What is Biodiversity Net Gain & how will it affect new developments?

As of 12th February 2024, most new developments are now required to deliver a quantifiable improvement (of at least 10%) in biodiversity levels by reference to a pre-development baseline.  The Environment Act 2021 gives Biodiversity Net Gain (BNG) statutory force and developers will have to secure mitigation, either on-site or through off-site biodiversity units (or the purchase of government credits as a last resort), before they can begin development.

What is Biodiversity Net Gain (BNG)

BNG is a mandatory environmental approach that aims to ensure that development projects leave a positive, quantifiable impact on biodiversity. During recent years, there has been a shift in how planning policy approaches development, emphasising the importance of securing environmental conservation while continuing to allow human progress. The Environment Act has formalised this trend and places the requirement for BNG mitigation on a statutory footing. A suite of planning regulations came into force in February 2024, accompanied by detailed Planning Practice Guidance (“PPG”), meaning that BNG is now mandatory for nearly all development sites in England.

Under a statutory framework, introduced by the amendments to Schedule 7A of the Town and Country Planning Act 1990, every grant of relevant planning permission will be deemed to have been granted, subject to a condition securing the biodiversity gain objective. This condition requires the approval of a biodiversity gain plan (“BGP”) for each development, and the objective is to deliver at least a 10% increase in relation to the pre-development biodiversity value.

This gain can be achieved by enhancing biodiversity on-site, off-site mitigation measures, buying BNG units from off-site habitat gain sites, or (as a last resort) buying statutory biodiversity credits.

1. Developers
2. Land Promoters
3. Land Owners
4. Glossary

How Can We Help?

Whether you are a developer, land promoter, BNG operator or landowner, our team of legal planning, real estate development, agriculture and private client lawyers is able to advise and guide on all aspects of biodiversity net gain.

We can advise on;

• Emerging legislation and advise on anticipated obligations;
• Undertake site assessment and due diligence;
• Working alongside your ecologists, we can help clients develop a BNG strategy;
• Negotiate and drafting legal documents, including section 106 agreements;
• Preparation of BNG Unit sale agreements and;
• Buying land for the specific purpose of habitat creation sites;
• Deliver webinars to clients and intermediaries to enhance understanding of BNG and explore the opportunities available.

1. Developers – Playing a Key Role in Balancing Progress with Responsibility

Developers will be required to secure BNG in line with the Biodiversity Gain Hierarchy. The Hierarchy focuses on the integration of sustainable practices into every stage of development, starting with site selection.

How our team can help developers

• BNG Strategy Planning – A bespoke service where we work as part of your project team alongside your ecologists to design and develop a comprehensive biodiversity net gains strategy for your development.
• BNG Legal Agreements – planning agreements and planning obligations such as Section 106, deeds of variation.
• Review of existing land agreements (including option agreements and promotion agreements) – The review will assess the impact of BNG, prepare BNG clauses for new agreements and assess the need for BNG whilst also setting the context for the costs associated with BNG within the promotion of land for development.

The BNG mitigation hierarchy for developers

The PPG makes it clear that BNG is not just a matter to be considered after planning permission has been granted. To ensure the biodiversity gain objective is met and the pre commencement condition to secure a gain plan can be discharged successfully, it is important that BNG is considered throughout the planning process. Prior to submission of a relevant planning application, applicants are strongly encouraged to consider BNG early in the development process, which extends to factoring it in at the site selection stage. This then feeds into a consideration of the Biodiversity Gain Hierarchy which should be followed for any development proposals.

The Biodiversity Gain Hierarchy (as set out in the PPG) requires that:

• First, in relation to on-site habitats which have a medium, high and very high distinctiveness (a score of four or more according to the statutory biodiversity metric), the avoidance of adverse effects from the development is to be prioritised and, if they cannot be avoided, those effects need to be mitigated.
• Then, in relation to all on-site habitats which are adversely affected by the development, the BNG mitigation measures should be prioritised in the following order (“where possible”) – the enhancement of existing on-site habitats, the creation of new on-site habitats, the allocation of registered off-site gains and finally the purchase of biodiversity credits. .
• Planning authorities must take into account how the Biodiversity Gain Hierarchy has been applied and if it has not been applied the reason for that or absence of a reason when determining whether to approve the BGP.

Long-term Viability

BNG requires developers to adopt sustainable practices that enhance the long-term viability of their projects. While net gain is now a mandatory requirement, integrating biodiversity considerations at an early stage can enhance the attractiveness of developments to environmentally conscious consumers and investors.

Cost Implications

The government has been clear that the requirement for new development to provide at least a 10% net gain is non-negotiable; BNG cannot be argued away on viability grounds. Coupled with the requirement to apply the Biodiversity Gain Hierarchy, it is essential that developers engage with BNG at an early stage in the life cycle of a scheme.

• How does BNG affect developers?
• How can developers meet their mandatory requirements?
• What is a Biodiversity Gain Plan?
• Are any developments exempt from BNG?

How does BNG affect developers?

From February 2024, most new developments in England (bar a few exceptions)  are required to deliver a quantifiable improvement (of at least 10%) in biodiversity levels by reference to a pre-development baseline. This requirement was introduced by the Environment Act 2021 and came into force in February 2024.  Developers will need to meet this mandatory requirement either through on-site or off-site measures (or as a combination of the two) before they can begin development on any scheme to which this new requirement applies.

How can developers meet their mandatory requirements?

If developers are unable to meet the BNG requirement on-site, they will need to look for off-site solutions which can include the purchase of BNG units from habitat gain sites (other landowners), or they can purchase credits from the Government as a last resort (Government credits are priced highly to disincentivise this route). For landowners to be able to sell BNG units, they will need to create or enhance their land for BNG purposes and register this land on the national register.

The planning practice guidance provides information about what needs to be submitted at the time of making the planning application. In a nutshell, the local planning authority will need to be comfortable with the baseline value of the site in biodiversity terms, as any increase will need to be assessed against this value.

If you already have outline planning permission in place for a development, or have already submitted an application for planning permission (before February 2024), then the new mandatory BNG requirement will not apply to that planning permission (including any reserved matters approvals granted pursuant to the outline). The new BNG requirement will only apply to new applications submitted after February 2024.

In terms of s73 applications made in the future, the government has confirmed that the position will be as follows – where the original permission to which the S.73 application relates was either granted before February 2024 or the application for the original permission was made before February 2024, then these will not be caught by mandatory BNG.

Note that both above points relate to mandatory BNG only. There may still be a local planning policy requirement to provide BNG in relation to development, which will be secured by way of condition or s106 obligation.

What is a Biodiversity Gain Plan?

Each planning permission granted post the February 2024 date will be subject to a pre-commencement condition requiring the approval of a Biodiversity Gain Plan (BGP) which sets out how the developer proposes to secure at least 10% net gain. The submission of a BGP is non-negotiable and cannot be amended on viability terms.  It will be necessary for developers to comply with this pre-commencement condition to avoid being in breach of the planning permission, and the Government has been clear that developers will not be able to use a section 73 application to vary the condition.

The BGP should set out how the BNG target will be met, whether this be through the provision of on-site measures, off-site measures (including the purchase of biodiversity units) or through the purchase of statutory credits from the Government.

At the time of writing (early January 24) there is no standardised wording for the pre-commencement condition, and this is expected in due course. There is guidance available from DEFRA, as well as some model planning conditions on the Local Government Association website.

There is a lot of detail which still needs to be fleshed out in respect of how BGPs will work practically, particularly in respect of the delivery of BNG mitigation in the context of phased development under an outline planning permission. The latest government guidance (draft PPG) confirms that a BGP must be submitted to and approved by the planning authority before any development on the site can begin and that this should set a clear upfront framework for how the biodiversity gain objective of at least a 10% gain is expected to be met across the entire development.  Each reserved matters application should then be accompanied by a separate BGP  before the development of that phase can begin, to enable the local planning authority to track progress towards the overall biodiversity gain objective. The intimation here is that there may be the ability to “flex” delivery of the BNG mitigation across the lifespan of larger developments, provided that the LPA is satisfied that the 10% net gain target will be met across the development as a whole.

What developments are exempt from BNG… for now?

There is currently an exemption for residential developments of nine units and under and for non-residential developments where the floor space to be created is less than 1000 sq. metres or where the site is less than one ha (the “small sites exemption”), but from April 2024 this exemption will be removed and BNG will also be required for these small sites.

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2. Land Promoters – Navigating Environmental Enhancement

As promoters of land and sites on behalf of land owners, with responsibility for obtaining planning permission on those sites, a promoter’s role is key in defining and strategising the BNG on all applicable sites (and all sites from April 2024).

• What does this impact land promoters?
• How will legal agreements change?

What does this impact land promoters?

Where you are a promoter dealing with land promotion rather than land acquisition, your promotion agreements will need to take account of BNG requirements.

You will need to ask yourself the following questions:

1. Will you be providing lots of detail in relation to BNG? E.g. will you be engaging with an ecologist to calculate the pre-development baseline of a site as well as the post-development baseline?
2. Will you be applying for reserved matters for the development or just obtaining an outline permission?
3. What commitments will be required in the Section 106 Agreement in relation to BNG?

Ultimately, you need to build as much flexibility as possible into the promotion agreement, so that your position and liability is protected during the planning process and the securing of the BNG requirements for each site. You also need to factor in that you will not be developing the land yourself, so the BNG provisions need to be suitable and reasonable, so that the land is marketable.

Considerations for BNG in Legal agreements for land promotion

The parts of your property documentation which you really need to be giving some thought to are:

1. The calculation of the Price: how should the set-up and management of BNG be factored in to the overall price? Will it be an additional promotion cost reimbursed to you will the landowner bear some of the costs, or will all the costs simply be borne by the ultimate purchaser with an impact on the market value of the site?
2. The definition of Costs: will BNG costs incurred as part of the land promotion be covered within the promotion costs that are reimbursed under the Promotion Agreement?
   • Is there a risk of any permanent financial cost falling to you?
   • Is this cost-neutral so that you will be reimbursed in full?
   • The definition of Third-Party Land. This needs to enable the inclusion of additional land within the promotion, or the planning application, in order to meet the BNG requirements.
   • Indemnities. You will need to ensure appropriate indemnities in the promotion agreement for yourself, but you may also need to include indemnities for the landowners as well if they will retain ownership of land being used for BNG, but third parties are appointed to take on the responsibility of enhancing and then managing and maintaining the habitat on that land.

Other agreement considerations include accommodating the ability to purchase units for BNG and allowances if the LPA does not agree that the landowner’s additional land may be used for BNG.

BNG is a new legal requirement, and you will need to obtain legal advice to ensure the mandatory BNG requirements are complied with. For help with your next land promotion agreement, get in touch with our experts.

3. Landowners: Stewardship and Conservation Opportunities

A landowner’s role is pivotal in the conservation journey. BNG offers an opportunity for landowners to contribute to the enhancement of biodiversity and monetise on this. BNG initiatives can provide financial incentives for landowners, if priced correctly. By actively participating in biodiversity enhancement projects, landowners can unlock economic benefits by identifying land to create or enhance habitat gain sites, which can then be translated into BNG units for onward sale. This is one type of natural capital opportunity.  Others are available, such as: Government assistance schemes under Agriculture Act (known as Environmental Land Management Schemes) and Voluntary nature credits for biodiversity and carbon offset. There are however, various pitfalls that any landowner who is considering entering this space needs to be aware of.

How our team can help landowners

• Legal Agreements securing BNG units – Drafting planning obligations (s106) and conservation covenants to secure any Biodiversity Net Gain units as required which can then be registered for sale to offset development under the planning regime.
• Sale Agreements – Advice regarding the onward sale of any BNG units to housebuilders/developers. As part of this we can advise on the statutory requirements for adding sites to the new National Register for BNG units.
• Third Party Landowner Agreements – Advising on the most appropriate structure in terms of any land deal with a Habitat Gain Site Operator or direct with the Developer, ensuring that provisions are consistent with the requirements for maintenance of the BNG units under the Habitat Management and Monitoring Plan.

Habitat Gain Site

A Habitat Gain Site is an area of land where habitats are created or enhanced to produce BNG units. The number of units generated is determined by the HGS’s scale and the nature of the enhancements. These units are calculated using a national metric to showcase the biodiversity value before and after the works.

• What are the pros and cons of habitat gain sites?

How to set up a Habitat Gain Site?

If you want to use your land for this purpose, there are two scenarios:

(1)   Habitat Banking – where a landowner begins habitat creation in advance of selling the units

(2)   Habitat Creation – where a landowner creates a bespoke habitat to meet the needs of a developer.

The legal mechanisms for either purpose are the same and landowners can apply for either a section 106, or a conservation covenant. As long as you have a redline and bind the site, you don’t necessarily need a planning application, depending on the nature of the work being carried out.

Currently, with little take up by responsible bodies to create conservation covenants, s106 agreements remain the most popular route to habitat gain site creation. They are “tried and tested” for both local planning authorities and stakeholders. Time will tell whether conservation covenants will start to be used more frequently.  Our legal planning team has expertise in drafting and negotiating BNG offsite s.106 Agreements with local planning authorities.

Evidencing units

Once a baseline value is established for your land, the number of biodiversity units attributed to the site is calculated by reference to that baseline as secured by the s.106 Agreement.

Calculation of biodiversity units is achieved via DEFRA’s statutory metric  – you will need professional ecological advice at this stage.

Habitat management and monitoring plan.

Under the s106 agreement, you agree to enter into a habitat management and monitoring plan (HMMP) – this sets out how you will establish and thereafter maintain the habitat creation or enhancements. As part of the HMMP monitoring provisions, you will need to appoint a “competent” land manager and commit to delivering monitoring reports so the local authority can be comfortable the habitat has not only been delivered but is also being maintained for the full 30-year period.

Registration of biodiversity units

Before you can sell the units, they must be placed on the national register and secured for 30 years from the date of creation.  As and when the units are sold to developers will also be recorded, including information about which development has benefitted from the units. If you have a large site, then you may want to look at creating the units on a phased basis.

Pricing units

While the pricing of the BNG Units is likely to be market led and fluctuate for various reasons, it’s important for any landowner or BNG operator to get the pricing right.  There are various cost implications with establishment and onward maintenance that need to be considered. Furthermore, thought needs to be given to the possibility of the site enhancements failing for whatever reason, resulting in a breach of the s.106 Agreement or Conservation Covenant.

External support

With the new emerging market, there are specialist firms now who can offer varying levels of support and guidance to landowners to set up habitat gain sites. There are a variety of creative and effective legal structures available to stakeholders to fulfil and manage their BNG commitments.  Our team can advise all parties on the most appropriate and efficient structure for them, ensuring seamless collaboration, and fostering mutually beneficial partnerships.

The Pros and Cons of habitat gain sites

The Pros

The capital received from biodiversity units can be invested elsewhere on the farm estate or provide a guaranteed income from a leasing structure. It can also support diversification, for example ecotourism opportunities, and sit alongside food production.  Additionally, landowners can simply choose to set up a site for philanthropic purposes.

Stacking is also an option for other schemes such as government environmental land management schemes, nutrient neutrality and voluntary market opportunities with organisations seeking to be nature positive, which could increase capital returns. However, stacking must be shown to produce additionality (other than for nutrient neutrality schemes), i.e. further enhancement away from the HMMP of the BNG gain site. In practice this could be difficult and would need expert ecologist advice.

At this early stage of the scheme there are many unknowns in terms of what happens next, whether there may be other more lucrative opportunities for the land in the future and issues around succession planning and the tax implications, which are far from settled presently. The landowner must commit to a 30-year period of reporting and maintenance and may rely on multigenerational buy-in.

The Cons

One of the main concerns about habitat banking for landowners is the government’s ability to designate land, with Site of Special Scientific Interest (SSSI) or by other means, to stop landowners from destroying what they have created at the end of the 30-year period. If that happens you may not be able to offer the land for further BNG or other schemes without Natural England’s consent. An Environmental Impact Assessment will almost certainly be required if a change of use is on the cards.

Establishing a habitat bank may also reduce the land capital value because the use of the land is essentially sterilised for the 30-year period. Lenders may be reluctant to lend against that part of the farm and onward buyers might not be interested in taking on the liability if the profit has already been taken as an initial lump sum.

Overall, there are opportunities and considerations for landowners and it’s important to take professional advice.

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4. Glossary

BS 8683 – the British Standard for designing and creating a habitat gain site.

Biodiversity credits –  Credits are either – the Government Credits that can be used as a last resort to onsite or offsite solutions  or biodiversity voluntary credits – on the private market.

Biodiversity gain plan – Developers must complete this document to show how a development will achieve BNG. The biodiversity gain plan will be submitted pursuant to a pre commencement planning condition on the planning permission,  for approval  by the planning authority.

Biodiversity units – Units generated by landowners/specific BGSs under the Environment Act and can be sold from habitat banks for BNG purposes and purchased by developers to meet the 10% statutory target where BNG cannot be provided on site.

Conservation covenants – these are given to responsible bodies and enforceable by them. Responsible bodies need to be designated as such by the government – could be a local authority or public body such as a charity where at least some of its main function relates to conservation.

Habitat banking – where a landowner speculatively begins habitat creation in advance of selling the units

Habitat creation – where a landowner creates a bespoke habitat to meet the needs of a developer.

Habitat gain sites  – set up by landowners to create and enhance biodiversity and registered on a national register of sites

Nationally significant infrastructure projects (NSIPs) – Delivery of bigger national infrastructure projects. Currently it is unclear on when BNG will come in (expected 2025).

Pre-development baseline  – The baseline value reflects the ecological value of the pre-development site.

S73 applications – applications made to vary or alter a planning condition under s73 of the Town and Country Planning Act 1990b

Section 106 – a local land charge, visible on planning authority web pages. Creates positive obligations to deal with the establishment, management and maintenance of habitat gain sites and is binding on successors in the title (those who buy it from you).

Why work with us?

Our teams boast extensive BNG and wider environmental experience, working with landowners, habitat gain site operators, house builders and developers.

We are a full service law firm, allowing us to collaborate with colleagues across many teams to provide tailored bespoke advice. Our clients also benefit from access to Marrons, our award winning planning consultancy.

Our existing client base includes landowners and developers allowing us to offer you networking opportunities with the potential objective of site matching.

We are proud to be part of the largest legal and professional services group to be B-Corp certified, demonstrating our commitment to using business as a force for good for our people, planet, communities and clients.

Watch our latest webinar

In this webinar we delve into the planning process, focusing on the automatic imposition of a planning condition that requires the Local Authority’s approval to a biodiversity gain plan before development can commence. We will discuss the significant impacts of BNG for land managers/owners, developers, and local planning authorities, considering that biodiversity increases can be achieved on-site, off-site, or through a combination of both.

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Shaping a Sustainable Future

Biodiversity Net Gain represents a real shift in the way development has to be approached, emphasising the importance of balancing progress with environmental stewardship. Moreover, the government guidance released to date is clear that proposals to mitigate any environmental harm need to shape development right from the early stages of design (see the Biodiversity hierarchy above).

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