This 500-page legislative mammoth’s objectives are described by the Government as designed to speed up the planning system, hold developers to account, cut bureaucracy and encourage more local authorities to put in place plans to enable the accelerated building of homes.
The Conservative manifesto at the last election laid great emphasis on dealing with regional economic disparity and therefore the need to ‘Level-Up’ and create a fairer distribution of economic opportunity. After the debacle of HS2 and their record in housing delivery, this legislation could be regarded as their last pitch before the next election to demonstrate that they still hold to their pledges to level up, particularly as their achievements to date in this respect look a bit thin?
The Act sets out extensive provisions relating to changes in plan making policy, infrastructure levy and funding of major projects, constitutional changes relating to Combined Authorities and the creation of Development Corporations (where have we seen those before?!) and significant amendments to Environmental Outcomes reports replacing EIA’s.
However, although all of the aforementioned will affect the real estate sector, there are other provisions requiring the disclosure of information relating to land interests, that will have considerable impact on the sector, with the declared objective of creating greater transparency in respect of land ownership and control in England and Wales. Landowners and developers will need to take note, especially as some of the provisions could be applied retrospectively (see Section 219(8) which state that the regulations to be made may relate to things done before the Act came into force on the 26th October).
The implementation of the disclosure of information as to land interests will depend upon further regulations to bring them fully into force, and no doubt the devil will be in the detail, but the framework is already set out in the Act. There will be three ‘permitted purposes’ where the Secretary of State may require disclosure of information.
The first is ‘the beneficial purpose’ where disclosure would be useful to identify the beneficial owners of the land or to understand the relationship of those persons with the land they may beneficially own.
A person will be considered a beneficial owner if the legal title is held by a body corporate partnership, or within a trust, foundation or similar legal arrangement, and the person is a beneficial owner relative to that body corporate, trust or partnership. The identity of the beneficial owner within whatever legal entity is involved, may already be in the public domain because they are ‘persons of significant control’ on the corporate register or register of overseas entities. However, although some express trusts are registrable on the Trust Registration Service that register is not public so the Act could require land held by UK trustees to be aligned and made public as currently applies to overseas entities.
Questions remain as to whether registration will be via the Land Registry and how these proposals will mesh with the requirements of the Economic Crime (Transparency and Enforcement) Act 2022.
The second ‘purpose’ is the ‘contractual control purpose’, where the Secretary of State considers that it will be useful in order to understand relevant contractual rights, who owns them and the circumstances of their creation; the interests could arise under contract, relate to development use or disposal of land, or held for the purposes of an undertaking , which could include a business, charity and a body which exercises public functions.
The third ‘purpose’, the ‘national security purpose', is where it appears there is a threat to national security in connection with the location of land, or its use , so as to identify the persons with relevant interests, rights or control, or influence over the person with such interests, and where the disclosure of the information is in the interest of national security.
The type of information will be drawn widely but will probably cover transactional information, contractual interests, rights, parties, sale, lease, options, development agreements, SPV arrangements and share sale agreements. Depending on the regulations to come, it may also include the terms of the engagement of professional advisers, and funding terms.
The extent to which information will be made public will no doubt be detailed in the regulations but it is clear that the information will be shared with persons exercising public functions and inevitably some of the information will be made public. Transactions that pre-date the Act may be caught.
The disclosure obligations will be enforced by a combination of freezing registration of changes at the Land Registry to effectively stop dealings with the land, and/or prosecution for the criminal offence of failure to provide the requisite information or providing misleading/false information, either against the individual person or officers of an entity with an interest, for example, company directors.
How these disclosure of information provisions will accelerate levelling up is not entirely clear, as the ability of landowners, developers with options, funders and even in some cases their advisers, to keep details of property transactions commercially confidential could become much more difficult, thereby materially changing how the real estate market works. Regulations will be eagerly awaited to see how these changes are to be affected but care will be needed so that an already fragile real estate market, the regeneration of our high streets, and economic recovery do not become mired in the very bureaucracy the government hopes the Act will cut?
These proposals, along with planning reforms, the auction of vacant premises (another controversial initiative), the refusal of planning permission if a developer has a track record of slow implementation, and enhanced CPO powers plus the advent of possible Development Corporations are all interventionist, and in principle are to be welcomed, but will they revitalise the real estate sector and get things moving.
But before you throw your hats in the air and start singing, ’Here we go, Here we go, Here we go’—pause and remember this government may not be around to implement these proposals, many of them are still subject to regulations to be introduced over an extended timescale, and well beyond the next election. It is easy to grant powers to intervene, and gather even more information from land owners, but where will the resources come from to enable the public sector to positively engage with land owners and developers, as without those resources and that capacity, some of these provisions will grind to a halt. It would be a tragedy if like the Mammoth, the Act’s objectives of levelling up became extinct before they even drew breath!
Malcolm Iley (Consultant)
T: 020 7870 7500