Navigating the legal terrain of biodiversity net gain: A deep dive FAQ

24 May 2024 | 25 min read

Navigating the legal terrain of biodiversity net gain: A deep dive FAQ

Navigating the legal terrain of biodiversity net gain: A deep dive FAQ
Everyone involved in developing real estate in the UK is working towards understanding the legal intricacies of biodiversity net gain (BNG) requirements. The broad strokes are simple enough to grasp: If you develop land, you’re removing natural habitats. And you’ll need to not only create a commensurate habitat to replace it, but increase the overall biodiversity by 10%.

But of course, as with any new regulation, no matter how well thought out, there are bumps along the road to implementation. Many of those have to do with legal questions, both general and specific. And they come from all stakeholders, from landowners to developers to builders to local planning authorities (LPAs).

In this episode of Sustainability Superheroes, host Stephen Marland, AiDash Director of Product Innovation and Strategy, conducted a rapid-fire Q&A about all these questions with Angus Walker, Partner at BDB Pitmans.

Walker advises clients on nationally significant infrastructure projects under the Planning Act 2008 and has long maintained a blog on the Planning Act 2008 regime. He’s regarded as a thought leader in this area.

The result is a crisp but thorough education on the legal issues around BNG so you can take action with confidence and clarity.

Watch a recording of the live event or read on for legal FAQs.

Q: Briefly explain BNG?

A: Biodiversity net gain as a concept was in the Environment Act 2021 and went into effect February 12, 2024. Basically, when you make an application for development, you will generally have to replace any habitat that the application (when built) will destroy with a new habitat somewhere. The value of the new habitat must be 10% better than the habitat that’s being lost.

Q: How long do people need to maintain the habitats?

A: The obligation to maintain the new habitat is for at least 30 years. And that’s on top of the time it takes to create the new habitat. The 30 years starts when you’ve created the new habitat.

Q: Presumably, very small developments, like extensions to houses or permitted developments are exempt. So at what point are developments caught by the obligations, and are there any caveats?

A: Yes, there are a few caveats. Very small developments do not have to provide BNG. Basically things like extensions to existing houses and self-build projects, where you are building a new house that you’re going to live in (up to nine houses at once).

Regarding biodiversity sites themselves, normally if you’re creating a new habitat, it won’t need planning permission, because it’s just planting seeds and trees and things like that.

The main exemption is a size one: If the amount of habitat on the site that is going to be degraded is less than 25 square metres, then you don’t have to provide BNG.

Q: There are two types of BNG, including one for Small Site Metric. How does that differ from the regular version?

A: If it’s up to 9 houses or up to 1,000 square metres, they can take advantage of the Small Sites biodiversity metric. It’s slightly simpler than the regular version for larger sites. For the larger metric, you need a professional ecologist to do all the calculations, whereas for smaller ones, you just need someone with relevant expertise.

Q: Do we expect the end-to-end process to be the same for very small sites? Will developers still need that 30-year commitment?

A: Yes, as long as you’re above that 25 square metre threshold.

But there are multiple options for securing that commitment. Two of them are legal agreements:

A Section 106 agreement, which planning people will already be familiar with. Or…

A conservation covenant, which is new and quite similar. But it can be done through a condition attached to the planning commission, which may be simpler.

Q: There are a few exemptions for larger, national-scale projects. What are they, and why do we need to wait until November 2025?

A: For very large infrastructure projects, instead of applying for planning permission, they get a special consent called “development consent.” It’s under a different regime called the Planning Act 2008. It covers things like power stations, airports, harbors, and even solar farms (if they’re above 50 megawatts).

The government has decided not to apply BNG to those projects until November 2025 because they’re more complicated. For example, these projects may involve a long railway or power line, which spans multiple LPAs.

Q: Planning law is far wider than biodiversity net gain. What are the key requirements from an environmental perspective, and how do they interact with BNG?

A: Essentially, BNG sits additional to any existing obligations. No existing obligation is disappearing or changing. For example, larger projects that needed environmental impact statements still need those.

As a developer, you may find some savings in assessing the land, though, because you could assess it for BNG at the same time as you asses it for all those other requirements.

Q: Does the LPA act as the enforcement agent for all planning associated with environmental requirements?

A: For some, like protected species, you need a license from Natural England (for example), and they would police that. But for the planning application (for BNG), yes, that is all policed by the local authority.

But notably, you don’t have to do that yourself. You can pay someone else, somewhere else, to enhance some habitat. And then it isn’t up to you – it won’t be enforced against you, the developer. It will be enforced against that other landowner and their local authority. And you will be out of the picture, which might be quite handy.

Q: Can LPAs require a developer to amend or add conditions to a plan in order to give approval?

A: Yes, it’s up to the LPAs.

Q: Can LPAs require greater than 10% BNG?

A: Yes, although the government has tried to discourage this, because I think they don’t want to create an uneven playing field.

Q: What happens if a developer fails to comply with the planning requirements for BNG?

A: If it’s on their own site, the LPA will enforce against them. If it was a condition attached to the planning permission, they will be enforced against for breach of condition. If it’s a Section 106 agreement, they’ll be enforced against for breaching that agreement.

But if it’s the new-style conservation covenant, that isn’t entered into necessarily with the LPA. That would be with an organization that has volunteered, called a “responsible body.” There are five of those available so far (as of May 2024). So they would enforce, in that case.

Q: What do LPAs require in order to approve a developer’s BNG plan?

A: There are two stages.

When you make the application as the developer, you have to say everything you can about the current site you’re proposing to develop on, like calculating the type of habitat (using the biodiversity metric that Natural England have produced). It divides all types of land into 130 or so different habitats of all different shapes and sizes. Each of them has a score.

You can get permission based on that. But before you can commence the development, you have to agree on a biodiversity gain plan with the local authority. That document sets out all the details of where the replacement habitat is going to come from. It could be on site, it could be offsite.

Or there is this last resort called biodiversity credits. Or it could be a combination of those.

But that will all have to be set out in detail and agreed to with the LPA before the development can start.

Q: What obligations do LPAs have to monitor compliance to approved plans?

A: It’ll probably be written in the Section 106 agreement that the local authority will monitor that the habitat is being created on time and then being maintained and not just abandoned.

Likely, the Section 106 agreement will contain a provision that the developer pays a local authority for doing this monitoring. So expect some money to change hands there.

And that will tell them what it might even include. For example, what happens if the developer’s not doing anything, or it’s not working, or whatever. The local authority might have powers to step in and do things itself to create this habitat and keep it going.

Q: BNG can also be administered by “responsible bodies.” What is the responsible body, and are their duties the same as the LPA? How do they differ?

A: This is a new concept that was also introduced by the Environment Act 2021 — a thing called a conservation covenant.

In general, it has a wider application than just biodiversity net gain. It’s for any environmental agreement to do something with land for an environmental purpose.

There are not very many responsible bodies declared so far. Natural England is one, but they have said they won’t do it for BNG because they are running the whole regime. and it would be a conflict.

The advantage of this conservation covenant is that if you’re getting nowhere with getting a Section 106 agreement with your local authority, you could try one of these instead, and they can operate anywhere in the country.

It may also help keep the costs down if you feel the local authorities are charging too much, and you try to get a better rate with a responsible body. Hopefully, that will inject a bit of economic competition into this area.

Q: Can you explain what a Section 106 agreement is and how it is generally used?

A: It’s from the Town and Country Planning Act 1990. Section 106 is what’s called a “planning obligation.”

Usually, they’re used for the developer to pay somebody (usually the local authority) to do something to offset the impact of the development. For example, say there’s a new supermarket near a roundabout, and all the extra traffic using the supermarket is going to clog up the roundabout. The Section 106 agreement might dictate that the developer is going to pay a million pounds to the local authority or the highway authority or somebody who’s going to enlarge the roundabout to stop all that congestion.

Q: How is that then applied to biodiversity?

A: The promise to create and then maintain a habitat for 30 years can be included in a Section 106 agreement, or as its own Section 106 agreement when the developer is doing it on their own land within the development site.
You might think developers might not want to do that, because they’ll have to use up some of their site for habitat, and they want to build all over it. But there are some habitats like green roofs and green walls that count for biodiversity purposes.

Q: Do responsible bodies have the option of issuing the same thing?

A: Their legal derivation is different, but their contents should be pretty much the same for biodiversity net gain whether they’re Section 106 agreements or conservation covenants. They’ll just be entered into with a different party.

Q: What specific legal documents do developers need to gain consent?

A: The standard planning application form has now been extended. It’s got a question on biodiversity net gain, and it says, “Do you think you’re exempt?” And if you say “Yes,” then it says “Which exemption? Give us reasons why.”
If you say you’re not exempt, then you have to tell how many units of other habitats are on your land.

To explain biodiversity units: At the time of the application, there’s this biodiversity gain plan before you can commence the development. And if you, the developer, are providing the biodiversity on the site, you will have to have a Section 106 agreement or a conservation covenant.

If it’s offsite, then someone else will be doing that. But you will probably need an agreement with that other party to make sure it just it’s your development that they’re going to use their units for, and for you to pay them the money to do it for the 30 years.

Q: So they need a legal document to say ,“I’ve purchased a particular set of units from a provider”?

A: There will be some sort of agreement to allow the money to be paid to the provider. But the way it’s recorded is in the National Register of biodiversity land. Say that one particular parcel of land has 30 units on it, and you the developer are going to use 10 of them. It will say that 10 of the units are now being used up for this development.

It costs 45 pounds to allocate your development to somebody on the register and 639 pounds to put the entry in the register in the first place.

Q: What happens if the developer needs to change a development plan after it’s been approved? Can it be amended, or do they need to start again?

A: It depends whether the change to their project affects what they were going to do with the habitat. If they’re doing something else, but their habitat effects are still the same, then they can probably keep going with the same Section 106 agreements.

If they want to do something different, then they will have to renegotiate a new agreement and probably start again with a new planning application.

Q: What happens if a project has all the necessary approvals and everything in place and starts work. But then the project stalls. What happens next?

A: If there’s a Section 106 agreement or a conservation covenant, the landowner would still be committed to creating and maintaining this habitat.

Q: Can the obligations be transferred to another party?

A: Section 106 agreements are described as running with the land. So that means if the landowner changes, it automatically transfers to the new landowner, and conservation covenants will be like that, as well. Because you can never have land that isn’t owned by anyone, there will always be someone on the hook for the biodiversity net gain obligation.

Q: If a developer has excess BNG units on site, how can they transfer those units to other development sites? What’s the legal process that they should follow?

A: If you can design your project so that you provide more than 10% biodiversity net gain on site, you can just allocate the first 10% to your project, and then put the rest on this register, just like a landowner can do. And then it can be allocated to someone else’s development, who will then pay you your units that are on the register. You can offset some of the cost of your development that way.

Q: Is the process for landowners the same, with the intent to simply to sell units?

A: It’s nearly the same. If you’re a landowner, and you have some unproductive land, or not sufficiently productive land, that you are prepared to tie up for this 30 years (plus any time it takes to create the habitat), then this could be an opportunity to make some money.

You don’t have the option of a planning condition. Because you probably won’t be using a planning application to create the habitat — you’re just planting some seeds or trees or something.

But you still have to agree to create and then maintain the habitat for 30 years, which you can do either with a Section 106 agreement or a conservation covenant. Once you’ve done that, you can put it on the national register, so that everyone can see it.

Q: Explain biodiversity credits?

A: You have essentially three options.
First is on-site BNG, where you the developer create the habitat and maintain it.
Then there’s offsite, where you might have some other land on your own somewhere else. Or, generally, you’ll be paying some other landowner or broker.

But if you can’t find either of those options, and maybe you’ve got this particular rare habitat or something, or they just aren’t very many sites, then you have an option of buying what are called “biodiversity credits” from the government.

But the government has set the prices of these deliberately high so that it doesn’t interfere with this market of buying and selling biodiversity units. The minimum cost of one unit of the least valuable habitat is 84,000 pounds, and the most expensive one is 1.3 million pounds.

It’s important to note that if you look this up, you’ll be led to believe that the lowest price is 42,000 pounds. But that’s the per-credit price, and if you read the fine print, you’ll find that you need a minimum of 2 credits for every 1 unit. So, 42,000 times 2 is 84,000. That’s 2 credits and 1 unit.

Q: Is there an ideal process to mitigate the risks for developers? What should they avoid doing?

A: The advantage of doing it all on-site is it’s all within the developer’s control. And it’s probably the cheapest option.

But if they want to subsequently sell a reasonably clean title to somebody else who you’re not going to saddle with a 30-year obligation to maintain that habitat, then the offsite option might be attractive.

What’s very low risk but very high cost is buying these credits, because all you do is give money to the government. Behind the scenes, they apparently will enhance some habitat with that money, but you don’t even know where it is or anything. And so you just wash your hands of it all. So it’s a balance between cost and risk, basically.

Q: How are units calculated?

A: For developers or landowners, it’s worth appreciating what factors affect the number of units a habitat creates.

You multiply four things together.

One is the area of land in hectares.

One is a figure associated with the type of habitat. It’s called its “distinctiveness” (0, 2, 4, 6, or 8). A 0 is land that’s just totally concreted over with nothing growing there at all, and an 8 is any very rare habitat.

Then an ecologist has to tell you what condition it’s in, with a score of 1, 2, or 3 (which correlates to “poor,” medium,” or “good.”)

And finally, if the habitat is rare enough to be mentioned as worth keeping, you multiply it by 1.15.

So you multiply those four things together, and that gives you the number in units.

For new land, it’s those same four things, but then there are discounts for how long it’s going to take to create the habitat, and where is this habitat compared with your development.

It’s a fairly crude discount, but if it’s anywhere in the same local planning authority, or a thing called the same National Character Area (NCA) (there are maps of those), then it doesn’t affect the score.

If they’re in the neighboring area, then you multiply by three quarters.

And if you’re anywhere further away (in England), then you must multiply by a half.

So if your development is in Cornwall, if the site is anywhere else in Cornwall, that’s fine. If it’s in West Devon, it will be three quarters, and if it’s anywhere further away, it doesn’t matter whether it’s in the Lake District or in Dorset, it will be half.

Q: If you pay for offsite, so a different area is enhanced, does that other area have to be in the UK?

A: It has to be in England, as this regime applies only to England so far.

Q: How can LPAs close the loophole of someone who claims a self-build designation for small and medium sites?

A: It’s difficult to tell the difference between someone who genuinely intends to live in the house that they’ve just built but then sells it, compared to someone who never really wanted to live there and was just pretending. It’s sort of question of believing the assurances of the developer, I suppose. But there are going to be things at the edges of this regime, just like any regime, that can be difficult.

Q: How are high-priority habitats and statutory-protected habitats accounted for in the biodiversity metric?

A: The exemption on size (under 25 square metres) only applies if the distinctiveness of the habitat isn’t one of the highest ones.

Q: What if a development doesn’t achieve the predicted BNG habitat condition after 30 years? Essentially, what if you fail your Section 106?

A: That will probably be defined in your Section 106 agreement. There may be milestones throughout that timeline you can tick off. And if it’s not happening, then there’s probably a plan you’ve agreed to with the LPA of what to do. Perhaps you’ll have to take extra steps, or the LPA may step in and take over the responsibility and charge you.

Q: For habitat loss/replacement, does it have to be like-for-like? For example, if I build on a species-rich grassland, do the BNG units need to be species-rich grassland?

A: There are certain rules about what type of replacement habitat can be compared with the habitat that you’re using up. They get stricter as you go up the distinctiveness scale.

So let’s say for a 2, which is low distinctiveness, any habitat that’s a 2 or greater will do. It doesn’t matter what it is.

For a 4, it must be what’s called the same “broad” type of habitat. So if you’re using up a grassland-type habitat, you’ve got to create a grassland habitat, but it could be a different type of grassland.

And then when you get it up to 6, you have to replace it with the same habitat.

When you get to 8, the highest one on the distinctiveness scale, you have to agree to bespoke arrangements. Because it’s such a rare habitat, you’re going to have to do something really complicated. So it gets stricter as you go up.

Get more information about AiDash BNGAI and how it can help you with your BNG projects.

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