Biodiversity net gain (“BNG”) refers to the objective to contribute to the recovery of nature and improve biodiversity post-development. From January 2024 (or April 2024 in respect of small sites), developers applying for planning permission in England will be required to provide BNG of at least 10% (subject to certain exceptions) when building new housing, industrial or commercial developments (“Mandatory BNG”).
Generally, developers will be able achieve Mandatory BNG by any (or a combination) of the following:
- carrying out on-site works;
- carrying out off-site works;
(together “BNG Works”); and/or
- purchasing biodiversity units as a form of ‘offset’.
Once delivered, the Mandatory BNG will need to be maintained (and most likely covered by a legal agreement) for at least 30 years after a development is completed (in the case of on-site BNG Works) or the habitat enhancement has been provided (in the case of off-site BNG Works).
Government guidance indicates that Mandatory BNG will be secured through a requirement that a biodiversity net gain plan (“BNG Plan”) is submitted to and approved by the local planning authority prior to commencement of development. The overarching consideration should therefore always be what would be acceptable to that particular local planning authority. It is important to note that some local planning authorities may introduce planning policies imposing a Mandatory BNG requirement that exceeds 10% (several authorities in the southwest and southeast of England have proposed a requirement for 20% BNG in their emerging plans). Delivery of Mandatory BNG in association with a development may be governed by a condition of the planning permission, 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.
With it being a pre-commencement requirement, it is crucial to start thinking about how Mandatory BNG will be achieved as early as possible in a transaction. And there is much to think about, especially where third parties need to be involved. In particular:
How will Mandatory BNG be achieved?
If Mandatory BNG is intended to be delivered by carrying out BNG Works, developers should first identify the likely nature and extent of these works. Achieving Mandatory BNG solely by carrying out on-site BNG Works is fairly straightforward (assuming that doing so would not render the proposed development unviable).
However, delivering off-site BNG Works on third party land (“BNG Land”) in full or part satisfaction of the Mandatory BNG requirement could easily become complicated. First, developers will need to ensure that watertight obligations on the owner of the BNG Land (“BNG Owner”) are in place before proceeding with a transaction. Often the BNG Owner will be the seller of the development site, although it can also be a third party with whom the seller and/or the developer make a deal to accommodate the BNG Works. In addition, a BNG Owner would usually wish to retain as much control over the BNG Land as possible, especially where they are contemplating future development of that land, and thus limit the flexibility developers may otherwise have to achieve Mandatory BNG.
Purchasing biodiversity units could get around some of the issues associated with delivering BNG Works, although it is not necessarily a quick and easy fix either. Preference will be given to the provision of BNG Works and prices of biodiversity units will therefore likely be set higher to encourage this. Depending on the amount of biodiversity units required, this route (assuming that it is available at all in the circumstances) may also have an impact on the viability of the project and/or the price a developer is willing to pay for a site.
What would complying with Mandatory BNG involve in practice?
In practice it is unlikely that a BNG Plan will have been approved prior to acquiring a development site. The parties should therefore cater for all possibilities for achieving Mandatory BNG. The earlier the parties’ respective rights and obligations are discussed, the better. Below are some examples of matters that should be considered as part of the negotiations:
- compliance with Mandatory BNG i.e. are some options preferred over others;
- extent of the BNG Land;
- the BNG Owner’s ability to approve the BNG Plan prepared by the developer (if required);
- obligations on the BNG Owner to ensure compliance with the Mandatory BNG requirement, e.g. allowing access for surveys, assisting with any queries raised by the planning authority in connection with the BNG Plan, entering into statutory agreements;
- responsibility for implementing the BNG Plan and maintenance of the BNG Works;
- timing for preparing, agreeing, submitting, and implementing the BNG Plan to ensure that the development can proceed in accordance with the build program; and
- costs associated with complying with Mandatory BNG – these are unlikely to be known before exchange of contracts. Thought should therefore be given as to how costs associated with achieving Mandatory BNG will be accounted for in the appraisal.
How can compliance with the BNG obligations be secured?
Given the potential delays that may result from failing to comply with Mandatory BNG in a timely manner, it is important to consider how the BNG Owner’s obligations will be secured. Bringing a breach of contract claim or referring a matter to an expert for determination would be an option in most cases but is not ideal when timing is an issue. Deeming provisions for the approval of the BNG Plan and any associated documents will likely be appropriate. Where a BNG Owner is in breach of its obligations in connection with the BNG Works, having step-in rights would enable continued compliance with the BNG Plan. Finally, having a restriction on the title to the BNG Land would ensure that future owners can also be bound by the obligations of the BNG Owner.