Levelling up and looking through

Part 11 of the Bill sets out a framework within which regulations can be published which require the provision of:

• certain classes of information in relation to the ownership and control of land in certain circumstances (section 209); and 
• transactional information in relation to the aforementioned circumstances (section 213).

The Bill sets out three “permitted purposes” in respect of which the Secretary of State (SoS) may make regulations requiring the provision of information relating to ownership and control of land.

The “permitted purposes” are:

1. the beneficial ownership purpose;
2. the contractual control purpose; and
3. the national security purpose.

Any regulations made by the SoS which require the provision of information for any permitted purpose must set out details of the person on whom the disclosure obligation falls, the time limit for compliance and whether such information is to be provided to the Chief Land Registrar. The requirement to provide information must also specify the “occurrence or circumstances” that have given rise to the demand for disclosure.

The Bill permits regulations created under it to:

• include provisions relating to the format in which information is to be provided (i.e. by electronic means); and
• provide or make provision about how they relate to persons outside of the UK or information held outside of the UK.

The Bill anticipates application to overseas entities but does not provide any further detail as to the nature or character of those entities. There is scope for crossover with other legislation / draft legislation which seeks to capture disclosure of beneficial ownership of overseas entities with UK land holdings (i.e. Economic Crime (Transparency and Enforcement) Act 2022, the Economic Crime and Corporate Transparency Bill and statutory requirements via the Trust Registration Service). 

The explanatory notes accompanying the Bill set out the reasons for introducing these new information-sharing requirements.

• First and foremost is to deliver on the commitment made in the 2017 housing white paper relating to “land transparency” which promised that data on contractual arrangements used by developers to control land (i.e. conditional contracts and options) would be collected and published.
• Secondly, these provisions are intended to dovetail with and support the Economic Crime (Transparency and Enforcement) Act 2022 by limiting opportunities to avoid or evade sanctions and disclosure requirements thereunder. 
• Thirdly, and finally, the often stated “wider national security” purposes and for macroeconomic reasons.

Information will be within the scope of the “beneficial ownership purpose” if the SoS considers it useful for the purpose of:

• identifying persons who are beneficial owners of land in England or Wales; or
• understanding the relationship of those persons with the land that they beneficially own.

The previous iteration of the Bill (as brought from the Commons, 19 December 2022) referred to “relevant interests in land” - this terminology has been refined and reference is now made to “beneficial ownership” which is more clearly targeted language. The Bill seeks to identify and understand ultimate ownership or interests in property. It also echoes the language used in recent corporate transparency legislation (both draft and in force) albeit consistency of meaning across the piece is not guaranteed, creating the possibility of multi-tiered rather than harmonious disclosure regimes.

Where land is owned by a body corporate or a partnership, a person is a beneficial owner of that land if they are a beneficial owner as defined by regulation 5 of the Money Laundering Terrorist Financial and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR). In short, a person will be a beneficial owner if they control, or have a sufficient level of control over, the relevant entity.

Where land is owned as part of a trust, foundation or land is owned as part of the estate of a deceased person a person is a beneficial owner if they meet the definition of beneficial owner under regulation 6 of the MLR.

Land is considered to be owned by such an entity if that entity has owns the freehold or leasehold estate in that land. There is no reference to “registration” and as such the concept of ownership is not “pinned” to the proprietor that appears on registered title at the Land Registry (in the same way as it is, for example, in in the Economic Crime (Transparency and Enforcement) Act 2022).

The fact that the Bill draws upon definitions in anti-money laundering legislation is perhaps indicative of the Government’s more widespread intention to legislate for increased corporate transparency – this concept is a driver behind other recent statutes and bills currently progressing through Parliament.

Information will be within the scope of the “contractual control purpose” if the SoS considers it useful for the purpose of “understanding relevant contractual rights”. The threshold appears low; the disclosure requirement can be engaged simply by the SoS wishing to know more about a contractual arrangement.

Relevant contractual rights are rights arising under a contract which relate to the development, use or disposal of land in England or Wales. The rights must be for the purposes of a business, charity (or similar) or in the exercise of public functions. The drafting is therefore very broad and has the potential to capture a wide variety of rights under many types of contractual arrangements.

The term “contract” seems to have deliberately wider reach than “deed”. The purpose seems to be to ensure that not only disposal documents (i.e. transfers and leases) fall within the remit of the Bill but also arrangements such as agreements for lease and sale contracts. The requirement for the contract to relate to “development or use of land” rather than just to “disposal of land” bolsters the wide reach of this provision. Additionally, under current statutory land registration requirements, certain interests in land do not need to be registered on the title register of property.

Information will fall within the “national security purpose” if it relates to land that appears to the SoS to be located in an area, or which has anything situated on or carried out on it that gives rise to, a threat to national security. This provision bears similarity to the type of language used in the National Security and Investment Act 2021 which was introduced as an upgrade to the UK’s investment screening powers to facilitate the identification and management of national security risks. In all cases the SoS must consider whether or not the provision of information would be justified in the interests of national security.

Information will also fall within this purpose if the SoS considers it useful for understanding the relationship of certain persons with the land.

Alternatively, information will fall within the “national security purpose” if it appears to the SoS that the information would be useful for the purpose of identifying persons who:

• own relevant interests in land (ownership includes legal and beneficial ownership);
• have relevant rights concerning the land (such as a right or power, arising under a contract); or
• have the ability, or are in a position that may involve the ability, to control or influence (directly or indirectly) the owner of a relevant interest in the land, or a person with a relevant right concerning the land, in the exercise of that ownership or right (ownership includes legal and beneficial ownership).

The drafting of this provision is extremely wide and purposely so. This provision gives the SoS a broad remit to effectively demand disclosure of information about interests in and ownership of land if there are national security concerns. The effect of the provision is tempered by the fact that the SoS must feel it is justified disclosure.

If regulations require the provision of information that is within the scope of a “permitted purpose” the Bill provides for that information to include certain types of transactional information about "instruments, contracts and other arrangements”.

The types of “transactional information” that regulations may necessitate sharing include:

• details of the parties to a transaction (in many cases some of this information already makes its way onto the title register by way of notice);
• details of persons on whose behalf or for whose benefit the parties to a transaction are / were acting (this seems to be intended to capture beneficiary information);
• details of the terms of the transaction (it is unclear if there is scope for redacting, for example, commercially sensitive terms);
• details of persons providing professional services in relation to a transaction (professional services is not defined however this may have implications for confidentiality);
• details of the source of any money paid or other consideration given in connection with a transaction (this is likely to be of concern unless such information is protected from public disclosure); and
• copies of documents giving effect to or evidencing a transaction (it is unclear if any level of redaction would be acceptable).

It is possible. The Bill states that regulations which require disclosure of information relating to land ownership or land transactions “may relate to things done or arising before the coming into force of” Part 11 of the Bill. This is potentially onerous. The Bill does not place any backstop date on this possible look back period. Presumably this provision has been included to: (i) prevent parties from taking action to avoid disclosure before Part 11 comes into force (assuming the Bill passes); and (ii) to level the playing field (by ensuring that information relating to extant property ownership is not protected or carved-out from the application of the disclosure provisions).

Firstly, by the introduction of criminal offences which carry both financial penalties and the possibility of imprisonment.

Secondly, if information required to be provided has not been provided, regulations may be made to prevent a “registration act” from being carried out in relation to any relevant interest in land / any relevant right concerning land.

A “registration act” is any act that it is possible to carry out in relation to a register of title. This would capture applications to register a disposition (transfer of legal title of a property) or for the grant (or amendment) of a notice or restriction. This is a clear transactional incentive to comply. For example, the effect of this may be that a disposal cannot be registered (creating registration gap issues) or that an interest cannot be “protected” by noting it on the register. It is unclear how these provisions will ensure that third parties will be on notice of transactions that have occurred (and which, except for registration matters, will be legally binding).

Although the Bill does not say as much, one might assume that any regulation that enacted this section would include provision to remove the prohibition on “registration acts” in event of compliance by the relevant party.

The Bill provides for regulations to be made to address the retention, sharing and publication of information that is provided as a result of regulations requiring disclosure of information about land ownership or land transactions. It is envisaged that information will be shared only with persons exercising functions of a public nature, however there does not appear to be a limit on where or how such information might be published.

In the context of publication of information, the explanatory notes specifically refer to the commitment, made in the 2017 housing white paper, to “publish data on options and other arrangements used by developers to exercise control over land.” It is not clear if this would include publication of beneficial ownership information – one clue appears in the explanatory notes to the Bill which refer to these disclosure requirements being necessary to “identify attempt to evade the sanctions and new disclosure requirements under the Economic Crime (Transparency and Enforcement) Act 2022.” However, it is possible that beneficial ownership information might be made public. We expect the detail of this would be included in secondary legislation.

This is likely to be of particular interest to commercial parties who may have concerns about publicly revealing their commercial arrangements. Often confidentiality provisions are inserted into commercial contracts to prevent such disclosure. Additionally, Land Registry exempt information forms currently enable redaction of certain commercially sensitive information.