Following on from the UK Government’s 25 Year Environment Plan, the Environment Act became law at the end of 2021. One of the most significant aspects of this wide-reaching act will be the proposed introduction of mandatory "biodiversity net gain". At the time of writing, this is expected to come into force in late 2023. Whether looking to develop, preserve or enhance land, you should make sure this new requirement is on your radar.
What is biodiversity net gain?
Very broadly, biodiversity net gain (BNG) is an approach to development that aims to leave nature, and in particular habitats on site, in a measurably improved position than before the development was carried out.
The Environment Act 2021 introduces new provisions that, when in force (it is currently expected this will be in November 2023), will mean every planning permission granted for the development of land in England shall be deemed to have been granted subject to a condition that development cannot start until a "biodiversity gain plan" has been submitted to and approved by the local planning authority.
The accompanying biodiversity gain plan must, among other things, show that the biodiversity attributable to the development exceeds the "pre-development biodiversity value" of the development site by at least 10 per cent. This percentage change will be calculated using “biodiversity metrics” published by DEFRA.
How will BNG be provided?
In principle, in producing a biodiversity gain plan, those developing land will be required to follow a mitigation hierarchy, and, either separately or in combination:
(a) Endeavour to create the BNG or habitat enhancements on their development site in the first instance.
(b) Where this cannot be done, they must link their development site with offsite enhancements.
(c) If offsite enhancements cannot be achieved, they must purchase "biodiversity credits" from the Government.
To secure the above, developers and third parties will be required to enter and register legally enforceable agreements, such as a section 106 agreements or a "conservation covenant", to secure the enhancement and maintenance of the relevant land for a period of at least 30 years, subject to any further changes made by regulations.
Given that the required habitat enhancements will not always be achievable on a development site, it seems likely that third party sites are going to be crucial to the operation of mandatory BNG. Landowners may therefore have an opportunity to create habitat enhancements on their land and sell the resulting biodiversity "units" to developers. It is currently proposed that the prices of such units should be agreed privately.
It has been recognised by the Government that assistance will be needed to establish this market and so it has been signalled that "habitat banking", the creation of BNG early to be banked until later allocated to future development, will be permitted to boost initial supply. Further details are also awaited as to whether other enhancements required under other development controls can be "stacked" and counted towards BNG so that landowners can benefit from the same enhancements to land, but where payments or benefits come from different environmental and/or planning regimes.
What can I do to prepare for the introduction of BNG?
As we await the BNG provisions coming into force (assuming there is no "planning reset" or delay by the Government), we expect the final details in relation to BNG to emerge through consultations and we will be monitoring these carefully.
If you are looking to bring sites forward for development, you should ensure that any new BNG requirement is appropriately factored into site selection and scheme design, including the availability of any exemptions. You may also need to consider funding arrangements, particularly where local authorities may expect to see insurance, bonds or other security in place to secure maintenance obligations. If you are entering into agreements with developers, you may also want to consider whether your contractual arrangements strike the right balance between flexibility and certainty to deal with any additional requirements and arrangements arising out of BNG and where the associated risks and costs should sit. It is worth noting that the local government and the private sector are already forging ahead with BNG by policy and contract.
If you are considering alternative uses for surplus land, preliminary market analysis suggests that there is potential for biodiversity units to command not insignificant value. It may, therefore, be worthwhile considering carrying out an audit and assessment of available landholdings, particularly areas that are not being put to productive use or where biodiversity gain may be easy to achieve.
If you need to carry out habitat enhancements in advance of the BNG provisions coming into force and want to keep the door open to potentially benefitting from the future BNG provisions (should it be permitted), it may be prudent to ensure that "biodiversity metric" measurements are taken before and after any development, so that the improvements can be evidenced.
The introduction of mandatory BNG provisions will mean a period of significant change as landowners, developers and local authorities grapple with these new requirements (not to mention the plethora of other planning reforms currently posited by the Government). There are still plenty of details to follow, but in the meantime, constructive conversations can help to ensure that you are prepared.
If you require further information about anything covered in this briefing, please contact your usual contact at the firm on +44 (0)20 3375 7000.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, October 2022