Summary

• The Government has launched a consultation: Transparency and competition: a call for evidence on data on land control. It considers that better data on land ownership and control is required to improve the planning and development process and to increase the public's understanding of who exercises control over land
• It is proposing to increase the transparency of contractual arrangements used to exercise control over the buying or selling of land to gain "a better understanding of the sort of arrangements that exist".
• The Government's particular focus is on options, rights of pre-emption and conditional contracts where it is consulting on proposals to make key information about these type of contracts over development land disclosable.
• The Government proposes to have some additional data on these rights detailed on the land registers held by HM Land Registry (HMLR) and to publish, free of charge, a contractual control interests data set. Other data collected will be limited to official use and shared across Government for the purposes of national security, law enforcement and financial stability.
• The proposals relate to England and may apply to Wales subject to the agreement of the Welsh Government.
• Developers and some beneficiaries of such arrangements may have concerns about the public disclosure of what may be quite detailed and commercially sensitive information. If the proposals go ahead, it could mean that additional compliance costs are incurred, increasing further if the parties wish to keep specific terms of the contract confidential by exempting them from the public land register held by HMLR. 
• The onus is on those who will be directly impacted by the proposals to highlight any concerns and where any potential issues may arise. Responses to the consultation are to be provided by 30 October 2020.

Openess and Transparency

The data provided by HMLR on the control of land is limited. The Government believes that disclosing better data on land ownership which is subject to contractual control interests is required to achieve its vision for the planning system as outlined in the recent white paper Planning for the future (August 2020). It is suggested that providing better data will help facilitate the development process for planners and developers by reducing the time and cost associated with site identification and encourage more companies to enter the house-building market to help build the homes the country needs.

There has been much talk in the press of developers strategic "land- banking", where an interest is held in land by developers but not owned by them. Such land often has the benefit of planning permission, but the developer does not buy and instead waits for the value of the land to increase so it can sell on at a profit or acquires the land for its own use at a later date under better market conditions. Many see land banking as an obstacle to preventing an increase in the number of homes being built and is contrary to the ethos behind the Build build build policy announced by Boris Johnson earlier this year.

Disclosure on Grounds of Legitimate Public Interest

It is the Government's opinion that the disclosure of land ownership in the context of options/pre-emptions/conditional contracts is of legitimate public interest on grounds of accountability including:

• the general public should have an informed role in community development and should be able to identify parties with intentions to develop who are stalling development (i.e. by land banking) in their locality and
• local authorities should have visibility of land holdings within their area and how quickly land is being brought to market.

Current Position

• HMLR publicly records ownership of land in England and Wales. This ensures that once land is entered on the title register any changes to ownership or entry of any leases/charges/ other matters benefitting or burdening the land are recorded on the title register.
• However, even if land is registered, not all interests relating to it are necessarily clearly recorded on its title. By way of example, an option entered into between a developer and landowner which gives a developer the right to acquire land in the future might be invisible on the face of the title register depending on how the option has or has not been protected.
• Contractual control interests are typically protected by the entry of a notice on the land owner's title register together with, in some cases, a restriction against the registration of a disposition of land without consent. Notices can be unilateral or agreed and ensure priority of the interest protected so it can be enforced against a subsequent owner. In the case of unilateral notices (which are the most prevalent form of notice), only limited information about the transaction for which protection is sought needs to be provided to HMLR and no copies of the document need to be submitted (therefore not available for public perusal). Alternatively where an agreed notice is used and a copy of the underlying document lodged at the Land Registry, an application can be made to exempt commercially sensitive details in that underlying document.
• Depending on the type of protection, the key information such as the terms of the interest, including the owner’s ability to freely use, develop or dispose of the property (as applicable) may not be available, or indeed detailed at all on the face of the register. As a result, HMLR is unable to provide accurate data identifying the number of titles affected by contractual control arrangements. 

Key Proposals

• Creation of a contractual control interests' data set. The Government proposes to collect and place additional data on the title register at HMLR and to publish a contractual control interests’ data set (which is to be made public and freely available), allowing the public to easily understand what land is subject to a contractual control, who is the beneficiary of that control and on what terms control is exercised. This data would be collected by requiring through HMLR protocols, the noting of options, pre-emptions and long term conditional contracts relating to the development of land. This noting would be by way of agreed notice (see "unilateral notice" below) only and through extending the data requirements attached to the application process.
• Collection of data for registered land only: There is no proposal to apply this system to contractual control interests in unregistered land.
• Additional data requirements:  Full details of the proposed additional data requirements (and what can appear in the title register or data set) broken down by type of contractual interest can be found at Annex A of the consultation document (p27) The consultation seeks views on the level of detail that is to be provided e.g. any contractual conditions (i.e. conditional on planning), type of planning permission required (outline or full), and the use type (residential/commercial) and whether such details should be included on the title register or in the new contractual controls data set.
• Estate contracts: In terms of estate contracts (for example, conditional contracts for the sale of land), the Government is specifically targeting long-term contracts (completing more than six months after exchange) conditional on obtaining planning permission. Estate contracts would require confirmation as to whether the contract was conditional; details of any deposit paid and the price. Options would require confirmation as to the type of option (put; call; put and call); details of any lockout periods and again price, together with details of any premium payable. Price, deposit and premium information would not go on the title register or dataset but would be collected for official Government use.
• Mandatory noting of interests? No. The consultation does seek views as to whether or not beneficiaries of contractual control interests should be placed under a duty to certify that all relevant interests have been noted. The Government acknowledges that the majority of these contractual arrangements are, in practice, already protected by notice and does not intend to mandate the noting of these interests at HMLR but, instead to rely on beneficiaries’ self-motivation to protect their own interests.
  
  As the requirements are not mandatory, beneficiaries would need to assess the benefit and cost of obtaining the protection that can be gained by noting their interest on the title register and the administrative burden of providing the additional details. The primary protection given by a notice is disclosing that interest to any future owner (or holder of an interest) in that land with the aim that they take subject to any such agreement.  However that is not a guarantee they will and is dependent on the interest the notice protects being valid with avenues being available to remove a notice from the title register where that is not the case (amongst others). Generally, the registration of a notice is likely to remain the preferred course of action given that it does offer a degree of protection against future owners and the provision of enhanced detail will hopefully result in relatively minimal additional work and legal cost if such detail simply needs to be inputted into an HMLR single form.
• Unilateral notice: The ability to use a unilateral notice to protect a contractual control interest would be removed. Instead there would be a requirement to apply for an agreed notice but not until certain data had been supplied as a pre-condition. The current procedure for exempting prejudicial information, contained within supporting documentation, would be retained save where the additional data was a requirement. It is unclear how the enhanced disclosure requirements will interact with exempt information forms which are often submitted alongside applications for registration where the applicant wishes to exempt sensitive commercial (or other) information from disclosure on the title register.
• Restrictions: The Government anticipates that parties might “forgo the protection of a notice and seek to protect their interests by way of a restriction” and is seeking views on various options to address this issue. For example, excluding contractual control interests from the category of interests capable of protection by restriction or compelling applicants to obtain an agreed notice prior to submitting an application for a restriction.
• Existing agreements: Any ongoing requirements to update details, for example on variation or assignment of the relevant contract, is the subject of consultation. The proposals could apply to existing agreements if they are subject to variation, assignment or novation. Many agreements last for a number of years. Therefore, the Government is seeking views on whether the requirement to provide additional data should be extended to existing arrangements in these circumstances.
• Legal Entity Identifier. Beneficiaries of all contractual control interests would have to provide a Legal Entity Identifier (LEI) – a unique global identifier in the form of a 20-digit, alpha-numeric code for legal entities participating in financial transactions. The LEI would enable related legal entities (subsidiary/parent companies) to be more easily identified and grouped, therefore providing insight into which companies may be influencing particular local markets.
• Avoiding unnecessary costs: The Government wants to precisely target additional data requirements to avoid placing unnecessary costs on parties to normal residential or commercial transactions and their professional advisers. The consultation asks whether there are any other forms of land agreement that should be subject to the new requirements for disclosure.
• Proposed exemptions: The Government believes that as the public interest lies mainly in land that could be used for development, it is not proposed to collect data on an individual’s contractual arrangements or rights relating to the purchase or lease of a domestic residence, testamentary options or any statutory rights, for example, a tenant's right of enfranchisement pursuant to the Leasehold Reform Act 1967 (provided in the first case, that the option is not dependent on a condition that requires planning permission). However the extent of the exemption is a matter subject to consultation.
• Use of enhanced data: It is intended that certain additional data collected is to be made available only for official purposes relating to, for example, law enforcement and financial stability. The collating of this additional information will, according to Government proposals, allow:
  • local authorities to immediately understand who controls land in their borough;
  • the Government to identify a “sound evidence base from which to identity inefficiencies in the land market”; and
  • the levelling of the playing field for residential construction through the reduction in costs of identifying viable sites (facilitated by PropTech tools and applications).

Impact of the Proposals

If the proposals are implemented, developers would need to provide additional information about the terms of the agreement. It would not be possible to protect the agreement at HMLR until such information had been provided. The right to remove sensitive information from the document before sending it to HMLR would be modified so that the data required under the new regime could not be redacted where that information falls within the information that HMLR must disclose.

To minimise the burden on businesses the Government proposes to simply adapt the existing agreed notice procedure to collect the additional data required, placing a reliance on the self-interest of beneficiaries to note their interests and avoid the financial and legal risks associated with no protection.

Comment

The proposals could have a considerable impact on developers in particular and the amount of information that they have to disclose about deals that they have entered into with landowners. Developers will be concerned that the Government’s plans for greater transparency may require the disclosure of commercially sensitive information about their business proposals and development opportunities that they have identified. 

Beneficiaries of contractual control interests would also be required to certify in their annual accounts that all relevant interests are the subject of an agreed notice. This would require additional time and cost spent on preparing annual accounts and identifying the relevant interests and could be onerous especially within larger corporate structures. As a result, this consultation may concern some beneficiaries of such arrangements.

The greater concern around transparency of information for developers may lie less in what is disclosed, but more in what conclusions the Government (or indeed others, for example, local authorities) arrive at from that information. If the Government were to reach a conclusion from that data of a “sound evidence base" of "inefficiencies in the land market” in a climate where there is a renewed and meaningful focus on delivering houses any further action that follows may have far greater impact.