Levelling-up and Regeneration Act 2023: Developers on notice

The Levelling-up and Regeneration Act 2023 gave the government the power to create a new contractual control of land register. Hot on the heels of the Act coming into force, the government has issued a consultation outlining its proposals and draft regulations that will implement the new register. The government wants to increase transparency in relation to third parties who have the power to control how land is used and developed. The intention is to allow local communities, councils and small developers to see who is controlling potential development land in their areas. What will be required? Third parties entering into certain agreements with landowners will be under a duty to register them on the new register. Unless they do so, they will not be able to note those agreements at the Land Registry or add restrictions to the landowner’s title. The categories of agreement that will be caught by the regulations are those intended to facilitate the future development of land, including option agreements, conditional contracts, pre-emption rights, promotion agreements or any other contract that prevents the landowner from making a disposition of their land or that regulates the circumstances in which they can do so. To be registrable, agreements must subsist for 12 months or more (taking into account rights to extend) and relate to registered land. The agreement must be held by an undertaking (a business, charity or similar endeavour or the exercise of functions of a public nature). The government has indicated that restrictive covenants, overage and clawback agreements and agreements to facilitate finance and loan agreements will not be registrable. The regulations will have retrospective effect. Existing agreements within the scope of the regulations will be registrable if they were entered into after 6 April 2021. Agreements entered into before this date may become registrable if they are varied after the new regulations come into force. Details to be provided The developer will need to provide details of the type of agreement entered into, names, registration numbers and type of organisation of the parties to the agreement, date the agreement was entered into, start date of the agreement, end date, rights to extend, any ultimate longstop date, the extent of the property subject to the agreement, title numbers of the land and details of professional advisers. If any of this information changes after the agreement is entered into, the register must be updated. If the agreement comes to an end, the developer must apply to remove it from the register. The 2023 Act makes non-compliance with the regulations made under it a criminal offence. Impact Developers will need to be prepared for the new regulations coming into force. In particular, they should begin thinking now of those agreements already entered into that will need to be added to the register and consider the effect of any confidentiality obligations in them. Registration is likely to be made via an online portal, and the information to be entered will need to be checked as it will be a criminal offence to knowingly enter incorrect or misleading information. More widely, the register may make life more difficult for developers who are assembling a development site. Currently, they may use different companies to acquire different parts of the site, the main reason being to ensure that, towards the end of the site assembly process, the remaining landowners do not realise that they have a key piece of the development jigsaw and inflate the asking price. Even if different companies are used, the increasing transparency of corporate information and proposals to increase the transparency of trust ownership will make it more difficult to remain anonymous. Currently a developer’s interest in land will likely be apparent through some entry on the registers, but having fuller details of the terms and lengths of any contractual relationship will go much further. It may result in earlier challenges to a development proposal, often before a developer is ready to proceed with a planning application and engage with the local community in relation to its plans. It is unclear whether the new register will be structured to permit searching by name to identify schemes particular developers are involved with. Such a facility is likely to be unpopular among the developer community as it would offer an opportunity for competitors and the public to target enquires into wider corporate activities rather than specific development proposals. The proposals may also result in increased competition among developers/promoters, for example by a competing developer offering preferential terms to acquire a key piece of land or putting forward an alternative scheme on a different site to reduce the chances of the original development being approved. On more complex developments, the number of agreements to be registered may be large and this may make it more difficult to analyse the information on the register as there may be several option agreements, conditional agreements for lease, development agreements and other documents entered into by multiple development parties. The consultation runs until 20 March. Key concerns arising from the proposals  The ready availability of land control information could work to stifle or delay development, which would be an unintended result of the government’s aim to increase transparency. If developer and development plans become more transparent at an earlier stage in the development process then active competition must be expected and, with that, frustrated plans, higher costs and a failure to meet local need in a timely way. The proposals are drafted so widely that they will capture agreements that do not give third parties control over the development of land. For example, a buy-to-let company enters into agreements for lease with a residential developer to acquire long leases of flats to be constructed on the developer’s land. Such agreements would likely satisfy the criteria for registration, even though the buy-to-let company has little or no control over the development. Given the criminal sanctions for a failure to register, is it right that such agreements should be subject to registration? Michael Callaghan is a professional support lawyer and Thomas Hall is a partner in the real estate division at Shoosmiths LLP Image © Close Brothers Property Finance