenarios

6.2.1    Title is held by two Jersey companies as trustees for a Jersey unit trust.

As it is two foreign corporate entities that are the Recorded Person, this would be in scope of the Regulations and relevant Associates would need to be determined using Schedule 1, Part 5 and also Part 3 (as they hold as trustees).  

6.2.2    Title is held by UK company A and UK company B as trustees for a foreign limited partnership acting by its general partner foreign company 1. 

The Recorded Person in this case is both UK company A and UK company B. As they are UK companies they fall within Schedule 2 and are outwith the scope of the Regulations, so no entry is required.

6.2.3    A foreign entity is registered as owner of a property which it rents out to a company for a period of 15 years. Is the tenant an Associate? Would it make a difference if it was a lease for a period of over 20 years?

Not normally, irrespective of the length of the lease. Under a normal lease a tenant does not have significant influence or control over the landlord's interest in the property. The owner still makes the decisions about the land, albeit it has to take account of the fact that there is a tenant in place. This is not what is intended to be significant influence or control in terms of the Regulations.

7.1    Will agricultural tenancies under the Agricultural Holdings (Scotland) Acts 1991 and 2003 be caught by the Regulations?

Tenants of land are to be interpreted for the purposes of the Regulations, as tenants of either a lease recorded in the Register of Sasines or a lease registered in the Land Register of Scotland (due to the requirements of the Land Registration etc (Scotland) Act 2012). Agricultural tenancies will therefore only be caught if they are granted for a period in excess of 20 years. A 1991 Act tenancy originally for less than 20 years now running on tacit relocation, or a limited or modern limited duration tenancy for less than 20 years which is allowed to run on per the statutory extension provisions in the 2003 Act, would not be caught, but a limited or modern limited duration tenancy of more than 20 years from its outset would. Most agricultural tenants will therefore not constitute Recorded Persons and will not require to disclose any information under these Regulations.

7.2   Where registered social landlords (RSLs) own property, will they be required to disclose information to the RCI?

Most RSLs will be constituted as co-operative or community benefit societies within the meaning of section 2 of the Co-operative and Community Benefit Societies Act 2014. Such co-operative or community benefit societies are exempt under Schedule 2, as falling within the list of bodies subject to other transparency regimes: such bodies are subject to reporting requirements to the Financial Conduct Authority for publication in its Mutuals Public Register.

However, if such a co-operative or community benefit society is an Associate of a Recorded Person, in terms of one of the categories of association caught by the Regulations, then information about that society will require to be disclosed in terms of regulation 11(2)(c).

7.3    Company X (a UK registered company) owns a property. In terms of the title deeds, the neighbouring proprietor has a right of pre-emption over the property. Does company X have to provide details to the RCI? 

No – in terms of regulation 10(2) the duty to notify does not apply to any person of a type listed in schedule 2, which includes companies incorporated under the Companies Acts.

If it was an individual who owned the land the position would be the same but for a different reason. A pre-emption right would not fall within the scope of the Regulations. It is simply a right to acquire the property should it be subsequently disposed of and it carries no rights to affect decisions about that land in the meantime. The holder of a pre-emption right is not a person with significant influence or control in terms of the Regulations.

7.4    Company X (a UK registered company) owns a property. The title deeds contain a burden preventing the use of land for residential purposes, the benefited property being an adjacent property. Does company X have to provide details to the RCI? Is the position different if it was an individual who owned the property?

No – in terms of regulation 10(2) the duty to notify does not apply to any person of a type listed in Schedule 2, which includes companies incorporated under the Companies Acts.

If it was an individual who owned the land the position would be the same but for a different reason. The holder from time to time of a real burden is not a person with significant influence or control in terms of the Regulations even though that burden regulates the use of the land. They have no say in decisions about the land, and for as long as the land is used for the purpose in the burden the benefited owner has only a passive role.

7.5    Will I need to get a search in the RCI in addition to the standard property searches which are carried out when transacting with a property?

No – the purpose of the Register is about transparency of ownership and about enabling people to engage with those that have control over the decision making in relation to land. It will not have an impact on the conveyancing process and a search in the RCI will not be required at completion of a transaction.

The carrying out of an RCI search will not be a prerequisite to submitting an application for registration of a transaction to the Land Register.

7.6    In terms of regulation 10(5), before providing any information to the Keeper the Recorded Person must take reasonable steps to verify the accuracy of the Associate's required details with the Associate. Once the Recorded Person has contacted the Associate to verify its details (and to inform the Associate about the various matters referred to in regulation 10(6)), does the Recorded Person have to allow a reasonable time to receive a response from the Associate before notifying the Keeper or can notification be made immediately?

Regulation 10(5) says the Recorded Person has to take "reasonable steps to verify" the accuracy of the Associate's details. This does not necessarily mean waiting for any period of time if the required information is already known by the Associate. There is therefore no requirement for the Recorded Person to wait for receipt of the required confirmation from the Associate before notifying the Keeper. 

7.7    After the Regulations come into effect, a UK registered company X sells a property (held on a sasine title) to an overseas entity Y (which doesn’t fall within the exemptions listed in Schedule 2 to the Regulations). Assuming Y has Associates as defined in the Regulations, does Y have a duty to register with the RCI as a Recorded Person (a) when it takes entry to the property, or (b) when its title is registered in the Land Register?

A person will become "owner of land" for the purposes of the Regulations on the date of application contained in the acknowledgment of receipt received from Registers of Scotland for the application to register title in the Land Register. Overseas entity Y would therefore be required to register any "Associates" in the RCI within 60 days of the date of application received from Registers of Scotland.

7.8    At the time the Regulations come into effect, a property sold by overseas entity A to overseas entity B (neither of which fall within the exemptions listed in Schedule 2 to the Regulations) is undergoing first registration. Assuming both have Associates as defined in the Regulations, which of A or B would have duties to register with the RCI as the Recorded Person at the time the Regulations come into effect?

Overseas entity B will have a duty to Register in the RCI as it will have become an "owner of land" for the purposes of the Regulations on the date of application contained in the acknowledgement of receipt received from Registers of Scotland for the application to register title in the Land Register.

7.9    Who requires to update the Register when a person sells/assigns the property and is no longer a Recorded Person?

This would be the responsibility of the outgoing Recorded Person who will require to submit a request for them to be removed from the Register.

While every care has been taken in the preparation of the foregoing article, it is not to be relied on as conclusive of the effect and application of the Regulations, nor is it to be regarded as legal advice.

It has been prepared in advance of the Register going live, and the publication of Registers of Scotland Guidance.

No liability will attach to any member of the SPPSLG or their employers in connection with the content of this article. Anyone using the content of this article for the purposes of making entries in the RCI does so at their own risk.