Making money from development without development
4 January 2021
Some local planning authorities are already insisting on biodiversity net gain for major schemes and this provides an opportunity for landowners. Once the Environment Bill which is currently making its way through Parliament becomes law, there will be a condition imposed on most planning permissions granted in England, that they must deliver 10% biodiversity net gain.
This new law offers very real opportunities for profit to rural landowners and may be of particular interest to those with land which has good prospects of environmental enhancement, but little prospect of obtaining planning permission for more urban forms of development. This might apply in particular to arable land away from urban centres.
Developers subject to the biodiversity net gain condition will have the option to provide the gain on site or off-site or to buy biodiversity credits from the Government.
The main opportunities for landowners lie in providing off-site biodiversity net gain.
Developers will have to assess the biodiversity value of their site against a biodiversity metric as it stands before development and against the same metre as it will stand after development. If the post-development biodiversity value is not at least 10 % greater than the pre-development biodiversity value, they will need to provide compensation for the shortfall off-site or by buying government credits. The Bill makes it clear that the Government credits should be priced so as to make them less financially attractive than identified off-site gain, so there will inevitably be a market for off-site biodiversity gain.
Sites providing off-site biodiversity gain will need to be registered and the increase in biodiversity provided by their scheme will need to be allocated to a particular development or developments.
A site proposed to provide biodiversity net gain will need to be assessed initially against the metric and then a will need to be devised to increase its biodiversity and the expected result assessed against the metric. This will generate a number of biodiversity credits and these will have a value for sale to developers to fulfil their planning condition.
The landowner or tenant will need to enter into a contract to secure the gain and that will have to endure for at least 30 years. It will be either a s106 agreement with the local authority or a conservation covenant with a ‘responsible body’. Conservation covenants are a new (not yet in force, in fact) form of statute-derived private contract and will be enforceable between the parties on broadly the usual contractual basis. The responsible body could be the local authority or it could be a conservation charity or a company with conservation as one of its primary objectives. The responsible body will also have to be registered as such in order to take on the role.
The conservation work itself may be done by the responsible body or it may be done by the landowner or tenant in return for a capital sum and/or a management fee and depending on the type and habitat provided, the provision of enhanced habitat need not necessarily exclude farming of some type on the relevant land.
Emerging policies on biodiversity net gain appear to fit well with the ELM Scheme which intends public money paid to farmers to support public goods. Whilst the provisions are not yet clear we understand that ELM Scheme payments are more likely to be secured for landscape or catchment scale projects with multiple benefits which are likely to require cooperation between landowners and a range of stakeholders. Projects of this type may also provide the greatest value in terms of biodiversity enhancement.
Carbon capture and ammonia compensation are also areas for which payments are likely to be available in the near future.
The signs are all pointing towards a future in which there will be real opportunities for landowners and farmers to make money from development without putting land into urban forms of development and to enhance the quality of the environment while doing so.
Birketts have been following the development of the law on biodiversity net gain closely and are already advising clients in relation to schemes for biodiversity enhancement. We would be very pleased to speak to any landowner with an interest.
This article is from the winter 2020 / 2021 issue of Agricultural Brief, our newsletter for farmers, landowners and others involved in agriculture. To download the latest issue, please visit the newsletter section of our website.
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The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at January 2021.