Natural Capital – legal considerations for landowners

Landowners and farmers should now be familiar with the terms Natural Capital and Biodiversity New Gain (BNG) which offer them an opportunity to secure additional income and new revenue streams as the basic Payment Scheme is phased out 2021-2027.

BNG is already a requirement of the National Planning Policy Framework and National Planning Practice Guidance so it is not a completely new concept.  I’ve been dealing with these projects in my role as trustee for various charities and their recent property developments.

More detail is now available about Natural Capital and The Environmental Land Management Scheme guidance, published 15 March 2021, sets out the goals of the 25 Year Environmental Plan and the Government’s commitment to net zero emissions by 2050.

Landowners and farmers will be paid to deliver projects that enhance Natural Capital including:

  • Clean and plentiful water
  • Clean air
  • Thriving plants and wildlife
  • Protection from environmental hazards
  • Reduction of and adaption to climate change
  • Beauty, heritage and engagement with the environment

To deliver this, farmers will also be able to access payments via the Sustainable Farming Incentive Scheme, which is currently being piloted and will be launched in full in 2022.

There will also be The Local Nature Recovery Scheme, which will encourage greater collaboration between farmers which begins
in 2022 and a full launch is planned for 2024.

The Landscape Recovery Scheme will see a number of projects including the restoration of wilder landscapes, large-scale tree planting and peatland and salt marsh restoration.  Around 10 pilot projects will begin in 2022 and a full launch is again planned for 2024.

How should landowners and farmers now approach the introduction of these schemes and what legal considerations should they consider before entering into any future agreements? They should also review any existing agreements they have in place with developers.

They should consider whether any existing agreements, mortgage terms or covenants will be breached by participating in any new scheme and we can help you to review these to understand your position.

Secondly, consider if you are happy with land being taken out of production for 30 years or more, what will be the ongoing costs to manage and maintain it and who is responsible for those.  Is there the succession in the farm business to continue this if you are no longer able to and does it also limit the potential for diversification projects at a later date?

Also, will you risk generating an unintended IHT bill for future generations which reduces financial gains to be made and could result in other land or assets needing to be sold to pay for it.

Understanding the ongoing legal responsibilities to avoid breaching them and possibly opening oneself up for legal action or financial penalties is important, so taking legal advice will therefore be vital to understand the detail of any agreement.

We are happy to review any documentation and advise on the legal implications of any future agreement to protect you and your
land interests.