Driving Out Dirty Money

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With £1.5 billion worth of UK property being bought by Russians accused of corruption or with links to the Kremlin, the Scottish Parliament has introduced legislation seeking to improve transparency of ownership and control of property in Scotland.

In the commercial real estate sector in Scotland, a sizeable proportion of the property investment and development transactions involve overseas structure and entities.

The Register of Persons Holding a Controlled Interest in Land (RCI) is a new register, required by law, that became operational on 1 April 2022 and will be maintained by Registers of Scotland to provide greater transparency on land ownership in Scotland.

To date, the two main Scottish public property registers - the Land Register of Scotland and the General Register of Sasines - both contain information about the current owners of land and property throughout Scotland. The RCI will now go one step further in cases where the named owner or tenant does not control or make decisions relating to the property. Improving transparency when it comes to land ownership in Scotland, the RCI will look behind the owner and disclose the details of the persons who truly have control over and make decisions in relation to the property. Those with this controlling interest may be different from the registered owner.

The RCI uses some new terms for those involved in the property:

  • “the recorded person” who is the owner or tenant and has control over the decision making for the property;
  • An “associate” who is not an owner or tenant but has control over the property. The Regulations refer to the associate as the person who "has the right to exercise, or actually exercises, significant influence or control over the recorded person's dealings".
  • “Control” refers to directing the activities of another. “Significant influence” refers to being able to ensure that another person will typically adopt the approach that the first person desires. “Dealings” refers to disposing, leasing, creating real rights over, or changing the use of, the land
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From 1 April 2022, if the ownership or tenant's interest in a long lease of any property registered in the Register of Sasines or Land Register is a controlled interest, then (subject to some exceptions) the recorded person will have to provide their details, details of the land, and details of the associate(s) exercising control, all to be held on the RCI.

The information to be included about each recorded person or associate includes their name, address, the property the interest is held in and the capacity in which the property is owned or tenanted. In other words, is the person’s interest as an individual, a partner of a firm or as a trustee. The RCI may have to be updated on each occasion property or land is sold or transferred.

Details will need to be provided to the RCI within 60 days of a person gaining a controlled interest. For controlled interests existing at 1 April 2022 there will be a period of 12 months in which to register.

The duty to disclose information for the RCI will apply to a wide range of landowners and tenants. It is anticipated that those with property in rural areas, such as farms and estates, will be particularly impacted as these are commonly owned and/or tenanted by partnership and trust structures.

Failure on the part of the recorded owner or tenant to comply with the duty to disclose information without a reasonable excuse is a criminal offence which is punishable by a fine of up to £5,000. The same fine can also be issued if a person makes a false or misleading statement or fails to disclose material information.

The aim of the Register is to increase transparency about who makes decisions in relation to land and property in Scotland. This will make it easier for people to ascertain who has control in cases where it may not have been easy to determine previously. It is time for land owners and those with controlled interests to embrace the change or pay the price.

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