Contracting with Natural Capital Partners

Insight

09.04.2025

Many rural estates are attracted by the returns projected from the sale of biodiversity net gain (BNG) units or other nature credits, but feel they lack the expertise to make a project work. They often look to partner with one of the growing range of service providers in the natural capital sector to help them out. Initial discussions can move quickly to heads of terms and then to a fully negotiated commercial contract. BNG schemes can involve a number of players, and it is essential to understand who is doing what. Here are some key points to consider from the outset.

Design of the scheme and the habitat management and monitoring plan (HMMP). The initial steps involve undertaking baseline ecology services to understand the biodiversity value of the site and to develop a biodiversity enhancement plan and/or HMMP. The HMMP, in particular, requires careful review by the landowner to understand the costs of creating and maintaining the site and any changes to how the land may be accessed and used. The HMMP will form part of the planning agreement with a Local Planning Authority (LPA) or an approved “Responsible Body”.
Securing the 30-year commitment with an LPA or Responsible Body. It has been more common for landowners to enter into a section 106 agreement with a LPA rather than agree a conservation covenant with a Responsible Body, although this is showing signs of changing as the BNG market matures. As the number of Responsible Bodies increases, conservation covenants are starting to become more prevalent, not least because Responsible Bodies are often able to progress matters more quickly than an LPA. The respective planning agreement will set out which party is responsible for the creation, maintenance and monitoring of the site, what happens if the habitat enhancement does not go as planned, and the actions that the LPA or Responsible Body can take if the landowner fails to meet its obligations. The service provider’s services may include preparing and negotiating the planning agreement on the landowner’s behalf; however, landowners may prefer to use their own solicitors. If so, it is important to clarify this right in the consultancy agreement (and to adjust the consultancy fees as necessary).
Delivery on the ground: creation, maintenance and monitoring. Generally, the landowner is ultimately responsible under the planning agreement for the creation, maintenance and monitoring of the site over the 30-year period, although it will often subcontract certain obligations to third parties. In particular, the service provider may agree (or require) that it undertakes the monitoring obligations under the planning agreement for an initial period. The LPA or Responsible Body may also charge for overseeing compliance. Some service providers will also undertake the creation and maintenance of the site and so it is important to set each party’s obligations out clearly in the services agreement.
Brokering and selling the units to the market. One of the main roles of the service provider is to broker and sell the units to developers. The service agreement may set out agreed terms, including a minimum price, with the landowner obliged to accept any offer from the developer on such agreed terms. We recommend that the landowner retains final discretion over the sale of its units, although it is sensible to create a template sales deed which will form the basis for negotiations.
Charges and other provisions. We have seen various fee models used by consultancies, although most models require the landowner to cover the initial costs of the surveys, the development of the HMMP, and the preparation of the legal agreements. Some service providers may agree to defer rights to commission on sales of units until the landowner’s costs (or part of them) have been recovered. Consultancy agreements may also include an early termination payment and/or exclusivity provisions, which require the landowner to use the service provider for any future BNG projects.

Whilst there is a clear statutory framework for implementing BNG, service providers take different approaches to providing BNG services to landowners and the commercial agreements require careful review to ensure that responsibilities and the charges are clear. Please do contact us if you are interested in how we can assist you with BNG.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.