Improving transparency in land ownership in Scotland: consultation analysis

1. Executive Summary

1.1 The Land Reform (Scotland) Act 2016 introduced new powers to provide for the disclosure and publication of information about controlling interests in land owners and tenants across Scotland.

1.2 Following public consultation, the Scottish Government identified the following key issues to be considered and resolved in developing regulations to deliver a register of controlling interests:

• The definition of a "controlling interest" in relation to a controlling interest in a land owner or tenant;
• The scope of the regulations, the type of land they will apply to and the persons to whom the regulations will apply;
• Where the information about persons with controlling interests in land owners and tenants should be held;
• The information to be disclosed about persons with controlling interests in land owners and tenants;
• The duty to provide the information, and the associated sanctions and enforcement arrangements;
• The process for challenging the information that ultimately appears on the register, or any refusal to disclose information; and
• Any (limited) exemptions from disclosure that should be provided for under the regulations.

1.3 The Scottish Government published a consultation document on 11 September 2016 to seek wider views on these issues with responses invited by 5 December.

1.4 58 responses to the consultation were received, 33 from organisations and
25 from individuals. A summary of the views they contained follows.

Defining controlling interest

1.5 There was much support for the principle of making information about persons with controlling interests in owners and tenants of land available, this being perceived as fitting for a modern democracy and in line with practice elsewhere.

1.6 Maintaining proportion and containing costs emerged as key themes. Other themes included the need to avoid burdensome procedures which may deter inward investment in Scotland; avoiding duplication in data collection between the existing databases including the Sasine and Land Registers; and ensuring a balance is struck between making information accessible whilst adhering to data protection requirements.

1.7 A repeated comment relating to definitions of "controlling interest" and "persons with controlling interests in land owners and tenants" was that definitions will be easier to determine once the overall purpose of the proposals becomes clearer. Another common view was that Scotland should harmonise new definitions with relevant existing definitions used in other jurisdictions and contexts.

1.8 There was some support for building upon the People with Significant Control ( PSC) framework, currently used for UK companies, and learning from its teething problems.

Scope of the regulations

1.9 The majority view was that the regulations should apply to all types of uses of land. The advantages of this were identified as aiding transparency; avoiding loopholes; being equitable; aiding accountability; and being simple.

1.10 Most of those who provided a view considered that there should be no exemptions.

1.11 Most respondents who gave a view supported "land" having the same meaning for the purpose of these regulations and for Land Registration purposes. The benefits identified included using a meaning which is already understood; avoiding confusion and unnecessary complexity; and minimising additional administration costs.

1.12 The majority view was that the regulations should apply where the proprietor of land is not recorded in the Register of Sasines or registered in the Land Register as the property was acquired prior to 1617 or they have not yet registered the deed in their favour in the Land Register. This was seen as ensuring transparency; providing a comprehensive picture; closing possible loopholes; and ensuring one law for all.

1.13 Most of those who responded agreed that the regulations should apply where a tenant in a high value lease that is not a long lease, falls within the definition of persons with controlling interests in land owners and tenants.

1.14 Almost all of those providing a view agreed that there are instances where natural persons who own land have an undisclosed relationship with another person who has a controlling interest in land. Several respondents identified instances of family businesses, such as farms, where this may be the case.

1.15 A repeated view was that those intent on avoiding the regulations will likely find a way of doing this, however the regulations are drafted. It was suggested that to minimise scope for avoidance, the definition of "controlling interest" and scope of the regulations should be made clear, with penalties for non-compliance sufficient to deter.

Where the information should be held and what information should be disclosed

1.16 The majority view was that a new register of persons with controlling interests in land owners and tenants should be created. Whilst individual respondents were generally in favour of creating a new register, organisations were more mixed in view.

1.17 The creation of a new register was perceived to have the key advantages of being tailored for purpose; avoiding adding more information to the Land Register; and ensuring the funding streams of different registers are kept separate.

1.18 The most commonly identified drawback of setting up a new register was that this would result in information fragmented across different registers, with multiple searches required to find out about ownership and controlling interests in land. Other potential disadvantages identified were: costs of establishing the register; and increased burden of registration.

1.19 Most of those who provided a view considered that in addition to the names of persons with controlling interests, other information should also be disclosed; largely so as communication between communities and those with controlling interests in land owners and tenants can be facilitated. The majority view was in favour of disclosure, in a public register, of the nature and extent of a person's controlling interest.

1.20 Although many respondents were aware of potential sensitivities relating to disclosure of such information, the prevailing view was that disclosure is in the public interest and sensitivities can be addressed by taking care to request and disclose only that information required for the purposes of the regulations. Particularly sensitive cases were identified: people in witness protection schemes; those at risk of violence; where physical or mental health problems could be revealed; where there are commercial considerations; and public figures who do not wish their residence to be disclosed. Private sector and professional bodies held the view that there will be cases involving commercial sensitivities in which information should not be disclosed; the majority of other respondents who provided a view disagreed.

1.21 Whilst a common view was that the information must be kept up-to-date in order to be fit for purpose, a few respondents acknowledged that in reality some leeway should be given to allow for changes to circumstances to be updated.

The duty to provide information

1.22 Most of those providing a view considered that, for the sake of completeness and transparency, the duty to provide information should apply to: land owners and tenants where the property was acquired prior to the Register of Sasines, which commenced in 1617; those who have not yet registered the deed in their favour in the Land Register; and tenants in a high value lease that is a lease of 20 years or fewer. Where there was opposition to these proposals, this was largely on practical grounds.

1.23 Whilst most respondents who addressed the issue were in favour of a duty to provide information applying to the "person with the controlling interest", potential drawbacks were envisaged including: inadvertent breach of the regulations by those not being aware they have controlling interests or not realising they have obligations under the regulations; reluctance from some people to divulge information; and enforcing the duty where there are complex ownership and controlling interest structures.

1.24 A commonly held view was that professional agents such as solicitors and accountants serve as intermediaries between registered proprietors and "persons with controlling interest" in land. Other intermediaries identified were: factors; companies; and trusts/trustees.

1.25 Views were divided on whether a duty to provide information should apply to intermediaries. A common view amongst those in support was that this would contribute to a comprehensive register with accurate details. Those opposed were largely private sector and professional bodies who considered that this could challenge the principle of client confidentiality.

1.26 Most of those who provided a view agreed that, for the sake of completeness and transparency, the duty should apply either when a person is a "person with controlling interest" when the regulations come into force, or becomes such a person when the regulations are in force.

Sanctions and enforcement

1.27 The majority view was in favour of a civil penalty being imposed for failure to comply with the duties contained in the regulations. Most felt that such a penalty was important in order to strengthen the regulations, although a period of grace should be considered to give time for people to understand the regulations and have time to act.

1.28 A slight majority of those providing a view agreed that failure to comply with the duties in the regulations should be a criminal offence. This was considered to be a powerful and appropriate deterrent to ensure the regulations are respected. Others perceived criminalising non-compliance to be a disproportionate response, which should be triggered only after all civil penalty options have been deployed.

1.29 Most of those responding considered that an application for land registration should be rejected if the applicant fails to supply information about any "person with controlling interest". A common view was that this represented a sensible and practical solution to ensuring complete information. Those opposed were largely private sector and professional bodies who considered this a disproportionate response which could provide a barrier to completing the Land Register by 2024, could result in delays in the conveyancing process and deter commercial investment in Scotland.

Challenge and exemptions

1.30 The majority view was that there should be no exemptions from disclosure of information, with the following reasons given: to achieve complete information; minimise loopholes; ensure the register is effective; minimise appeals; maintain simplicity; and ensure transparency. All of the private sector and professional bodies who provided a view considered that there will be instances in which exemptions will be appropriate, for example, where there is risk of violence to those identified.

Assessing impact

1.31 The most common view was that the proposals would result in greater transparency and enable everyone to be treated equally.

1.32 Potential costs were identified to the tax-payer and to land owners, in addition to greater costs of conveyancing and possible reductions in inward investment. Some respondents considered that over time costs would reduce and be partially offset by registration income.

1.33 A recurring view was that whilst some land owners and tenants might view disclosure of their details as an infringement of their privacy, their concerns will be inconsequential when set against the public gains from reliable, accessible and transparent data on ownership.

1.34 Positive impacts on the environment were envisaged in terms of better environmental stewardship leading to more sustainable land management.