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Obligations Relating To Controlled Interests in Land
What are the RCI Regulations?
The Land Reform (Scotland) Act 2016 (Register of Persons Holding a Controlled Interest in Land) Regulations 2021 (the “RCI Regulations”) came into force on 1 April 2022, and created the Register of Persons Holding a Controlled Interest in Land (the “RCI”).
The most commonly affected parties are partnerships, trusts and other unincorporated bodies (subject to the exemptions set out below) but the RCI Regulations also impacts upon individuals and other legal entities.
Why were the RCI Regulations required?
The Scottish Land Registers – the Land Register and the Sasines Register – record everyone who has a registered title to land in Scotland, including the tenants of long leases (over 20 years’ duration) of land. But – in some circumstances – the registered owner or tenant may not be the only person who is entitled to exercise control over the land in question. According to the Scottish Government, the primary purpose of the RCI Regulations is to increase transparency when it comes to land ownership in Scotland, by making public information on who makes decisions and has control of land. The RCI will therefore contain the details of the persons who truly have control or influence over the land. Knowing who controls land may be vital to neighbours, developers, public authorities and a host of other parties.
The RCI is open to the public and is free to search.
Grace period and potential changes to the RCI Regulations
While the RCI Regulations are already in force, there is currently a grace period during which no penalties will be issued for non-compliance. The Scottish Parliament have approved a SSI, delaying the date after which penalties can be issued for non-compliance with duties under the RCI legislation. The offence provisions will now take effect after 1 April 2024 and not 1 April 2023.
In the meantime, the RCI remains open to submissions, and this delay does not change the duty to register. Those in the scope of the RCI are still expected to comply.
Once the grace period comes to an end, failure to comply will be a criminal offence punishable by a fine (up to £5,000 at the time of writing).
Key terminology
An associate is an individual or entity (for example a partnership, a club or an unincorporated body) that has significant influence or control over owners or long term tenants of land. An associate is not the owner or tenant of the land.
A recorded person is an individual or entity that owns land or is a tenant under a long lease of land registered in the Scottish Land Registers that has an associate, and therefore must register in the RCI.
Significant control or influence is where an associate can:
- direct the activities of the recorded person; or
- ensure that the recorded person will typically adopt the approach that the associate desires.
Despite the obvious influence which they otherwise have, creditors acting under a Standard Security (Mortgage) are not considered associates for the purposes of the RCI Regulations.
When is RCI Registration necessary?
Registration in the RCI is free of charge and can be done online here.
It is necessary to register in the RCI if:
- a recorded person is registered as the owner of land or as a tenant under a long lease; and
- an associate has significant control or influence over the recorded person – for examples of circumstances where an associate has been created, please refer to the following paragraph; and
- the recorded person is not subject to another transparency regime or is otherwise exempt. For example, the following entities are exempt:
UK companies, LLPs and Scottish Limited Partnerships;
Charitable Incorporated Organisations; and
public authorities subject to Freedom of Information legislation
Whether or not an association will trigger registration in the RCI is not straightforward. By way of example, there will be an association where:
- There is an individual recorded person who has entered into a contract or other arrangement with an associate, under which either: the recorded person owns or tenants the land for or on behalf of the associate; or the associate has significant influence or control over decisions about what the recorded person can do with the land as a result of the contract or other arrangement (such as an option to purchase, depending on the terms); or
- The recorded person is in a partnership with another partner that is not registered as owning or tenanting the land; or
- The recorded person owns or tenants the land as a trustee or in trust for someone else and another trustee is not registered as owning or tenanting the land; or
- The recorded person owns or tenants the land for an unincorporated association (for example a sports club or village hall committee) and another person with general control or management is not registered as owning or tenanting the land; or
- The recorded person is an overseas entity in respect of which someone else holds a 25% or more controlling interest in what the recorded person can do with the land.
In such circumstances, the recorded person will need to provide information about their associate in the RCI. Please be aware that the above list is not exhaustive and there will be other circumstances to which the RCI Regulations may apply.
The RCI Regulations apply retrospectively. This means there is an obligation to register a controlled interest in land even if the controlled interest was established before 1 April 2022.
Duties under the RCI Regulations
The recorded person has the following duties:
- to register required information about themselves in the RCI within 60 days of an association being formed. Such information includes their name and address (if an individual) or registered number (if applicable to non-individuals). They must also provide information about the land which they own or tenant and information about the associate (for example their name, address and date of birth (if an individual) or their registered office (if applicable to non-individuals);
- to notify the associate within seven days of submitting a RCI entry; and
- to keep their details held in the RCI up to date.
The associate has the following duties:
- to provide required information about themselves to the recorded person;
- to notify the recorded person if the associate knows or ought reasonably to know that they are an associate; and
- to keep their details held in the RCI up to date.
If an associate has concerns that publishing such information in the RCI would put them at risk of violence, abuse or intimidation, the associate can apply to request that their information is not made public.
How can RCCW Help?
The RCI Regulations are complex. It is not always immediately obvious whether an individual or entity would be considered an associate or not, but recorded persons and associates may face significant future penalties if they ignore the RCI Regulations.
If you think you may fall into the category of recorded person or associate, please contact a member of Raeburn Christie Clark & Wallace’s Commercial Property team for specialist advice.
