Biodiversity Net Gain: A Good Opportunity for Landowners?

Achieving biodiversity net gain (BNG) is now mandatory for almost all new developments in England. For landowners looking to fill funding gaps left by the phasing out of the Basic Payment Scheme, there are potential opportunities to provide ‘off-site’ BNG to enable developers to comply with their biodiversity net gain obligations. However, these opportunities need to be approached with caution and should not be entered into lightly. There is still some uncertainty about how biodiversity net gain agreements will actually work in practice and whether the payments on offer really represent good value over the (lengthy) duration of the agreements.

Key points for landowners to know

• Achieving biodiversity net gain is now a requirement for planning permission to be granted for almost all new developments
• This can be achieved either through on-site or off-site gains, the latter of which presents a potential opportunity for landowners
• Local Planning Authorities will require any biodiversity enhancements to be secured for the future, so landowners will need to enter into binding legal agreements to that effect if they want to be paid for doing so
• There are two options that can be used for this – (a) section 106 agreements with a Local Planning Authority or (b) ‘Conservation Covenants’ with a ‘designated responsible body’ (as designated by DEFRA)
• These agreements will place significant obligations onto landowners, so must be carefully reviewed and the risks properly understood before entering into them
• Landowners will need to balance the potential revenue from BNG schemes against the costs of making biodiversity improvements, the risks of any problems that may occur and the fact that they will be tying up their land for a very long time
• Expert advice and support from specialist land agents, legal advisers and accountants should always be sought before entering into a BNG scheme

How does biodiversity net gain work and how can landowners benefit?

Briefly, the requirement for developers to achieve biodiversity net gain means their proposed development must increase the net biodiversity for a development site by at least 10% in order to obtain planning permission. Whilst this may be achieved by increasing the biodiversity on the development site itself (‘on-site gains’), if that is not possible then it can also be done through improving biodiversity at a different site (‘off-site gains’).

It is this second approach that offers a potential revenue stream for landowners. Not all developers will be able to increase biodiversity on site, so they will be looking for other sites where biodiversity can be increased. Landowners with suitable sites could, therefore, enter into agreements with these developers to help them meet their BNG obligations. However, it is important to be aware – before incurring significant costs / professional fees and starting to make any changes – that not all land will be suitable for BNG.

Local Planning Authorities will want to ensure that any biodiversity improvements are actually secured for the future and landowners will, therefore, need to enter into appropriate legal agreements to ensure this obligation is met before receiving any payments.

What are the types of BNG agreements?

There are two types of agreements that landowners can enter into with regard to BNG:

1. Section 106 agreements
2. Conservation Covenants

A section 106 agreement is a legal contract between a Local Planning Authority and a landowner to meet certain requirements, related to the granting of planning consent for a particular project. The developer may also be party to such an agreement. A section 106 agreement is a way for Local Planning Authorities to ensure that the landowner will be committed to making the required biodiversity improvements on their land.

Conservation Covenants will instead be made between the landowner and a ‘designated responsible body’ appointed by DEFRA.

Whether using a section 106 agreement or a conservation covenant, landowners should always consult a specialist land agent and solicitor before signing, as the agreements will last for a minimum of 30 years and will significantly affect the landowners’ ability to use and/or dispose of their land.

What must landowners consider before entering into a BNG agreement?

Whether entering into a section 106 agreement or a Conservation Covenant, landowners need to carefully consider the legal obligations they will be taking on. Any failure to comply with the terms of the agreement/covenant could result in the cancellation and/or repayment of any payments from the developer and could lead to enforcement action by the Local Planning Authority or designated responsible body.

Landowners will need to ensure that the environmental improvements they are obliged to make are clear and achievable, throughout the length of the agreement. The agreement will also need to make it clear who is responsible for creating or enhancing the habitats needed to meet BNG requirements, who will maintain and monitor those habitats and what happens if for any reason outside the landowner’s control the biodiversity requirements can no longer be complied with.

Other issues that landowners will need to consider include when the agreement will end, whether any consents or licences are required to carry out the necessary works, any actions that the Local Planning Authority or designated responsible body can take if the landowner breaches the agreement and how any disputes should be resolved.

It is also important to consider that by entering into a BNG scheme, a landowner will be tying up their land for the next 30 years. This may also have an impact on how future generations are able to use the land after the 30 year period comes to an end.

There is also the question of how much profit can actually be made by a landowner in this situation. Delivering the BNG requirements could become extremely costly over the 30 year period and therefore advice should be sought from a specialist at an early stage.

Depending on how any payments are structured, it could potentially de-value the freehold interest in the land and in any event, it could be difficult to find a purchaser for the land.

A BNG agreement will almost certainly impose significant restrictions on the landowner disposing of the property without consent from the developer and the Local Planning Authority / designated responsible body.

Landowners should therefore always take expert advice from both a specialist land agent and a solicitor before entering into any form of BNG agreement. Advice from an accountant should also be sought, as entering into a BNG agreement may have an impact on a landowner’s tax liabilities, including inheritance tax reliefs.

To discuss how we can help landowners with biodiversity net gain opportunities, please contact us.

Please note the contents of this article are given for information only and must not be relied upon. Legal advice should always be sought in relation to specific circumstances.