Conservation covenants for the delivery of sustainable development: a new era for environmental law in England

On 30 September 2022, Part 7 (sections 117 - 139) of the Environment Act 2021 came into force. This means it will now be possible in England to enter into a “conservation covenant”. But what are conservation covenants? When might they be needed and what do they mean for you?

What are conservation covenants?

Conservation covenants are private, voluntary agreements between landowners and a “responsible” body for the purpose of delivering lasting conservation benefit for the public good.  Conservation covenants help to achieve this by creating both positive and restrictive obligations in respect of the land. These obligations will then bind all subsequent landowners either until the specified term of the conservation covenant expires or in perpetuity.

English law has so far lacked a legal mechanism which is specifically designed to give individuals or communities, corporations, developers and public bodies the means by which they can both protect land in perpetuity from harm as well as ensure that it is positively managed for the benefit of conserving and enhancing nature. This is a significant step and reflects the growing need to protect habitats and species in the face of steep declines in biodiversity either on a voluntary basis or as part of a legal or planning-policy requirement.

A key use of conservation covenants: to support the delivery of Biodiversity Net Gain (BNG) for developments   

A key use of conservation covenants is to support the new BNG requirements under the Environment Act 2021.

See Freeths' previous BNG publications here:

• Biodiversity Net Gain (BNG): Opportunities for Landowners and Hurdles for Developers
• Biodiversity Net Gain under the Environment Act 2021: Key Issues for Consultant Ecologists

The concept of BNG was introduced under the Environment Act 2021 and will mean that from November 2023 it will be mandatory for new developments requiring planning permission under the Town and Country Planning Act 1990 to deliver an at least 10% BNG. It is also anticipated that mandatory BNG will come into force in 2025 for nationally significant infrastructure projects given development consent under the Planning Act 2008.

BNG will need to be delivered by developers through habitat enhancement biodiversity gains (also known as biodiversity units) within the redline boundary of the development site and / or via reliance on off-site biodiversity gains (which would first need to be recorded in Natural England's register of offsite habitats).[1]

Conservation covenants have two roles in the new BNG legal regime:

• First, where a developer wishes to rely on on-site biodiversity gains to meet or contribute to the “at least 10%” BNG requirement, then the Local Planning Authority may decide that those gains need to be managed / maintained for 30+ years and may require a conservation covenant agreement as a means of legally securing that management requirement (the alternative mechanisms that an Local Planning Authority could rely on for this purpose are a section 106 agreement or a planning condition).0
• Secondly, the amendments which the Environment Act 2021 insert into the Town and Country Planning Act 1990 state that in order for offsite biodiversity gains to be registered on the Natural England register of offsite habitats (an essential first step if a developer is to be able to rely on them to achieve the 10% target), the works required for their delivery will need to be legally secured either through a conservation covenant or a section 106 planning obligation. Conservation covenants are, therefore, one of the two officially sanctioned legal mechanisms for the delivery of offsite BNG.

Using conservation covenants to deliver ecological mitigation driven by (i) the need (under existing legislation) for development to avoid impacts on designated conservation areas; or (ii) to be able to offset carbon emissions  

Where developments are proposed in locations close to legally protected nature conservation areas (e.g. “European sites” and Sites of Special Scientific Interest) there is often a requirement (depending on the nature of the development) for ecological mitigation to be delivered in conjunction with the development so as to negate any negative impacts associated with the development on the protected area.  Two key examples of this are the need for housing developments close to certain European sites to achieve “nutrient neutrality” or “water neutrality” where, otherwise, the sewage output / water demands created by that development could undermine the conservation objectives for the European sites.  See here for Freeths' previous article on “nutrient neutrality” and its application to European sites protected under the Conservation of Habitats and Species Regulations 2017 which are affected by diffuse pollution.

In these “nutrient neutrality” and “water neutrality” situations, conservation covenants are a mechanism by which ecological enhancements to other nearby land could be legally secured, with those enhancements then being acceptable to a Local Planning Authority / Natural England as a form of mitigation for a housing development as they are capable of negating (or neutralising) the development's potential impacts on a European site.

Conservation covenants may also be used to secure (legally) the delivery of habitat creation/conservation projects which support the sequestration of carbon.

Other situations in which conservation covenants may be used

Now that they are in force, conservation covenants may also be used in a number of scenarios in addition to the uses discussed above. The 2019 Defra consultation document on conservation covenants suggested the following situations when they might be used:

• Payment for ecosystem services - An area of woodland upstream of a river which passes near homes has helped to mitigate localised flooding. After negotiations, the landowner agrees to continue with current land management practices, restoring and maintaining the woodland in return for a yearly payment. The obligations for land management and annual payments are set out in a covenant between the landowner and the “responsible” body.0
• Altruistic uses - A landowner who has inherited extensive moorland which includes a crag much used by rock climbers. The landowner intends to leave the land to his children. They use a conservation covenant to ensure that the moorland is properly managed and that the public continue to have access to the crag.0
• An alternative to land purchase by conservation organisations - A wildlife charity identifies a plot of land as containing the habitat of a native bird species. It makes a financial offer to the landowner in return for the land being maintained as a habitat. The landowner agrees. The conservation covenant sets out the obligations that the landowner has to undertake to receive the financial offer.0
• Disposals of land by conservation organisations - A heritage group has invested funds in buying and restoring a Victorian house. The organisation wishes to sell the land but ensure that the work it has undertaken, and the heritage value of the property, are preserved. A conservation covenant ensures that future owners of the property maintain the conservation improvements made through the restoration work.

How will conservation covenants work in practice?

As mentioned above, a conservation covenant is an agreement between a landowner and a responsible body.  The responsible body effectively regulates and enforces the promises made by the landowner under the agreement.

Under the Environment Act 2021, the Secretary of State is named as the responsible body with whom conservation covenants can be entered into by landowners. It is very unlikely, however, that the Secretary of State will take an active role as a responsible body.  Instead, we expect the Secretary of State to exercise its power under the Act to designate other bodies which choose to apply to become “responsible bodies”. These bodies will likely include Local Planning Authorities as well as environmental charities, and public bodies such as Natural England, the Environment Agency and the Marine Management Organisation (should they decide to make the necessary application to the Secretary of State). Upon receipt of such an application, the Secretary of State must consider if he is satisfied that such a body is “suitable” to become a responsible body. For a Local Planning Authority, this is whether it meets certain criteria indicating suitability (which at the time of writing are not yet published). For other bodies the criteria are, in essence, whether some of their main purposes or activities relate to conservation. If the body is considered “suitable” it will be designated by the Secretary of State as a responsible body.

In practice, therefore, landowners can expect (in due course) to be able to pick and choose which responsible bodies it wants to work with (and ultimately face enforcement action from, if the landowner fails to comply with their obligations under the conservation covenant). Responsible bodies can, however, decline an invitation from a landowner to enter into a conservation covenant. If the responsible body disappears (for example goes bankrupt or is abolished) then the Secretary of State becomes the responsible body of last resort.

If conservation charities become responsible bodies, such as the RSPB or Wildlife Trusts, then that will mean that they will take on a quasi-regulatory role with regards the enforcement of covenants. Whilst some Local Planning Authorities may be happy not to have to resource enforcement action, responsible bodies will need to be clear-eyed about the resource implications of the role they are stepping into, including in respect of the various reporting requirements specified under the Environment Act 2021.

Conservation covenants can only be entered into if they are of a “qualifying kind”. This means that they must either require the landowner to do or not do something on their land or require the responsible body to do something on the land. The conservation covenant must also be for a “conservation purpose”. This means it must conserve, protect, restore or enhance:

• the natural environment of land or the natural resources of land
• land as a place of archaeological, architectural, artistic, cultural or historic interest, or
• the setting of land with a natural environment or natural resources or which is a place of archaeological, architectural, artistic, cultural or historic interest.

Delivering biodiversity net gain on land naturally falls into the “qualifying kind” category.

Conservation covenants and section 106 obligations

Inevitably there will be a great deal of comparing and contrasting between conservation covenants and section 106 obligations. It is likely that, at first, practitioners, developers and Local Planning Authorities will gravitate towards tried and tested section 106 obligations rather than dabble in the unknown of conservation covenants. That fear of uncertainty may be reduced if Defra produces a template conservation covenant which can be used in connection with biodiversity net gain, as hinted at in their BNG consultation.  The availability of conservation covenants will also depend on bodies putting themselves forward to the Secretary of State to apply for responsible body status.

The Environmental Law team at Freeths will be able to advise you on the differences between these two mechanisms and which one may be the best option for you depending on your circumstances.

What does this mean for you?

If you are a developer who will need to provide biodiversity net gain units or a landowner looking to supply those units, then conservation covenants may rapidly become a very familiar legal mechanism. Their novelty will likely deter many, particularly when it comes to the difficult issue of long-term enforceability. However, the success of section 106 obligations has largely been predicated on their flexibility in a planning context. Conservation covenants have been designed with this flexibility in mind and when this is recognised it is likely that they will become increasingly popular in the delivery of biodiversity net gain.

Biodiversity net gain aside, there is also a great deal of scope for conservation covenants to be used in the other contexts discussed, for example the creation of habitats for the purposes of “nutrient neutrality” or for carbon sequestration. As Natural Capital markets emerge, conservation covenants provide a bespoke legal mechanism to ensure their delivery.

Furthermore, if you work for a body that may have the means to apply for and become a responsible body then having the ability to enter into conservation covenants with landowners may allow you to amplify your reach in terms managing a great deal more habitats across the countryside and, importantly, to generate funding for that purpose. However, in weighing up that decision, you will need to think carefully about the enforcement obligations discussed above.

Conclusion

Having worked with the Law Commission in 2014 on the drafting of conservation covenants I am, unsurprisingly, supportive of their use. On a number of occasions over the past 8 years it has occurred to me that a conservation covenant could have provided a better way of securing ecological outcomes compared to other more awkward or expensive options. As they become more familiar, it is likely that conservation covenants will grow in popularity.

Please contact Penny Simpson or Richard Broadbent in the Freeths' Environmental Law team if you would like legal advice on conservation covenants, including:

• Drafting conservation covenants, either from a developer or landowner perspective.
• You are a business looking to supply offsite BNG units to developers and require advice on which legal mechanism is appropriate in your circumstances.
• Whether you should agree to enter into a conservation covenant over your land.
• Whether to enter into a conservation covenant or section 106 obligation to comply with your BNG obligations.
• If you would like to apply to become a responsible body and you would like to find out how to go about that or to understand more about a responsible body's enforcement and reporting obligations.

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[1] Units can also be purchased directly from the Government using their credit scheme, however this will be made deliberately expensive.