Conservation covenants – How to secure biodiversity net gain

Landowners can take advantage of new conservation covenants to get ahead on mandatory net-gain requirements.

Mandatory biodiversity net gain and conservation covenants have both been introduced by the Environment Act 2021 (EA 2021). One can exist without the other, but working together they provide an opportunity to secure biodiversity net gain on a site for 30 years or more.

Here we consider the different ways that biodiversity net gain can be secured and what can be done now to prepare. We focus on development in England under the Town and Country Planning Act 1990 (TCPA). For an article outlining the impact of mandatory biodiversity net gain requirements on nationally significant infrastructure projects (NSIPs), click here.

Where does the new biodiversity net gain requirement bite?

Once Part 6 of the EA 2021 is in force, with some exceptions, all development in England will need to demonstrate that it will achieve a minimum 10% increase in biodiversity net gain which will be maintained for at least 30 years. This is separate to biodiversity gain requirements that many local planning authorities already require through local planning policy.

Once in force, planning permissions will be subject to a deemed condition requiring that the development permitted may not commence until a "biodiversity gain plan" has been submitted to and approved by the local planning authority. This plan must demonstrate that the biodiversity value attributable to the development will exceed the pre-development biodiversity value of the on-site habitat by at least 10%.

What will be required?

Preferably, the net gain should be achieved on-site, although mechanisms allow the gain to be achieved off-site if necessary. Developers should, in the following order:

1. Avoid or reduce biodiversity impacts through site selection and layout.
2. Enhance and restore biodiversity on-site.
3. Create or enhance off-site habitats (including by purchasing biodiversity units).
4. As a last resort, purchase statutory biodiversity credits from the UK government.

The priority is to avoid or reduce biodiversity impacts on-site, and where possible to achieve the minimum 10% biodiversity net gain on-site as well. However, the government recognises that this is not always possible, hence the ability to achieve the biodiversity gain objective through off-site enhancements, including by purchasing "biodiversity units" on the open market or, as a last resort, by purchasing biodiversity credits from the government.

How can on-site gain be secured?

Planning conditions and obligations pursuant to section 106 of the TCPA can be used to secure on-site biodiversity net gain, binding the land which is the subject of the planning consent. If drafted in accordance with legislative requirements, future owners will be bound by requirements to maintain biodiversity gains for the minimum 30 year period.

How about off-site gain?

Biodiversity gain sites

Biodiversity gain sites are sites that are bound by a planning obligation or conservation covenant which requires habitat enhancement works to be carried out on the land and maintained for at least 30 years following completion. Such sites must be registered on a biodiversity gain site register. The habitat enhancement may be allocated to one or more developments in accordance with the terms of the obligation or covenant. Landowners with sites which would benefit from habitat enhancements can work with developers which are seeking to achieve biodiversity gain objective off-site.

Conservation covenants are a new mechanism that has been introduced by Part 7 of the EA 2021 to help to secure long term conservation benefits for the public good. It has always been problematic in English law to create long lasting binding obligations and the workarounds that have evolved can be complex and costly. Conservation covenants are designed to provide a solution by setting out obligations which are legally binding not only on the landowner but on subsequent owners of the land and they come into force later this year. How will they work?

Conservations covenants

Conservation covenants are private, voluntary legal agreements between landowners and "responsible" bodies which bind current and future landowners to positive and restrictive conservation-related actions.  Although already used in other jurisdictions such as Scotland, conservation covenants have not been available for use in England until now. Conservation covenants can be separate agreements or contained within wider agreements, in which case the statutory requirements relating to conservation covenants would attach to that part of the agreement that satisfies the test for conservation covenants.

Conservation covenant agreements are made between a landowner, which for these purposes is a freeholder or the holder of a leasehold estate of more than seven years, and a "responsible body", namely the Secretary of State or bodies designated under the EA 2021. They will be registered as a local land charge and bind the land indefinitely unless otherwise agreed (or, in the case of leasehold land, for the remainder of the term of the lease that has been bound). It must be apparent from the agreement that the parties intend to create a conservation covenant and the agreement containing the covenant must be executed as a deed. It must also contain a provision which satisfies three tests:

1. It is of a "qualifying kind", ie the provision:
   1. requires the landowner to do, or not to do, something on specified land; or
   2. requires the landowner to allow the responsible body to do something on such land; or
   3. requires the responsible body to do something on such land.
2. It has a "conservation purpose". This includes conserving the natural environment or natural resources of the land but can also refer to other purposes.
3. It is intended by the parties to be for the public good.

What will stop a landowner from breaching a conservation covenant?

Conservation covenants will be enforceable by injunction or an order for specific performance as well as by damages for breach. Exemplary damages may be rewarded in certain cases, for example to prevent a landowner profiting from a breach.

A landowner's liability will come to an end when they part with the whole of the land burdened by the obligation, or if the land is no longer bound by the conservation covenant pursuant to the agreement.

Biodiversity units

The government intends that the trading of biodiversity units will take this one step further, with landowners creating habitat enhancements independently of any particular development and then selling "biodiversity units" on the open market to developers. Department for Environment, Food and Rural Affairs (Defra) envisages that a market will develop, with transactions facilitated by brokers or planning authorities who may also sell units for themselves.

What is the difference between biodiversity units and biodiversity credits?

Before a market for biodiversity units is established, the government recognises that developers may struggle to meet the 10% net gain requirements, whether on- or off-site, hence the proposed system of "biodiversity credits" which will be sold by the government itself and priced higher than the open market cost of biodiversity units. Whether this system will work depends on the detail. If mishandled, it could simply act as another levy on development which is easier to pay than provide the biodiversity gains on- or off-site.

When will these requirements come into force?

TCPA development will need to comply with mandatory biodiversity net gain requirements from November 2023, although NSIPs will have until 2025. However, conservation covenants can be used from 30 September 2022.

What steps should developers and landowners be taking now?

Developers should now factor in the need to achieve the biodiversity gain objective when identifying development sites and opportunities. Landowners may wish to take advantage of the opportunities offered by conservation covenants when they come into effect on 30 September 2022 to identify potential biodiversity gain sites or to offer biodiversity units to the market.