Scottish land reforms could prevent non-EU registered companies and trusts from owning land

Out-Law News | 05 Dec 2014 | 9:47 am | 2 min. read

Companies, trusts and partnerships would not be able to own land in Scotland unless they were registered within the EU, under plans put forward by the Scottish government.

Aileen McLeod, the Scottish government's minister for the environment and land reform, said that the proposal would make land ownership more "transparent". It would not affect individuals who wanted to buy land in Scotland, regardless of where in the world that they are based. It is one of a number of proposals set out in a consultation on land reform, which closes on 10 February 2015.

However, property law expert Alan Cook of Pinsent Masons, the law firm behind Out-Law.com, said that the proposal could prevent much-needed investment in Scottish urban areas. He said that overseas developers often used 'non-natural' legal persons, such as joint venture companies, to purchase investment properties.

"There are plenty of examples of investment properties in the central belt being acquired by, for example, companies registered in offshore jurisdictions for reasons connected to the tax treatment of non-EU investors, or perfectly respectable and transparent investment funds which just happen not to be based in the EU," he said. "Given that the mischief that the Scottish government has said that it is trying to address predominantly involves rural land, it seems disproportionate that investment or development properties be affected as well."

"There are many reasons why investors in Scottish property would choose to order their affairs in these perfectly legal ways. In any of these cases, the proposals contained in the consultation would prevent these investors from investing in Scotland, which is simply going to inhibit investment into Scotland and has no relevance to the policy aim of opening up areas of land to community ownership. As a player in the global economy, Scotland must remain open for business with non-EU investors that wish to invest in property in Scotland, and these proposals would prejudice that investment potential," he said.

Preventing legal entities not registered within the EU for the purposes of improving the "traceability and accountability" of landowners was recommended by the Land Reform Review Group, a group of property law experts and academics set up to consider ways to strengthen the relationship between communities and land ownership. Subject to consultation, the measure will be included in a new 'Land Reform Bill' which would also seek to introduce a number of other recommendations by the group into Scottish law.

Other policies included in the consultation are a new approach to the management, usage and transfer of 'common good' assets, such as local parks and town halls, and giving public bodies powers to intervene where land ownership patterns or landowner conduct are acting as a barrier to sustainable development. The consultation also proposes to establish a 'Scottish Land Reform Commission' to make future recommendations for land reform and assess the impact of existing policies.

"I am keen to see a fairer and more equitable distribution of land in Scotland, where communities and individuals can own and use land to realise their potential," the minister said. "Scotland's land must be an asset that benefits the many, not the few."

"At present information on who owns land is held by many different bodies including Registers of Scotland, SEPA and local authorities as well as the Scottish government. This consultation will look at finding ways to bring this information together, which will not only inform debate and public decision making but also help private decision making and drive opportunity," she said.