What is a ‘contractual control register’ and the consequences of the proposals?

The Department for Levelling Up, Housing and Communities (DLUHC) is running a consultation for eight weeks and concludes on 20 March 2024 and we urge all who will be impacted by the proposals to respond to the online survey. The link to the survey is here: Contractual Controls on land: consultation – Department for Levelling Up, Housing and Communities – Citizen Space.

The consultation anticipates the regulations will commence on 6 April 2026.

The Government estimates that the initial cost of this process will cost £4.8m, in total (as per their 2019 prices) and off this £4.5m is estimated to fall to the private sector and the remaining cost is expected to fall on local authorities.

The Proposals

The Government has already powers through the Levelling Up and Regeneration Act (LURA 2023) to gather and publish information on contractual control agreements. The term ‘contractual control agreements’ refers to:

• Option agreements,
• Pre-emption agreements,
• Conditional contracts, and
• Promotions agreements.

The regulations seek to create a dataset comprising the ‘what’, ‘where’, who’ and ‘when’ of contractual control agreements that will promote transparency by providing a reliable, accessible source of information for communities, developers and other stakeholders.

The proposals will create a legal requirement for ‘contractual control agreements’ to be registered at HM Land Registry if the agreement meets the following requirements:

• The contract is in writing and binds the land;
• Relates to registered land only;
• Subsists for 12 months or more from the requirement arising or which if it does terminate within 12 months, includes extension provisions which would extend the period beyond 12 months; and
• Relates to a:
  • New agreement entered into after the commencement of the regulations; or
  • An existing agreement entered into after 6 April 2021; or
  • An existing agreement entered into at any time which is varied in such way that alters any of the required information or is assigned after the date of commencement or the regulations.

It is expected that share purchase agreements to buy companies which hold land will not be included within the scope of the proposals.

Consequences of The Proposals:

Developers will have to provide information on the contractual controls they use. This will include:

• Details of the land and location including title numbers;
• Details of contracting parties;
• How long the contractual control is in place;
• The date the agreement was entered into;
• The start date of the agreement and the end date; and
• Details of the entitlement for the beneficiary of the agreement to extend;
• The conveyancers SRA number.

Currently there is no legal requirement to register a contractual control agreement at HM Land Registry, although the sensible and prudent beneficiary of a contractual control agreement will register at HM Land Registry a unilateral notice and a restriction to protect their interest. The restriction and unilateral notice will usually only refer to the date of the contractual control agreement, the parties and the land involved.

The Government proposals will provide more information is disclosed to the wider public in relation to the term of the contractual control agreement.

Excluded types of agreements include:

The proposal excludes the following types of agreements:

• Restrictive covenants;
• Overage and clawback agreements;
• Agreements made for the purposes of national security or defence;
• Agreements made to facilitate and finance agreements;
• Contractual control agreements for less than 12 months with no ability to extend.

Proposed process for providing and updating information about future contractual controls

The proposals include:

• 60 day deadline for notification: The beneficiary of the contractual control will be required to provide information within 60 days of the contractual control agreement being entered into.
• Restricting ability to protect the contractual control agreement: A notice or restriction cannot be registered at HM Land Registry without the contractual control agreement details being supplied to the HM Land Registry.

Information on the contractual control agreement will need to be supplied to HM Land Registry and needs to be provided by a ‘conveyancer’ to provide assurance the information is accurate.

Proposed process for collecting information about pre-existing agreements which pre-date commencement of these regulations.

The Government proposes to collect data on existing agreements entered into from 6 April 2021 (five years before the expected commencement of the regulations). In addition, the proposals would catch any existing agreements which are varied in such a way that alters any of the required information or are transferred to a third party from the commencement date of the regulations (expected 6 April 2026). In both instances, data needs to be provided within 60 days, as for any new agreements.

Beneficiaries will have 12 months to provide details of existing agreements from the commencement date 6 April 2026.

This will require developers, promoters and any other beneficiaries of land to carry out an extensive review of their existing agreements and then instruct a solicitor to notify HM Land Registry of all contractual control agreements that meet the criteria. This will undoubtedly be a large task for many active housebuilders and will incur an administrative cost internally and in relation to external legal fees.

Keeping the information up to date

There will be a continuing obligation to update HM Land Registry about any variations to the contractual control agreement within 60 working days of the variation, so every time you extend the term, or change the extent of the land or transfer the option HM Land Registry will need to be notified by a conveyancer.

Consequences of non-compliance

The consequences proposed are severe and include a criminal conviction and a maximum prison sentence of up to two years and an unlimited fine for knowingly or recklessly providing false information!

The Government plans to put in place ‘standard data assurance process checks’ also to check information.

Publishing information

The Government intend to publish the data in a downloaded format and they anticipate that Property Technology companies will be able to access the data and incorporate it into existing (or new) tools and views. Property Technology companies are mentioned several times in the consultation and it appears they will be one of the main users of this information.

It is unclear how the information can be accessed through HM Land Registry and if this will be by area or developer/promotor search.

The Government has indicated that they do not anticipate charging fees to provide or access the information; but the requirement to provide the information through a conveyancer is likely to incur legal fees estimated at £226 per hour (in 2019 prices).

Contractual control agreements are usually confidential documents with sensitive information and the consultation proposals includes a statement that they do not currently plan to collect or publish the original agreement, which is welcome relief to all.

Conclusion

The Government says that the contractual controls sometimes act as a blocker to communities and SMEs from securing land for development. This is not my experience as often some of this information is already available at HM Land Registry. There are many blockers to securing land for development and the issue is complex and having considered the proposals I need convinced further that this proposal will assist or promote development for community groups or SMEs.