Environmental Updates and Land Changes

Potential for Natural Capital Value

Despite the volume of public discussion and the market perception of what might be incorporated in “natural capital” issues, such as Carbon, Biodiversity Net Gain and Nutrient Neutrality, the concept is still largely undefined with much about opportunity, risk and value still to become clear. Discussions have however begun regarding overage provisions relating to sales of land and how these might be appropriate to capture further value that may materialise from environmental attributes in a sale, or a contractual agreement.

Where the relevant opportunity involves works that need planning permission, overage provisions with reference to the grant of planning permission would provide a starting point, albeit with relevant adaptations. It appears more difficult to define a reasonable trigger for an overage provision to apply, other than on the grant of a planning permission, as these usually capture enhancement in value rather than general movements in land values. Earlier reviews have suggested some possible occasions that may trigger an overage clause including:

• a sale of land for its environmental attributes or natural capital 

• entry into an agreement for the changed management of the land, which could include: 
  • entry into a government backed incentive contract (Woodland Carbon Guarantee Scheme)
  • entry into a local authority or government agency backed scheme (Nutrient Management)
  • entry into a commercial contract regulated by a conservation covenant (Biodiversity Net Gain)
  • entry into an Agri-Environmental Scheme

It is however, worth considering that these triggers may only offer access to a stream of revenue, rather than a capital payment, which would create issues over how such a clause could be applied, in practice. A further issue to be considered is how potential purchasers might view such clauses, when negotiating the terms and price of the initial deal. Especially where the quantum of value is relatively low, such a provision might deter a purchaser from even pursuing such opportunities.

Sustainable Farming Incentive (SFI)

DEFRA has published its latest guidance on payments under the SFI, which includes further information on what will happen when a farm changes hands due to a farm sale, grant of a new tenancy, or a surrender, for example.

SFI Agreements will run for a fixed period of three years. If you wish to make changes which involve increasing standards or adding land, these changes can be requested towards the end of the first and second years of the agreement and will be considered by DEFRA. Changes which involve removing or reducing standards, removing land from an agreement, or ending the whole agreement early, may result in DEFRA requesting repayment of some, or all, of the money already paid to you. DEFRA have explained that this is because "Your SFI standards agreement payments are based on you completing the actions in the standards for a full agreement year". This appears to indicate that it is the payments in the year of the transfer which are the ones which may be reclaimed by DEFRA, therefore the outgoing farmer may lose these payments entirely. After the transfer, the incoming farmer will then be able to add the new land to his existing or to a new SFI agreement.

Where changes in land occupation are on the horizon, it is worth considering the risk of a loss of payment, if you are entering into a SFI Agreement, or alternatively delaying the transfer or the original claimant remaining in management control of the land until the end of the Agreement.

Careful consideration should be given to minimise these issues, which we can assist with. Please contact a member of the Agricultural Team for further advice or assistance.

Key Dates

• Hedge cutting and trimming can now be undertaken from 1^st September, up until 1^st March 2023
• Lump Sum Applications under the Basic Payment Scheme must be submitted by the 30^th September 2022
• Capital Grant Applications under Countryside Stewardship are still open throughout the year. For some of the ‘Water Quality’ capital items, you will require approval and a visit from your local Catchment Sensitive Farming Officer. Grants are available for Boundaries, Trees & Orchards, Air Quality and Water Quality. The maximum grant available for any application is £60,000 and the limit for each category is £20,000.
• Farming Innovation Programme: Feasibility & R&D (Round 2) – DEFRA have announced funds of £16.5m available for farmers, growers, foresters, businesses and researchers.  Applications are open from 31^st August to 12^th October 2022 at 11am.  If you wish to apply for  funding to look at the viability of a research idea, or to develop a solution that has been proven to work in practice, please speak to the Agricultural team. 

Verity Garlick – Rural Chartered Surveyor