New laws intended to make it easier to find out who owns land in Scotland could have the inadvertent effect of deterring investment in the country’s property sector, according to law firm HBJ Gateley.

The Land Reform (Scotland) Act 2016, which received Royal Assent in April, will set up a register for ‘persons of controlling interests’ in land in Scotland, the details of which could ultimately be made public by Registers of Scotland, which registers all properties.

The Scottish legislation follows similar laws in England, primarily intended to deter corruption and money-laundering, and will make it simple for anyone to find out not only who owns but who controls any given property in Scotland. As well as allowing easier resolution of disputes – over access or environmental issues, for example – the Scottish laws will also make it harder to use complex legal structures and entities to conceal the individuals who control Scottish land.

A consultation has just been launched by the Scottish Government on the scope of the Regulations, the type of land they will affect and who they will apply to and Alison Newton, a partner at HBJ Gateley, said the introduction of the changes would have to be carefully handled so as not to deter investment in Scotland.

She said: “There’s a growing trend for wealthy overseas investors to consider Scotland as a stable and attractive place to invest in property. That creates and protects jobs, as well as enabling investment in property assets.

“Better transparency is always a good thing, but that has to be set against the wishes of some highly-respectable – and -respected – investors for an element of commercial discretion.

“The last thing we want to do is create a regime where foreign investors feel unwelcome, especially at a time when confidence remains patchy in the domestic market.”

The property changes follow a general trend towards corporate transparency. Since April 2016, UK companies and LLPs have been required to keep a new company register showing details of all people who have significant control over the company or LLP. This information on the beneficial ownership of UK entities will be publicly available, although without additional action there is no guarantee that similar information will be available on foreign companies that own property in Scotland and the rest of the UK.

Ms Newton said the intent behind the Scottish legislation was sound and for legitimate foreign investors the only disadvantage would be the additional administration in registering property ownership.

But she warned that it may lead to a rise in more complex structures being used to hold property and that it had to be implemented carefully to avoid being perceived as an additional hurdle to clear before investing in Scotland.

Some other countries, including France, the Netherlands, Australia and Ireland, have committed to creating registers of ultimate beneficial owners of corporate entities, and a new EU directive obliges member states to establish registers of ‘beneficial ownership’. However, other jurisdictions, notably the US, have not committed to introducing such a register, creating a possible imbalance. Unless such registers are maintained internationally, in the current global economy there is a risk that investment moves elsewhere.

Ms Newton said: “Scotland has a well-established and dynamic property sector, and the stable returns it offers has created an international reputation for being a good place to do business.

“Consulting comprehensively with people who know this sector inside out will help the legislation to tread the right line between deterring corruption and attracting valuable and very welcome foreign investment on a level playing field.”