Biodiversity Net Gain (BNG) - Key Considerations for Landowners and Developers

From 12 February 2024 (April 2024 for smaller sites), Biodiversity Net Gain (BNG) will be mandatory for most planning applications, including those made under s.73 of the Town and Country Planning Act 1990. This policy requires the creation and enhancement of natural habitats, imposing BNG conditions on all development planning permissions granted in England. The primary goal is to guarantee a tangible positive impact (net gain) on biodiversity following the completion of any development. While there are exceptions to these regulations, it is crucial to assess whether they apply to your specific site.

From this date in England, this new planning condition will require a biodiversity gain plan to be submitted and approved by the Local Planning Authority before any development can lawfully commence. This plan must include an evaluation of natural habitat values both before and after development, ensuring a minimum net gain of 10%. It's important to highlight that 10% is the baseline requirement, with some local authorities already stipulating a higher percentage.

Developers can achieve BNG through on-site or off-site activities or a combination of both. They may also opt to purchase biodiversity units as a form of offset. The measurement of biodiversity is standardised in units, with the quantity determined by factors like size, location, and quality.

Once delivered, the BNG must be actively maintained, likely through a legal agreement, for a minimum of 30 years after the completion of the development.

Why is this of interest to landowners and developers?

If the developer cannot achieve a 10% gain in the required biodiversity gain, they will be obligated to purchase off-site units. This presents a tangible opportunity for landowners to provide these units, serving as an additional revenue stream.

What are biodiversity units worth?

In determining the pricing for biodiversity units, landowners should factor in the expenses associated with providing the BNG land. There will be costs related to drafting legal agreements, fees for ecologists and other experts, insurance, and acquiring the necessary staff and machinery for the comprehensive management and maintenance of the land over the stipulated 30-year period.

The landowner must ensure that their pricing covers all these costs over the minimum 30-year period to meet the obligations in any BNG legal agreement. While online marketplaces and land agents may offer insights into biodiversity unit pricing, conducting a comprehensive costing exercise is imperative to ascertain that it adequately addresses the unique expense of each landowner.

At the outset, developers can also acquire statutory credits from the Government. However, the cost is deliberately elevated to stimulate the private market for biodiversity units. For instance, the least expensive statutory credit for low-grade land begins at £42,000, while the cost escalates significantly to £650,000 for the most valuable units.

What do landowners have to do?

Landowners seeking to sell biodiversity units must have an agreement wherein they undertake the responsibility of establishing or improving habitat on their land and overseeing its management for a minimum of 30 years to meet the specified conditions.

The legal agreement will be with a responsible body or local authority, and non-compliance with any terms in the BNG legal agreement may incur penalties and enforcement actions.

How can land be registered for BNG?

Before a landowner can register a site, they must have a legal agreement in place setting out covenants concerning the scheme's delivery, maintenance and management. The fulfilment of BNG in conjunction with a development may be governed by a condition of the planning permission, such as a planning obligation contained within a legal agreement made under Section 106 of the Town and Country Planning Act 1990 or via a conservation covenant agreement made under the Environment Act 2021.

The landowner will need to register their land as part of the registration process. Here is a link to the Government's register of all off-site biodiversity sites - Sell biodiversity units as a land manager - GOV.UK (www.gov.uk). 

Landowners must also submit a metric tool calculation to accurately determine the potential number of units that can be generated on their land. The Government provides accessible online tools to assist landowners in this calculation process. For detailed guidance and tools, please visit the Statutory biodiversity metric tools and guides - GOV.UK (www.gov.uk) 

Finally, landowners must enlist the expertise of an ecologist to assess the biodiversity value of the current habitat and provide recommendations for suitable creation or enhancement efforts on the land. Leveraging more units per hectare becomes achievable by strategically creating, enhancing, or restoring specific habitats relevant to the location. Collaboratively, the ecologist will formulate a comprehensive habitat management and monitoring plan to support the application. This must be agreed upon by the party with whom the landowner is entering into an agreement with.

How does a landowner sell their units to developers?

There are several options available, which include:

Independent Unit Sale:​

• Directly engage with developers through unit purchase agreements.
• Some land agents have already set up platforms to help match landowners and developers together in the same locality.

Collaborative Habitat Banking:

• Team up with local non-governmental organisations or fellow landowners to establish a larger habitat bank and sell units as a group. 
• This option requires a detailed legal agreement among group members summarising their responsibilities and outlining a fair distribution of payments.

Habitat Bank Operation:

• Use a habitat bank operator who leases the land and pays the landowner a fixed, regular fee.
• Allow the operator to act as an intermediary, managing legal agreements, site registration, and liaising between the landowner and unit buyers.
• This option requires a comprehensive contract with the operator, specifying responsibilities, payment terms, and contingency plans if habitat targets are unmet.

What are the issues for developers and their future sites?

BNG will be a pre-commencement requirement, meaning it is crucial to start thinking about how mandatory BNG will be achieved as early as possible in a transaction, as third parties may need to be involved. 

When aiming to achieve BNG through on-site works, developers should initially identify the anticipated nature and scope of these works. The process of attaining BNG exclusively through on-site works is generally straightforward, provided it does not jeopardise the viability of the proposed development.

However, delivering off-site BNG works on third-party land (Off-Site) in full or partial fulfilment of the BNG requirement could quickly complicate the situation. First, developers must ensure watertight obligations with the owner of the Off-Site land before advancing in any transaction. If the landowner is also the seller of the development site, it simplifies the process. However, clarity is essential when involving a third-party landowner to determine the party responsible for securing the Off-Site land to facilitate the BNG works.

Acquiring biodiversity units presents a practical solution to address challenges related to executing BNG works, although it may be expensive until sufficient land is available. Presumably, local authorities would favour developers undertaking BNG works themselves, considering that the initial high cost of biodiversity units is intended to incentivise on-site implementation.

Depending on the number of biodiversity units required, this route (assuming it is available at all in the circumstances) may also impact the viability of the project and/or the price a developer is willing to pay.

Will this impact inheritance tax reliefs for landowners?

Many landowners may express concerns regarding the potential loss of agricultural property relief on inheritance tax when considering participation in a biodiversity scheme. The current strict definition of agriculture encompasses land or pasture utilised for crop cultivation or animal rearing.

Should the land be incorporated into a biodiversity scheme and cease agricultural use, it may forfeit eligibility for relief. Landowners are advised to consult with their ecologists before registering a site for BNG and explore the possibility of maintaining some form of farming while enhancing nature and habitat. In cases where farming coexistence is not viable, landowners will need to think carefully about the tax implications before proceeding.

Get in touch

If you are a landowner or developer interested in pursuing BNG, please reach out to Damien Newton, Commercial Property Specialist, on 02392 776554 or email damiennewton@warnergoodman.co.uk. Damien and the Commercial Property team will be able to provide you with comprehensive support and guidance on BNG and its requirements.