In the consultation paper “Transparency and Competition - A call for evidence on data on land control”, published as part of the suite of consultations accompanying its White Paper “Planning for the Future”, the Government is now proposing the registration of the ownership and control of development land and that those acquiring interests in potential development land should file 36 different items of information (including such details as the SRA registration number of the solicitor dealing, whether the price is indexed, and if so, by reference to which index).
Why do they propose this? Paragraph 9 of the consultation document states -
“without comprehensive information on those controlling land, local communities cannot fully understand the likely path of development in their area;
…—if this information is not readily available it raises a barrier to entry for small builders and new market participants and could potentially offer opportunities to exploit market position, reducing competition and market efficiency”.
It quotes a RTPI paper from 2013 that asserts that the lack of information about the ownership of land and about who may hold options over potential development land inhibits planning authorities from discharging their functions because they do not know which land owners are holding land back, thereby stalling development, nor which developers control land under option. It also claims that the information will enable the “PropTech” sector to “create tools and applications to reduce the time and cost of site identification and assessment by local planning authorities and developers”. Do these propositions bear scrutiny?
1 Is information hard to find?
Most of the information is already in the public domain, or obtainable from commercial sources. As the consultation document itself states) over 85% of the land area of the country is registered, and (as it does not mention) all land that has been sold after 1990 at the latest had to be registered on such sale, or from a much earlier date in many parts of the country. Most of the unregistered land in England and Wales is held by public sector or institutional owners, whose identity is likely to be well-known locally.
Options and other estate contracts have long been capable of being protected by registration, and in almost invariably those taken by developers over potential development land are so protected, because they represent a substantial investment on the part of the developer who will want to ensure that the subject land cannot be sold free of their interest. The land registers of the Land Registry are open to public inspection. Users of the Land Registry’s portal service, can be carry out a free “Mapsearch” which shows the extent of each registered land holding, and for just £3 for each title, details of the owner’s name and the proprietor of any interests registered can be downloaded. There are also commercially available map-based databases produced by companies like Land Technologies Limited, that combine land ownership data with details of registered interests and planning designations. Their products are now widely used by the land development, land agency and land promotion industries.
Once a developer or promoter has paid to acquire its interest it will want to get a return on its investment. It will be obliged to promote the land and can only do so by participating on the Local Plan process and putting forward the land as a candidate site for development in the site allocation process, or make an application for planning permission. At each stage the identity of the party controlling the land becomes a matter of public record.
2 Will the information that it is proposed to collect capture all parties controlling or promoting potential development land?
A substantial proportion of land is not promoted by developers and house builders. The land promotion industry now is a significant part of the development industry. Promoters do not buy the land, but take on the expense and risk of planning promotion in return for a share of the sale proceeds if a permission is obtained, whereupon the site is sold. The information currently available has been sufficient for them to gain a place in this market. Many landowners who have the resources and experience to promote their own land without the need to involve a promoter or developer, so there will be no further agreement to disclose or register. These include a number of Government and public sector bodies. Any register of land agreements will not pick up any of these groups.
3 Are the categories of contract, details of which are to be registered, relevant to sites controlled by developers?
The consultation document states-
24. The Government understands that, in the development context, the most common ways of exercising an element of control over the purchase or sale of land are:
• rights of pre-emption;
• options, and
• estate contracts.
The proposal suggests that interests be registered under these three categories. No mention is made of conditional contracts, often preferred by landowners for shorter term agreements.
While it is correct that options have long been a preferred means of securing an interest in potential development land to underwrite speculative investment in promoting it for development through the planning process, the other two types of agreement are not. An “estate contract” simply means any agreement to transfer or create any legal right in land or an interest in land. This includes options, agreements to buy houses, lease shops and grant rights of way over land. A right of pre-emption is a right for someone to buy (or at least bid) when the owner decides that they want to sell, with no obligation to sell. A developer investing hundreds of thousands of pounds in promoting a site through the Local Plan Process and making a planning application is not going to put the control over when (if it all) they can acquire the subject land in the hands of the landowner.
4 Would the proposals mitigate the factors that have reduced the number of SME developers in the market?
The lack of information is not what is driving small local builders out of the market, as they usually have the local knowledge and connections to find the sites. It’s the cost, risks and uncertainty. They can no longer afford to risk the increasing cost of making and pursuing applications for planning permission. The cost of applying for permission for even a relatively modest scheme for 20 houses can be a six-figure sum, which might all have to be written off if the application is refused. This is before absorbing the cost of increasing regulation, and facing the difficulty and cost of obtaining funding. As mentioned above, the land promotion industry has grown and now promotes a significant proportion of new development sites through the planning process. The information currently available has been sufficient for them to gain a place in this market. Where is the market failure caused by lack of information that the consultation document refers to?
5 How will the proposals affect landowners contemplating dealing with a developer or promoter?
The only new information that the proposed new register would gather is commercially sensitive information about price and other financial terms. Any obligation to make such information public can only dissuade landowners from seeking developers or promoters to take on the promotion of their land. The only real issue should be is it suitable for development, not how much someone stands to gain if it is sold.
6 What benefit would the proposed registers bring?
Councils and others already have all the tools they need to identify the relevant parties who own or control land, namely the Land Registry and commercial providers of land information who have been able to “create tools and applications” without any need to impose further administrative burdens or incur public sector expenditure compiling registers of data. Whatever the expressions “inefficiencies in the land market” and “market failure” mean, pulling this information together will not unlock a previously hidden source of development land in locations that are both suitable and uncontroversial locally.
The consultation merely feeds the myth that the development industry keeps land off the market and hides its control to help it do so. The house building industry cannot afford to do so. Its business model depends on turning the capital it raises from shareholders and banks into sites with planning permission and homes that can be sold at a profit, which is realised in cash to pay for its next projects, service its borrowings and pay its staff and suppliers and dividends to its shareholders – which usually includes our pension funds!