In an insightful recent article from our friends at Boodle Hatfield LLP, Sophie Henwood and Neil Biswas outlined how the UK continues to attract global capital for inward investment, during a time when global markets and trade are undergoing significant structural changes. As with the rest of the UK, Scotland continues to be a beneficiary of this trend. Recent research carried out by EY UK has identified Scotland as the top UK location for foreign direct investment (FDI) outside of London, and it is ranked sixth among FDI locations in Europe.
As Neil and Sophie noted in their article, the legal system in Scotland is distinct from the rest of the United Kingdom (the Scottish legal system having pre-dated the creation of the UK) and this article explores some of those distinctions. Nevertheless, investors in Scotland’s real estate benefit from a similarly well-established system of property laws.
Ownership and other rights in land in Scotland
Interest in Scottish land is most often heritable i.e. outright ownership, similar to freehold in England and Wales. Unlike England and Wales, it is less common to see long leasehold titles. Scottish legislation contains provisions so that the ownership of the common parts of multi-owner buildings (both residential and commercial) is shared amongst those owners (albeit this can be adjusted in the titles for the building). This means there is rarely a “cliff edge” of leasehold expiry for property owners in Scotland.
Leasehold tends to be reserved for operational occupiers of investment properties. This gives the right to exclusively possess and use the land for a specified duration and in these cases, it tends to be for a period of between 5 to 20 years. It might also be used in a development scenario where a developer is taking on a large site which they intend to develop over a longer term. Moreover, leases cannot exceed 175 years in duration.
In some cases, parties might instead use a licence to occupy which does not carry exclusive possession, but this is normally limited to short-term arrangements for a specific purpose (for example seasonal lets or pop up arrangements).
Land is commonly held subject to title conditions which can be real burdens (similar to covenants in England and Wales) or servitudes (similar to easements), either enforceable by third parties against landowners (a burden on the land) or, conversely, enforceable by the landowner against third parties (a benefit to the land). Importantly, these conditions bind future owners of the burdened land and can also be enforced by future owners of the benefited land.
Registration of land and transparency regulations in Scotland
Title to land in Scotland will either be recorded in the historic Register of Sasines or registered in the Land Register of Scotland: a digital, map-based public record of land ownership in Scotland. In both cases, any fixed securities which affect the land will be visible from the registers. Both are stable registration systems maintained by the Registers of Scotland. All new land transactions go into the Land Register so in time this will result in a complete map-based record.
Under the Economic Crime (Transparency and Enforcement) Act 2022, the UK government has established a transparency regime in respect of land ownership in the UK (including Scotland), with a public register known as the Register of Overseas Entities (ROE) at its core. All non-UK entities (including trusts) that wish to acquire land in the UK are required to firstly register details of their beneficial owners on the ROE. (The same requirement applies to existing non-UK owners subject to a historic cut-off date which differs depending on where the property is located within the UK). Failure to comply with these registration requirements is a criminal offence and prevents registration of property dealings at the Land Register of Scotland.
In Scotland, the Register of Persons Holding a Controlled Interest in Land (RCI) applies in addition. This requires non-UK entities to register their landholdings (including any leases of more than 20 years) and provide information on who ultimately controls the entity. A similar obligation applies to any owner or tenant under a long lease (whether a company, individual or other entity) where the property is in practice controlled by a party other than the person or entity named on the property registers.
Scotland’s property market offers significant opportunities for both domestic and international investors, underpinned by a stable legal framework and well-established property laws. While the Scottish system has its nuances (particularly in relation to ownership structures, title conditions, and regulatory compliance), these can be navigated successfully with expert guidance. Investors who understand these distinctions are well positioned to benefit from Scotland’s growing appeal as a prime location for investment.
At Burness Paull LLP we have an extensive and experienced team of real estate specialists. If you would like to discuss anything raised in this article, we would be happy to assist. If you would like to discuss anything raised in this article, please get in touch with Nick Naddell or Yvonne Allan, or your usual Burness Paull contact.
