Environment Act’s impact on developers and lawyers

Answer

The Environment Act 2021 introduced a statutory obligation on pretty much all developers to improve biodiversity by a minimum of 10%. This statutory obligation takes effect in respect of developments from 11 November 2023 onwards, but what does this mean for lawyers?

‘Biodiversity’ or ‘biological diversity’ is the variety, variability and interaction of life on earth or in a particular habitat.

Biodiversity, for the purposes of the mandatory requirement to improve it by no less than 10%, is measured by a metric (or calculator) that’s been developed by Defra (the Defra Metric).

So, what’s the requirements on developers?

If you’re a property developer and want to build residential homes or commercial properties on a plot of land, you must now perform a baseline assessment of the biodiversity on that land by applying the Defra Metric and then, before you can start building, demonstrate how you’ll achieve an improvement in biodiversity by no less than 10%.

This is problematic

If you take an area of land and build on it, unless you’re building bug hotels the biodiversity is going to be significantly worsened rather than improved.

So, how do lawyers get involved?

Off-site mitigation schemes are being developed by private landowners, local authorities and public and quasi-public bodies to off-set the biodiversity damage that developers are causing by building much needed homes and other properties and to provide the biodiversity improvements that developers need to get building. This involves detailed and complex contracts to be put in place between the parties involved for a number of years.

The types of contract that we’re developing and agreeing between the parties involved include the following:

• The agreement between the mitigation site landowner and the relevant local authority (usually called a S106 agreement or conservation covenant). Pursuant to this agreement, the landowner agrees that it’ll perform certain nature-positive actions on a specified area of land to create an improvement in biodiversity (again, applying the Defra Metric). This improvement is represented by or converted into a unit or credit that can be sold.
   
• A biodiversity credit or unit sale and purchase agreement between the landowner of the mitigation site and a developer needing to show that they can meet their biodiversity mandatory requirement. The actual improvements that the landowner realises (or intends to realise) in the environment can’t be sold and so we reflect that improvement as a 'credit' or a 'unit' that can be traded with developers.
   
• Broker agreements. Often third-party intermediaries are involved that broker these deals. Landowners (often farmers) and developers can operate in separate circles and so having an intermediary that has connections in both industries and can match a landowning seller with a developer buyer is key. We often prepare the agreements that document the brokers role and the commission that’s payable to them.

These types of arrangement are really interesting as a lawyer. We frequently operate in the financial capital markets, but this is the natural capital market and fundamental to the continuation of all other business. It's important that clients are getting the right advice to ensure they’re complying with the increasing requirements on their developments – this is an area of law we’ll continue to see growth in and potentially for increasing profitability for law firms with the right expertise.

Chloe Vernon Shore is a partner in the commercial team at Michelmores LLP.