Petra Grunenberg

As part of the Scottish government’s commitment to improving the system of land ownership in Scotland, the Register of Persons Holding a Controlled Interest in Land (RCI) came into effect in 2022.

Under the RCI regulations, the Keeper of the Registers of Scotland must establish and maintain a register which will identify and record (in a publicly accessible format), the details of anyone who controls decision-making in relation to the management, use, or development of land in Scotland.

However, while the RCI became operational on 1 April 2022, a transitional period was put in place before the regulations would be enforced – and this ends on 1 April 2024.

What details will the RCI register require?

The Register will hold entries for specific areas of land where there exists some form of external significant influence or control over the decision-making of the owner or tenant of that land.

The regulations have detailed provisions on who must provide certain information to the Keeper and which notices need to be served on the relevant parties connected to the submission to the RCI.

The two main parties involved in a submission are:

• The owner or tenant of land under a long lease, that is, a lease of more than 20 years which is registered in the Land Register of Scotland (or recorded in the General Register of Sasines). Once registered in the RCI, the owner or tenant is referred to as the recorded person.
• The associate. In broad terms, an associate is a person who has significant influence or control over the decision making of the recorded person’s dealings with the land.
  Part 2 of Schedule 1 of the RCI Regulations specifically covers land held by or on behalf of partnerships.

It is important to note that the regulations do not apply to partnerships that are subject to other transparency regimes, such as Limited Partnerships registered in Scotland, limited liability partnerships (LLPs), and general partnerships which are a qualifying partnership (e.g. where all the partners are limited companies).

Who will be most affected by RCI rules?

In Scotland, a large majority in the farming industry still farm through a partnership.

They are quite often made up of family members, with the membership of the partnership changing over time as partners pass away or retire, and new partners are assumed.

Within that farming partnership we often over time see internal changes as to who or how the heritable property is actually owned and/or registered on the Land or Sasine Register.

It is this group of farming businesses that we currently see most affected by the new RCI regulations and where we are already seeing the most RCI submission activity.

When would an RCI submission be triggered?

As a fairly basic rule, a partnership where all the partners are listed on the title as the partners and trustees for the firm will not need to make an RCI submission. However, a partnership where not all the partners in the partnership are named in the titles will need to register under the RCI regulations.

Where no Associate exists, a Recorded Person does not need to make a submission to the RCI. For example, where title is held by two individuals, who farm in partnership together with no other party exercising control of their decisions, no submission is necessary.

So, let’s consider some practical examples of events which may occur during the life of a farming partnership and trigger the need for a submission to the RCI:

Death of a partner:

• Executors of a deceased’s estate have a duty to inform the RCI on the death of a recorded person. This must be done as soon as reasonably practicable.
• As part of the deceased’s estate, administration conveyances may take place of the heritable property or interests held by the deceased. Upon completion of such conveyances, the new registered owners will need to consider if a new submission, or update to an existing submission, is required. At present the view is that a mere docket transfer on a Confirmation does not trigger the need for an updated RCI submission.

Retiral of a partner:

• If such a retiral results in a situation where the partners noted on the title held in the Land or Sasine Register is different from the partners who now form the partnership, a submission to the RCI will be required.

Assumption of a new partner:

• If such an assumption results in a situation where the partners noted on the title held in the Land or Sasine Register is different from the partners who now form the partnership, a submission to the RCI will be required.=

Title held by one or more partners in trust for the partnership by way of a trust declaration:

• The person(s) holding title will require to make a submission to the RCI if there are additional partners in the partnership.

RCI rules and agricultural tenancies

The RCI regulations apply to leases of more than 20 years which are registered or registerable in the Land Register of Scotland or Sasine Register.

The main agricultural tenancies to consider here are fully protected 1991 Act tenancies, Limited Duration Tenancies (LDT), and Modern Limited Duration Tenancies (MLDT).

An LDT or MLDT can be for a period of more than 20 years from the start or have started off as a shorter-term lease which has been extended between the parties either by express agreement or by continuation under law.

The tenants under such leases can fall within the scope of the RCI regulations and should consider whether their own circumstances result in the need for a submission.

This may be the case, for example, where one partner in a partnership is the tenant under the lease, but the tenanted land is farmed through the partnership.

The position on fully protected 1991 Act tenancies is somewhat different. Most, if not all, of such tenancies are running on tacit relocation from year to year, so the current view is that these will not require a submission under the RCI regulations.

How to make an RCI submission

Once it has been established that a submission to the RCI is required, the Recorded Person (landowner or tenant) is responsible for notifying the RCI that they have an Associate or Associates, and for providing the Associate’s details and serving relevant notices on those affected by the submission.

The submission is made online through Registers of Scotland.

While the assessment of whether a submission is required and the completion of such a submission can be complex and cumbersome, there is no requirement for a submission to be made by a solicitor and there is no registration fee chargeable by Registers of Scotland.

Recorded Persons must keep the RCI up to date and update the register in the event of any changes of control.

Associates also have certain duties they must comply with. These include the duty to notify a recorded person where they have not received due notification where required, to provide the recorded person with required information if requested, and to advise a recorded person of subsequent changes to their details.

When purchasing land in the future, where there is partnership involvement, we envisage that the requirement to register and maintain the register will now be one of the factors to consider when contemplating how to structure the ownership of the land.

While partnerships have traditionally been used by farming businesses because it has been seen as a structure that is subject to minimal regulation and one which affords partners a degree of privacy, the introduction of the RCI will mean that more detailed information on the ownership and partnership setup will be in the public domain.

What should I do if affected by RCI?

With one month to go, we urge anyone who thinks they may be impacted by these new regulations to take steps to confirm whether a submission may be required.

Taking the necessary measures to ensure compliance at the earliest opportunity is advised, as the failure to do so is a criminal offence which may incur penalties of up to £5,000.

Petra Grunenberg is a partner at Shepherd and Wedderburn