BIODIVERSITY NET GAIN BNG from a local government perspective

Adam Corbin

Adam is a Partner and Barrister, with broad legal and practical experience, and a focus on delivering bespoke advice, strategic direction, and novel drafting, in cases and deals which involve complex interrelationships between diverse areas of law. He likes challenging legal puzzles which involve advising on the relationship between different areas of law, and reaching for novel or less used legal doctrines and concepts.  His clients include large businesses or public bodies in a range of sectors, including agriculture, infrastructure, public service, and food and beverage. He appears in Court, before Arbitrators, and the Tribunals. He is ranked in Band 2 for Agriculture & Rural Affairs in Chambers UK and is listed as a Next Generation Partner for Agriculture & Estates by the Legal 500.

Adam kindly agreed to write this article, following his presentation at 2025 ACES National Conference in Bath. He outlines legal structures and various mechanisms and statutes in place to meet nature enhancement. 

Introduction 

It was a privilege and a pleasure to be able to speak at the ACES conference in Bath last year. As your chair pointed out, the organisations represented by the audience are uniquely placed to participate in and benefit from natural capital opportunities. It was also great to be able to speak alongside Emma Chapman of Hertfordshire County Council, as we have worked together on matters for a number of years, and I consider Emma to be an excellent surveyor. 

Although my talk was titled "BNG from a Local Government Perspective", I also covered some of the other natural capital opportunities. So here I summarise some aspects of BNG, and also some points about those other opportunities. 

Is there a market? 

As we tour the country speaking on this topic, we often encounter some scepticism about whether there is a market for BNG, usually upon the basis that either it is all going to be delivered "on site" or that the law is going to change due to a change in government. 

The latter point appears to have been put to bed for the moment as the Planning and Infrastructure Act 2025 has left the 'old' regime substantially intact. As to the former point, it is of course accepted that "on site" opportunities are often more attractive, both due to the metric favouring them, and because it is often easier to secure them through an existing option or promotion agreement. 

However, in practice, it is often the case that a proposed site is better developed fully for housing due to proximity to amenities, services, and transport networks, for practical and economic reasons. Similarly, from a habitat regeneration perspective, it is often the case that gains in habitat or species coverage are more easily achieved adjacent to existing habitats or species. The problems of increased public access over a fragile and developing habitat are also commonly encountered. We need to take care not to expect too much. It may not be possible to co-situate a Suitable Alternative Natural Greenspace, BNG area, and flood mitigation area! The reality is that the market is overtaking this scepticism, as we see a very large number of active 'off site' deals, with consequent active habitat creation talking place. 

A further, and often determinative market feature is the possibility of generating nutrient neutrality (NN) credits. For the LPA areas affected, the fact that nutrient credits are catchment area specific, and tend to require land use change at scale, mean that the opportunity can be very valuable, with near freehold value offered for a 90-120-year covenant which requires only cessation of intensive agricultural use. The fact that this option can be 'stacked' with BNG, and some other opportunities (subject to the other inputs being additional), is financially attractive, and allows for maximisation of land use. 

Outline of ‘normal’ deal 

While the deals we work on are by no means "'cookie cutter' yet, we do have a widely accepted structure, as set out the extract from my Parter Ben Sharples' first diagram. 

A ‘normal’ deal

The suites of agreements we actually enter into in practice are seldom this simple, but at its heart a deal for BNG credits is the sale of an ongoing obligation by a landowner to a developer, who then passes on the benefit to the LPA. 

As the markets, and opportunities have developed, we have seen deals that look a bit more like Ben's more elaborate diagram. 

 A bit more of a deal

This may all seem a little far-fetched, and look like a piece of gold plating by a lawyer looking for work; but there are lots of live projects which already encompass these aspects. 

Conservation Covenants 

So what about these 'Conservation Covenants'? Are they going to take off? 

Perhaps unusually, the successive governments' lack of progress in implementing the Environment Act, to allow the establishment and regulation of responsible bodies over the past two years, has caused the market to circumvent the use of conservation covenants through the use of s106 agreements. This has only been possible because LPAs have been willing to take on the burden of enforcement, instead of insisting a responsible body does so, as envisaged originally under the Environment Act. 

The government has now more or less caught up with the hare it set running, and we now have a number of LPA responsible bodies, a handful of wildlife charities, and some significant more commercial offerings, such as RSK Wilding, Fera, Plantlife, and the Land Trust. 

I am expecting that the LPAs will gradually start to insist upon the use of a conservation covenant, rather than a s106 agreement, in order to keep the regulation of the created BNG off their books. 

One other option worth mentioning is an agreement under s33 of the Local Government (Miscellaneous Provisions) Act 1982. These are useful where the gain is to be secured in a different LPA's area, and a s106, or conservation covenant is not possible for some reason. They still allow for enforcement of covenants without benefiting land as per conservation covenants, and have similar provisions as conservation covenants to modify, enforce, or lift. 

Phasing 

Because of the significant costs of establishment of new habitat, and the costs and complexity of documenting new deals, the ability to phase the introduction of habitat, and the sale of credits, has often been a key requirement for clients. 

The common approach adopted in practice is to register the whole of a BNG site under a 'master' s106 agreement, and then to use subsidiary s106 agreements to allocate units to each development. The habitat management/implementation can then be undertaken in an incremental basis, and in the event that the whole site is not in the end used, the relevant part can be de-registered. 

Common property issues 

In many ways these deals are much like any other property transaction, with title due diligence and reports on title, and an assessment of risk. These transactions do require a slightly different mindset though, as they differ in character to a freehold or leasehold transfer. 

Aspects which attract an instant red flag include mineral reservations, onerous charges, and restrictive covenants, all for obvious reasons. 

The more nuanced advice is required for sporting rights or grazing profits which may not fundamentally impact the creation of new habitat, or may require only minor modifications. Similarly, the existence of overage provisions may not be a problem if examined closely. 

Aspects which are often overlooked are access, and periodic tenancies (such as under the Agricultural Holdings Act). Access is often restricted to a particular purpose, and, while it may be sufficient once habitat is established, the establishment itself may require large plant or other invasive work. 

Finally, as trailed above, public access often conflicts with the habitat creation and maintenance process, to the extent that sites are often unsuitable purely on that basis. 

Landscape Recovery 

Many local government entities are involved in Landscape Recovery Schemes (LRS), but it continues to be difficult to marry the wider natural capital opportunities and the requirements of multiple stakeholders with the strictures of this initiative.  

The 2023 policy paper accompanying the opening of round 1 of landscape recovery applications said: 

This scheme is for landowners and managers who want to take a more radical and large-scale approach to producing environmental and climate goods on their land. 

This scheme represents a new approach to supporting long-term, significant habitat restoration and land use change of the sort that will be essential to achieve our environmental ambitions. We know there is demand for these kinds of projects, both among those who will deliver them and among the general public who want to see our most precious and beautiful landscapes restored and rejuvenated. 

My personal view is that the scale of ambition here is not matched by the scale of the commitment required from stakeholders. This mismatch is understandable. Persuading stakeholders numbering between 3 and 30 to commit their land to management restrictions and positive obligations for 20 years was always going to be tough. 

The hope remains that the opportunities provided by BNG and nutrients in particular, and the seed funding provided by DEFRA, will provide enough income to prime the large opportunities envisaged by the landscape recovery ideals. 

In practice, so far, the successful schemes seem to have involved a huge amount of goodwill, trust, and energy on the part of their stakeholders. Unfortunately, if this is what is required to make the model succeed, we cannot be entirely optimistic it will do so. 

Local government in the marketplace 

Moving to the application of these ideas, concepts, and market opportunities in a local government setting, there clearly are activities which can be undertaken to make use of them. 

In practice so far these have included: 

• Provision of BNG and NN for own development 

• Sale of BNG and NN while retaining land for core/ancillary proposes 

• Participation in LRS 

• Statutory credit sales 

• Brokerage. 

As may be anticipated, there are some factors to consider in pursuing these opportunities, which are summarised briefly next. 

Local government in the marketplace: procurement 

Readers will probably recall that the Public Contracts Regulations 2015, and The Concession Contracts Regulations 2016 have now been revoked, and that the successor legislation, The Procurement Act 2023 covers both areas. 

It was not really ever clear whether BNG and NN transactions were covered by either or both, and advice tended to focus upon an analysis of exactly what the operative parts of the transaction were, with a mixture of outcomes. That probably will not change, even though the law has been modified by the new Act. 

The so called 'land exemption' has survived, and this often applies to the types of transaction required to deal in some way with credits or their security over land. What also has not changed is the need to operate fairly and to the standards expected of a public body, and that is so even where the Act does not apply. 

Local government in the marketplace: purpose/appropriation 

Readers will also be well aware of the relevance of the purpose for which land is held or to which it is appropriated. This is then relevant to transactions, particularly if the transaction will result in a change. 

Well-advised buyers should be asking that the vendor confirms for what purpose the relevant land is held. Of course, there is a mechanism for change under s122 LGA 1972, which allows for land to be appropriated to a different purpose, and there are a number of permitted purposes which would be appropriate. 

In many instances, land will be held for smallholdings under s39(a) of the Agriculture Act 1970, and (subject to some specific advice) where the smallholding purpose is still being carried out, there may be no need to appropriate the land to something else. 

Local government in the marketplace: trading 

Readers will also be aware of the challenges around local government entities trading. Of course, historically local authorities had not been generally permitted to trade. This is in practice treated as an activity which is distinct from a property transaction. The LGA at s123 confers powers to dispose of land: 

Disposal of land by principal councils. 

(1) Subject to the following provisions of this section [...], a principal council may dispose of land held by them in any manner they wish. 

Accordingly, my view is that the analysis of the vires to transact in this area must stem from whether or not the relevant transaction is trading or a property transaction. 

The concept of trading requires further explanation. S95 of the LGA03 granted powers to trade in function-related activities through a company: 

(1) The appropriate person [Secretary of State] may by order— 

(a) authorise relevant authorities to do for a commercial purpose anything which they are authorised to do for the purpose of carrying on any of their ordinary functions, and 

 make provision about the persons in relation to whom authority under paragraph (a) is exercisable. 

[…] 

S111 of the LGA03 sets out subsidiary powers of local authorities: 

1. Without prejudice to any powers exercisable apart from this section but subject to the provisions of this Act and any other enactment passed before or after this Act, a local authority shall have power to do any thing (whether or not involving the expenditure, borrowing or lending of money or the acquisition or disposal of any property or rights) which is calculated to facilitate, or is conducive or incidental to, the discharge of any of their functions. 

The LGA03 was succeeded (though not repealed) by the Localism Act 2011, s1 of which sets out a local authority's general power of competence: 

(1) A local authority has power to do anything that individuals generally may do. 

S4 of that Act sets out limits on doing things for commercial purpose in exercise of general power: 

(1) The general power confers power on a local authority to do things for a commercial purpose only if they are things which the authority may, in exercise of the general power, do otherwise than for a commercial purpose. 

(2) Where, in exercise of the general power, a local authority does things for a commercial purpose, the authority must do them through a company. 

The decided cases in this area indicate that if the disposal of credits is not a disposal of an interest in land, it is probably trading and as such, the requirement to set up a company applies. 

So are s106 agreements disposals of an interest in land? Unfortunately, the answer to that is still moot. There are analogies, and encouraging statutory wording exists, but there is nothing decisive, and my view is that it is necessary to proceed with some caution in this area, treating each transaction and activity separately. 

Conclusions 

Although this area may appear to be a minefield strewn with additional traps for the unwary, it is at least exciting, and interesting. I am personally enthused by the opportunities presented to the public sector by natural capital, and continue to look forward to seeing new projects to realise them. 

If readers are interested in hearing more about working on these deals, they would be very welcome to attend one of the Michelmores Natural Capital Roadshows being held 2-6 February across England, details here: Natural Capital Roadshow 2026 - Michelmores Natural Capital Roadshow 2026: Structuring Deals, Unlocking Investment, Driving Landscape Recovery