How will landowners and developers be impacted by of Part 11 of the Levelling Up and Regeneration Act 2023?

Part 11 of the Levelling Up and Regeneration Act 2023 (the Act) came into force on 26 October 2023 with the aim of achieving greater transparency around land ownership and control.

It introduces new powers allowing the Secretary of State to make regulations that require disclosure of information about interests and dealings in land to be provided to the Chief Land Registrar (or other bodies who require it in the exercise of public functions on behalf of the Crown). Regulations are therefore needed to give these new powers teeth. However, once regulations are made and these new powers bite they  will inevitably impact landowners and developers.

What are the new disclosure powers?

The Secretary of State now has the power to require the disclosure of details and documents surrounding property ownership providing it serves one of the three permitted purposes under the Act. Failure to comply is a criminal offence and may prevent registration of a transaction at HM Land Registry.

What are the permitted purposes?

The Secretary of State can require the disclosure of information if any of the following three permitted purposes apply:

1. Beneficial Ownership – It would be useful for identifying the beneficial owners of land in England and Wales, or understanding the relationship of beneficial owners with the land.

This will particularly affect properties owned by a corporate body or partnership, a trust, foundation or other legal vehicle that typically holds legal title with the beneficial ownership held by the shareholders, members, or beneficiaries as appropriate.

2. Contractual Control – It would be useful for understanding relevant contractual rights, including identifying the persons holding them and the circumstances in which they were created.

For example rights that:

• Arise under a contract
• Relate to the development or the use or disposal of land
• Are held for the purposes of an undertaking.

National Security – Information will fall within this purpose if it appears to the Secretary of State:

• There is a threat to national security in connection with the location of the land or anything being done on the land
• The information would be useful for identifying persons who own relevant interests in the land or have relevant rights concerning the land or have the ability to control or influence a person with such interests or rights or understanding the relationship of those persons with the land
• Requiring the provision of the information would be justified in the interests of national security.

What information will be required?

Where any of the above purposes are engaged, the Secretary of State can request  information about contracts and other arrangements which create, change, terminate, evidence or transfer interests or rights in land.

The relevant contractual rights under Part 11 appear to have a wide scope and could capture the following transactional documents:

• Sale contracts
• Transfers
• Agreements for lease
• Leases
• Options
• Pre-emption agreements
• Promotion agreements
• Lock-out agreements
• Covenants and easements.

Similarly, the definition of transactional information is very broad and could include the following in relation to a transaction:

• The parties
• Details of persons on whose behalf or for whose benefit the parties are acting
• The terms
• Details of the persons providing professional services
• Details of the source of any money paid or any consideration given in connection with it
• Copies of documents giving effect to or evidencing it.

It is suspected that some of this information may be made public, which will be of particular concern to developers who wish to keep commercial terms of transactions  confidential.

Part 11 may also apply retrospectively, however the extent of publication and sharing (if any) will not be clear until the regulations are published.

What if I refuse to provide disclosure?

It is an offence to fail to comply with a requirement to provide information, or to provide false or misleading information. Both offences are punishable by a fine or imprisonment, or both. In cases of legal entities, the relevant officer could be liable for the offence.

Failure to comply may also prevent registration of a transaction, notice or restriction at HM Land Registry.

What do I need to consider in future transactions?

1. Whether the proposed transaction may be caught by Part 11 and the effect this will have on the timetable – what additional steps will be required to comply and how long might this take?
2. The contractual obligations on parties to comply with any Part 11 requirements to allow for registration at HM Land Registry. This might be by making the contract conditional on satisfaction of requirements if they are known at the outset of the transaction, or provide for compliance at any time (including post completion)
3. How to protect commercially sensitive terms. It is not yet clear whether confidentiality agreements or exempt information documents will be captured by Part 11 and so parties may wish to wait until there is more detail before entering into agreements which contain commercially sensitive terms or information.

Whilst the Part 11 provisions have a potentially wide scope, the regulations setting out the extent and finer details are awaited. Landowners and property lawyers will have to carefully consider the implications of Part 11 on future transactions and also previous transactions given that Part 11 may apply retrospectively.

If you are a commercial landlord or property owner we would be happy to assist.