Contractual controls on land consultation: Have your say

The official consultation on how the Government intends to compile a dataset of who exercises contractual control over land in England & Wales has been published: Contractual controls on land: consultation – GOV.UK (www.gov.uk). 

The regulations they are consulting on seek to create a dataset comprising the “what”, “where”, “who” and “when” of contractual control agreements, with the aim of promoting transparency by providing a reliable and accessible source of information for communities, developers, and other stakeholders.

In some ways the revised proposals disclosed by the consultation are less onerous than was feared given the suggestions made in the 2020 call for evidence. But the rules are proposed to apply retrospectively to agreements entered into after 6 April 2021. Within scope are real estate options, rights of pre-emption or conditional contracts lasting for 12 months or longer which are granted to an ‘undertaking’ and which provide for, or restrict, the sale or lease (for 7+ years) of the land.

The closing date for the consultation is 20 March 2024. It will be of interest to those engaged in sectors such as the built environment or renewable energy, where options for purchase or lease, conditional contracts, rights of pre-emption or promotion agreements are common.

The anticipated commencement date is 6 April 2026.

Types of Land & Parties affected:

Commercial, residential and mixed use assets where the beneficiary of an agreement within scope is an ‘undertaking’ – which could be a business or charity. It will not apply to private individuals acting in a personal capacity.

Agreements intended to be within scope:

Any written agreement entered into after the commencement of the regulations with the intention of facilitating future development of registered land in England and Wales will be in scope, including:

• option agreements where upon exercise the landowner is bound to make a ‘relevant disposition’ – a transfer of the land or the grant of a lease of more than seven years;
• pre-emption agreements (right of first refusal) if the landowner wishes to dispose of land;
• conditional contracts; and
• promotion agreements (developer promotes land to secure planning permission and is entitled to a fee upon a relevant disposition).

Existing agreements entered into after 6 April 2021 which are still extant on the date the regulations come into force, and agreements granted at any time but varied to alter any of the required information (see below), and agreements assigned after commencement, would also be within scope.

Given there is no transaction to prompt those with the benefit of agreements entered after 6 April 2021 which are neither varied nor assigned to provide the information, it appears there will be some form of information campaign to notify businesses of their new responsibilities. The current proposals anticipate that a conveyancer will be required to certify the details (thus requiring legal advice to be obtained) within 12 months of the regulations becoming law.

Agreements not in scope

• where the agreement will terminate within 12 months with no right to extend;
• if made for the purposes of ‘national security’ or defence;
• those which facilitate finance and loan agreements;
• those relating to overage, clawback, and restrictive covenants; or
• relating to unregistered land.

Information required to be published:

• the parties’ names;
• the type of agreement;
• description and location of the land affected;
• the date of, start date (if later) and end date of the agreement and any rights to extend it.

This is more restricted than suggested byTransparency and competition: a call for evidence on data on land control – GOV.UK (www.gov.uk) in 2020, which proposed the disclosure of financially sensitive information (deposits, premiums, and prices) in some circumstances.

The information would be published by the Land Registry as one of its datasets on GOV.UK.

There is also a proposal to collect details to identify the professional advisers involved (by Solicitors Regulation Authority number or equivalent) which would not be made public but would be available to officials for compliance purposes.

How the information will be provided

The grantee under the contractual control agreement (the party with the benefit of the option etc) would be required to provide the Land Registry with the relevant information within 60 days of the date of the agreement (or assignment or variation, if applicable). The information would be required by the Land Registry prior to a notice or restriction being registered, or even if the grantee did not choose to protect the agreement by notice.

Again, this is a welcome change from the 2020 Call for Evidence which proposed a requirement to protect agreements by an Agreed Notice (AN1) and would have required a copy of the agreement itself to be disclosed, rather than a Unilateral Notice (UN1) – which does not require a copy to be made public.

Non-compliance penalties

If the relevant information was not provided, the Land Registry would refuse to register a notice or restriction against the title to the land, resulting in no protection or priority for the grantee.

Failure to provide the relevant information (without reasonable excuse) or knowingly or recklessly providing false or misleading information would also be a criminal offence punishable by up to two years imprisonment and potentially unlimited fines.

Impact

The impact in relation to agreements entered after the regulations are in force may not be as onerous as was anticipated from the suggestions made by the Government in the 2020 Call for Evidence. But imposing disclosure duties for pre-existing agreements raises concerns over the consequences of an ‘innocent’ oversight – where an undertaking may not have become aware of the new rules, or not realised their agreement is in scope. As it is proposed that legal professionals must certify the accuracy of the data disclosed, the regulations will, in effect, impose an additional requirement for legal advice in relation to pre-commencement agreements, at a time when there might be no other reason for lawyers to be engaged.

If your business is likely to be affected you might consider responding to Contractual controls on land: consultation – GOV.UK (www.gov.uk) to have your say before the regulations are finalised.

If you would like further guidance on the Government’s proposals, then please contact Ross Polkinghorne or your usual Burges Salmon contact.

This article was written by Rose-Anna Higgins.