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You're a developer who has to comply with the biodiversity net gain (BNG) requirement. You cannot secure the BNG on the development site alone and you need to deliver some (or all) of the BNG off-site by allocating off-site gains to your development. To achieve this you will purchase 'BNG units' from a landowner or habitat bank.
Or, you're the landowner, land manager or habitat bank selling BNG units to developers.
In both scenarios you need to agree the legal terms which apply to the sale and purchase of the BNG units, and that's where commercial lawyers get involved.
What legal terms apply to the sale of BNG units?
The mandatory BNG requirement is relatively new. The market is still developing and a specific template sale agreement does not yet exist.
The Department for Environment, Food & Rural Affairs (Defra) has issued guidance on how to sell biodiversity units to developers as a land manager, which sets out some of the key considerations which apply. The guidance notes that sellers should specify the number and type of units being registered and allocated, ensure commitments to record the allocation of units, and agree prices and payment terms with buyers. It is also important to determine whether payment will be made as a lump sum, in stages, or based on results, and to note that developers may wish to delay completion until their biodiversity gain plan is approved. Defra notes that it's up to the land manager how they structure and arrange the sale and the land manager may wish to seek legal advice.
In practice, it is the seller of the BNG units (whether a landowner, land manager or habitat bank) which usually prepares the sale agreement. This is often referred to as "Terms of Sale" or an "Allocation Agreement". They take a variety of formats from short-form terms and conditions to a longer form, more formal looking, contract. The format is usually determined by the structure of the commercial transaction, for example:
- The developer has secured its planning permission and knows how many BNG units it needs for the development. It enters into a sale agreement with the seller for those units.
- The developer has not yet secured its planning permission. The developer enters into a conditional sale agreement with the seller with an option to buy BNG units, within a specified period, if the planning application is successful.
- The developer is managing a large number of developments. It wants to be able to draw down BNG units from the seller (usually a habitat bank) over a period of time. The developer enters into a framework sale agreement with the seller.
The format will also be influenced by a number of other commercial and planning considerations. For example, does the normal statutory planning process apply or is the planning process different such as a Development Consent Order? Is one of the parties subject to other regulatory or public law requirements?
How can our commercial lawyers help you?
Our commercial lawyers handle the full range of contractual and commercial issues and have extensive experience in supply and purchase agreements. We offer a blend of legal, commercial and practical support to our clients. Our commercial team works closely with other specialist teams within the firm, including the planning and infrastructure, employment and tax teams, to provide a cohesive approach to commercial contracts that integrate separate specialisms.
Buying and selling BNG units is rarely a standard deal. Buyers and sellers often want to build in bespoke terms, and we work closely with our clients to ensure the sale agreement reflects the commercial reality of the transaction.
We also work closely with our planning and infrastructure colleagues to ensure individual sale agreements properly reflect the BNG process. Together, we've developed template terms for BNG unit sales that align with the mandatory BNG requirements and Defra's guidance. Our planning and infrastructure team has guidance on the BNG requirements, and how to apply the "Biodiversity Gain Hierarchy", and provides support with these aspects.
Are you a developer who wants support with the legal terms offered to you by a landowner or habitat bank? Or, are you a landowner or habitat bank looking to create template terms for the sale of BNG units?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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