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The Environment Act 2021 (and the real estate sector)
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The Environment Act 2021 (and the real estate sector)

The landmark Environmental Protection Act 1990, which established legal responsibility for contamination and control of land, air, water, and water, was a landmark piece for the real estate industry. It also regulates waste disposal, nuisances, and waste disposal. In the thirty years since then, our understanding of climate change and contamination has improved significantly. The long-awaited Environment Act was finally adopted in 2021. What does the new legislation mean to the UK’s realty industry once it is fully operational

Overview of the Environment Act 2021

The Environment Act 2021 (the “Act”The following is a split of the ‘() section. The first half of the document provides a legal framework for environment governance. This requires the Government to set long term targets in each of the priority areas (air quality, water quality, biodiversity, resource efficiency, waste reduction) by October 2011. It also creates an independent, statutory environmental body, called the Office for Environmental Protection. This new body will hold the Government responsible for environmental law after the UK has left EU.

The second half focuses on specific environmental improvements, including measures to reduce waste and resource efficiency, water quality, nature and biodiversity, as well as conservation covenants. More details are set out HereHere are three of the key measures that will have a significant impact on the real-estate sector.

  1. Local Nature Recovery Strategies
  2. Biodiversity net gains
  3. Conservation covenants
  4. Conclusion

1. Local Nature Recovery Strategies

The Act will introduce Local Nature Recovery Strategies, which are a new, England-wide system of spatial strategies that will establish priorities and map proposals for specific actions to drive nature’s recovery and provide wider environmental benefits in the area covered by each strategy. Many details affecting businesses will be determined later, after the delineations of the Secretary and the local authorities or other entities have published their draft strategies. Defra conducted a consultation in 2021 on how the new scheme would be implemented and is currently reviewing all responses. It is clear that these strategies will be included in the local plan for each region and will be considered by developers when they apply for planning permission for a new scheme. Developers must ensure that their applications clearly show how their scheme will enhance the environment, in accordance with the local nature rehabilitation strategy. These strategies may be useful in development planning, as they will identify any national nature reserves, conservation sites, or other areas that may be important for biodiversity or other environmental reasons.

2. Biodiversity net gains

The Act significantly enhances pre-existing recognitions of biodiversity requirements in planning systems that arrived in 2012 with the light touch and persuasive language of the National Planning Policy Framework (“identify opportunities for securing measurable, (biodiversity), net gains”). The Act states that certain applications for permission to develop under the Town and Country Planning Act 90 will be subjected to a condition of biodiversity net gain. Making this a pre-commencement requirement demonstrates the importance being attached to it by Government – the risk of potentially stalling new development is a price worth paying if it helps to deliver on wider environmental commitments. The condition would require that the developer submit and have approved a biodiversity growth plan showing how a 10% increase in biodiversity value will occur. Importantly, the 10% figure is proposed as a national standard but the consultation is clear that it is a minimum and not a cap – in practice, local standards may require a higher percentage.
This requirement can be met using a variety of methods. First, it is preferable to do this on-site. However, recognising that some development sites may be constrained in this regard, developers will be able to propose either (1) achieving the required gain on an alternative site for a duration of at least 30 years, or (2), as a “last resort”, purchasing what will be known as ‘biodiversity credits’, when the system has been set up.
The biodiversity net-gain requirement is expected to apply from 2023 to projects. However, there are certain exemptions. These include householders, change in use and projects that have a minimal effect on low or medium value habitats.

What is the biodiversity-gain site register?

Once the regulations are in place, the register will include details of all sites in England for which someone is required to carry out works to enhance habitat. It will list the sites where enhancements can be allocated to one or several developments on other sites. This will be a register for off-site units. However, it is possible, but it is not yet decided, to include onsite gains. The public can view the register and find details about:

  • The location of the gain sites
  • The size (or length), and the type of habitats created, or enhanced.
  • The number of biodiversity units that result from habitat enhancement or creation, calculated using a biodiversity gain metric indicated to the Secretary of State (this is expected to be Natural England’s Biodiversity Metric 3.0; further consultations will confirm that it is the metric for mandatory biodiversity net gains).
  • The planning reference for the development to which the enhancement will be allocated;
  • Habitat management and monitoring of gain sites;
  • the enforcement body for gain sites (usually the planning authority or a conservation covenant’s responsible body)

Similarly, nationally significant infrastructure projects (NSIPs) will need to demonstrate a biodiversity net loss where it is stated in a “biodiversity gains statement”. This statement recognizes the substantial differences between types NSIPs that are subject to development consent order. The Government has stated that it will formulate a core statement, which will then be adjusted for each project type, unless consultation uncovers that bespoke statements are required. Currently, biodiversity net gain will only apply to NSIPs starting in November 2025. At first, it will only be applicable to onshore projects.
DEFRA is currently being implemented Consulting on regulations and implementation of the biodiversity net gain principle. The consultation focused on three main themes: defining the scope for the biodiversity net loss requirement for property developments; how to apply the biodiversity goal to different types development; and how the mandatory biodiversity net gain regime will function in practice.

What are biodiversity credits?

The UK Government is allowed to sell statutory biodiversity credit to developers under the Environment Act 2021. This is done to avoid any delays in the planning process if developers are unable to deliver net gains on-site or off-site on other landholdings or by buying biodiversity units on the marketplace. Although the system is not yet finalised, the Government’s current plans include:

  • There will be a need for statutory biodiversity credits to be available to developers – though only as a last resort, in line with the mitigation hierarchy – as soon as the new biodiversity net gain regime is implemented. Developers will be able buy them on a platform that will be easy to use, cost-effective and designed to avoid and manage fraud. It will also be able capture the data required to comply with reporting obligations to the Secretary of the State under the Act.
  • The preferred method is for developers to buy credits before final approval of the biodiversity gains plan and discharge of pre-commencement conditions. However, the DEFRA consultation currently requests feedback on the best timing.
  • The UK Government will conduct a credit price review in order to confirm how the price of statutory biodiversity credits will change.
  • The goal is for a market to grow for biodiversity units that eventually will replace the Government’s credit.

3. Conservation covenants

The Conservation Covenants were recommended to the Law Commission in 2013 and were introduced by the Act. They are agreements between landowners and responsible bodies (such as a local authority or a conservation charity) that require the landowner or allows the responsible body do something on land in England. They will be protected under local land charges, and will bind any successors in title. These are some possible uses

  • As a legacy, where woodland owners leave it to their children but wish to ensure that it is not destroyed in the future for building.
  • For heritage property: A property that has been purchased and restored by a heritage group and is being sold to ensure its preservation.
  • As a condition for funding, conservation and land management grants may be subject to the preservation of the financed improvement.
  • It can be used as a planning tool to help planners target preservation of a part of a development site or ensure that biodiversity losses from a development are offset by long-term biodiversity benefits at another site (though it is not clear how the interaction with other Environment Act planning levers works);
  • In a biodiversity offsetting program, credits could be used to compensate for biodiversity sites.

The consultation envisions the use conservation covenants or planning requirements as a way of securing long-term off-site benefits that would last beyond the sale of the land. It states that the government will work with the sector in order to create models of planning conditions, obligations, or template conservation covenants. Standardisation – alongside the consultation’s repeated focus on aligning reporting and digitising data – would be welcomed if it can bring early clarity and consistency of approach when applying these new requirements.

4. Concluding thoughts

If the biodiversity net gain requirements are going to be fulfilled, there must also be adequate funding for local planning authorities that are responsible for evaluating them and securing their implementation. This consultation acknowledges that it will be a burden, and that the funding will be made available for planners. The failure to properly resource the coal face has historically hampered the aspirations for wider planning reforms. If the plan is not approved by the planning authorities, there is a real chance of delays in development.
Developers and landowners need to plan ahead now more than ever. They should be reviewing their existing sites and/or incorporating the new requirements into their site selection process. Pre-development biodiversity value will become more important. There will be a need for a re-evaluation of strategies for strategic sites and the timelines to bring them through the planning process. Potential off-site enhancement opportunities will be available to those who have sites that could be used in their own developments or in combination with others.
The Act, which contains many details that remain to be determined, enshrines a number core environmental principles that are meant to protect the environment and promote sustainable development. The Government would love to know about any potential problems or unforeseen consequences of the proposed biodiversity net gain system. Please let us know if your intention to respond to the DEFRA consultation, or if you would like to contribute to a combined response. You can also contact us to discuss your strategies and how the new requirements might affect specific development sites.

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