4th January 2023

Farming the environment – opportunities and risks of biodiversity schemes for landowners

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Rural landowners have always had an appetite for diversification, finding new ways to create income beyond the revenue generated by traditional farming.

A relatively new opportunity has arisen for landowners as a result of regulations which are designed to protect internationally significant habitats sites. Where these protected sites are in unfavourable condition, developers are required to demonstrate that the nutrient (phosphates and/or nitrates) impacts of their developments will not adversely affect the integrity of any protected site – ie. that the development is ‘nutrient neutral’.

This issue first arose in the Solent region and in Herefordshire, but has since spread across the country and is holding up the development of new houses and tourism accommodation as well as agricultural development. Currently 74 local planning authorities are affected by this issue and the delivery of over 100,000 houses has either been prevented or delayed.

Opportunities of nutrient neutrality for landowners

In practice it is very difficult for developers to mitigate on-site all of the nutrient impacts which arise from their developments, so they will likely need to consider off-site mitigation. This creates an opportunity for farmers and rural landowners who are in a position to provide that mitigation by changing farming activities on their land or ceasing an intensive livestock enterprise.

It represents an interesting and relatively new market for landowners. For example, if they have an intensive livestock enterprise which generates a substantial volume of phosphates each year, it may be more profitable for a landowner to close down this farming operation and be paid for the mitigation instead. In addition, the landowner may then be able to exercise their permitted development rights to convert the agricultural buildings to houses (Class Q) or storage and distribution (Class R) for example.

However, there are also potential pitfalls to consider before committing your land to environmental mitigation.

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The risks of nutrient mitigation schemes for landowners

As with any strategic business decision, changing the use of land from conventional farming to environmental mitigation should only be carried out after a full assessment of the risks and benefits.

As with many major business decisions, tax is often a key consideration. Land used for agriculture benefits from generous tax allowances (eg. agricultural property relief for inheritance tax) which may not apply once it is taken out of farming use.

It will also be important to consider such a change in the context of succession planning. Any land used to provide mitigation will be required to enter into a s106 agreement with the local planning authority which will impose a planning obligation on the landowner to maintain that mitigation “in perpetuity” (ie for the lifetime of the development being mitigated). This raises the question as to whether there will still be a viable farming enterprise afterwards and to what extent any landowner should take all their agricultural land and turn it over to nature and woodland.

For many, it will be important to find the right balance. For example, a chicken farmer may find it more profitable to close their chicken enterprise, receive a mitigation payment from a developer, and redevelop the buildings, while still using their agricultural land for food production.

Legal obligations for landowners delivering nutrient mitigation schemes

To secure the mitigation, the local planning authority will require the landowner to enter into a legal agreement (often referred to as a s106 agreement) with their local planning authority.

The terms of such a legal agreement are more onerous than traditional agri-environment schemes such as Countryside Stewardship agreements. Landowners will be required to provide the mitigation in perpetuity, keep records of management activities carried out on the mitigation land and to produce regular reports to the local authority.

Furthermore, the legal agreement will also include the right for the local authority to step in and take measures if the landowner is breaching their obligations, and to recoup its costs for doing so.

Any diversification project or change of use of land can be complex and requires careful planning. Be sure to seek advice from a specialist agricultural legal practice which can look at all aspects of your farm, business and personal circumstances before you commit to any scheme.

The Thrings Agriculture team has been chosen by the NFU to act for its members in more counties than any other firm. Find out more about how we can support farmers, food producers and rural communities on our Information for Farmers page.

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