Biodiversity Net Gain: what landowners need to know

Many landowners will have come across biodiversity net gain or BNG and may be aware that it can be a way to generate a financial return on land. In this article, Richard Nixon and Robin Adams look into the legal requirements and the ways landowners can capitalise on BNG.

With some exceptions for smaller developments, a statutory planning condition now applies requiring a recipient of planning permission to not only replace natural habitat lost to the development but add to it, by at least 10%, hence biodiversity net gain or BNG. The new condition applies to planning applications made after 12 February 2024 for most sites, and after 2 April 2024 for some smaller sites.

Assessment

Sites must undergo an assessment by an ecologist to assess the site’s biodiversity pre and post-development.

Assessment, using a prescribed Defra assessment tool, allows a determination to be made of what will be required to achieve the BNG. The plan to achieve BNG must be submitted to the local planning authority (LPA) by the applicant and must be approved by the LPA before development can begin. The extent of the BNG requirement for a development is expressed in terms of BNG units.

Similarly, a landowner seeking to create BNG units for sale will need to complete a similar exercise for the habitat site.

Once the relevant ecological assessments are done, a landowner will need to enter into a section 106 agreement with the relevant local planning authority, under which the landowner accepts obligations to create and maintain the relevant habitat, for a period of 30 years. A conservation covenant, registered against the land and enforceable by a designated responsible body, is the alternative route for a habitat owner. Once the section 106 agreement or conservation covenant is in place the landowner will need to register the scheme with Natural England.

Meeting the requirement for BNG

The BNG requirement can be met by the developer delivering BNG on-site to the extent of the necessary BNG units, on the same land as the development, or off-site, by purchasing BNG units from another landowner. If those routes are unavailable, the developer can purchase statutory units from Defra (which are priced high to encourage on-site solutions and the development of a private off-site market for units).

Habitat banks

A landowner may wish to create a bank of BNG units, available for easy and quick purchase by developers. A local authority wishing to do that will most likely need to transfer suitable sites into a new company, a habitat banking vehicle, owned by the authority, which can apply to create BNG units to hold as a stock or bank of units, available for purchase by developers. That route allows the authority to remain responsible for the enforcement of the related section 106 agreement or conservation covenant.

Using BNG to create income

There is therefore a significant opportunity for landowners, whether private or public, to generate income under the regime by creating BNG units in relation to their own land. That is particularly the case where, for whatever reason, other ways to benefit financially from land are limited or not available or attractive.

For developers too there are opportunities to sell excess BNG units not needed for their own developments.

Any sale of units can be unconditional and immediate, for an existing scheme where the buyer has an immediate requirement for units, or it can be a longer-term conditional arrangement, more akin to an option, available once the buyer obtains planning permission(s) and has a need for units. The latter scenario will often involve an upfront payment to secure for the buyer access to the units over the agreed period.

Experts in the field

The dedicated Natural Capital team at Muckle LLP, comprising lawyers from our property, commercial and agricultural teams, has been involved in a number of BNG matters since the new condition came into force.

Many aspects of the scheme, including getting the section 106 agreement or conservation covenant right and negotiating the terms and contractual protections on a sale of BNG units, are new. The market and approach are both evolving, so it pays to have a legal team that is familiar with the BNG regime.

For support in relation to BNG, please contact Richard Nixon, partner and head of our natural capital team via [email protected] or 0191 211 7924 or Robin Adams, a partner in our natural capital team, via [email protected] or 0191 211 7949.