Environment Bill

Earl of Devon Excerpts

Committee stage
Wednesday 14th July 2021 Lords Chamber

Moved by

[The Earl of Devon]

266: Clause 110, page 109, line 11, leave out “appears from” and insert “is stated within”
Member’s explanatory statement
This amendment, along with others to this Clause, is intended to add formal requirements for an agreement to qualify as a conservation covenant.

[The Earl of Devon (CB)]

My Lords, I shall also be speaking to my Amendments 267, 268, 269, 274 and 276. These are amendments to Part 7 of the Bill, which introduces into English law for the first time the important and radical concept of conservation covenants. Following in part the Law Commission’s 2014 report on conservation covenants, the provisions of Part 7 are a hugely significant change to long-standing principles of English property law—a radical departure, in the words of the Bar Council, from the centuries-old rule that only restrictive covenants benefiting neighbouring property can run with the land and bind successors in title.

The Law Commission proposed a stand-alone Bill to introduce these significant changes, as would be appropriate. It is therefore regrettable that such radical new property provisions, including significant departures from those proposed by the Law Commission, find themselves tucked away in Part 7 of the Environment Bill and are afforded only a short slot for debate on the eighth and last day of this Committee.

I am grateful to all noble Lords willing to consider these provisions and to the NFU, the CLA, the Bar Council and many others for their support and insights. Having started my career as a junior property barrister, the intricacies and implications of the significant change to the law of real property are clear to me, but they may not be to noble Lords who do not keep a copy of Megarry & Wade to hand, so excuse me for providing some context.

Conservation covenants are central to this legislation. They are the principal vehicle by which the private finance will be brought into the brave new world of biodiversity net gain—the means by which developers will be able to ensure that the biodiversity lost to their development will be off-set, plus 10%, on someone else’s land. If successful, they will be a key tool in turning the environmental tide and an important alternative source of funding for farmers, whose basic payments are rapidly diminishing. They are an exciting development on which the Government are to be congratulated and which many in the farming community, including me, strongly support.

However, as the Minister described on day six of the Committee, the Bill creates an entirely new market in biodiversity net gain, the likely size and extent of which the Government are unwilling or unable to specify—despite repeated requests. It is described by some as the wild west of ecosystem services. It is a new frontier, and I am aware that a number of major financial institutions are prospecting with keen interest.

I am therefore surprised that the Government cannot estimate the likely size of the market. It must be a simple calculation to estimate how much biodiversity will be lost over the next decade, given the Government’s proud housing and development aspirations and the recent publication of the updated biodiversity metric. An impact assessment should be possible, and it seems a mistake to launch such a radical new land use and property law scheme without at least trying to understand what its impact will be. You do not venture west without a telescope to see where you are going. Can the Minister please say whether the Government will be able to provide an impact assessment of biodiversity net gain by Report?

Given this background of considerable uncertainty, the aim of my amendments is to ensure that this new market actually works, that trust and good practice in conservation covenants are established at the outset and, most particularly, that we are able to protect our natural environment and those who work it from the disastrous impacts of poorly conceived covenants entered into by cash-strapped farmers dealing with sophisticated for-profit commercial operators.

This is a complex area of law, and the covenants entered into will have long-standing—potentially perpetual—implications for generations. If they are wrong at conception, both farmers and their land will suffer and the market will not succeed. If they are right, well drafted and clear in their terms, they will be a vital tool to achieve the biodiversity net gains we all aspire to.

In legislating for conservation covenants, the Government have departed significantly from the Law Commission’s cautious recommendations by introducing for-profit companies as responsible bodies capable of entering into, registering and enforcing conservation covenants. The Law Commission proposed that only public bodies, registered charities and local authorities be able to enter into such covenants but, in their efforts to inject the energy of private markets and finance into this sector, the Government have opened it to any private body that the Secretary of State designates, so long as at least some of the body’s main activities relate to conservation.

In response to this proposal, the Bar Council stated:

“We do not see that there is any case for this. A for-profit company does not appear to us to be an appropriate body to hold the benefit of such covenants.”


It noted the danger of a private, for-profit entity being able to recover exemplary damages and the potential for abuse of a system that may allow for-profit companies to enter covenants for tax management purposes—that is, to adjust land values.

Conservation covenants bind successors in title and are able to be registered as local land charges on the land charges register. In the Land Registry’s own words,

“land charges are generally financial charges or restrictions on the use of land which are governmental in character and imposed by public authorities under statutory powers”.

It is therefore a major departure from standard Land Registry practice to permit for-profit enterprises to wield such quasi-governmental functions, particularly as the Minister has admitted that we simply do not know how they would work in practice.

There are multiple other significant and potentially dangerous implications to entering into a conservation covenant. I have already noted the right to claim exemplary damages from a landowner who unwittingly breaches the covenant—an extraordinary remedy in the hands of a for-profit company—plus the fact that the covenant binds successors in title, thereby banishing once and for all English property law’s long-held aversion to the perpetual control of land by the dead hand of one’s predecessor. Beware the zombie habitat banks—and here I am not being facetious. Conservation covenants will bind land to a particular use by default in perpetuity, and the land management prescriptions that may be agreed in writing now between a farmer and a developer might well fail the test of time, particularly given that this has never been done before. As the Minister so clearly explained last Wednesday, there are simply not ecologists and consultants currently in the market who know how to make this happen. It has never been done before, and we are entering wholly uncharted territory.

I ask noble Lords to consider the intervention of the RSPB on Exminster Marshes, which I have mentioned previously, which showed that even the most well-funded and well-intentioned land management prescriptions can have disastrous implications for the flora and fauna they aim to protect. In that case, on taking over the marches from traditional pasture farmers, the RSPB set about 20 years of intervention, removing livestock, minimising pest control and flooding fields to create an artificial wetland. When ground-nesting birds all but disappeared and Canada geese took over, the RSPB abandoned those practises, restored ditches and reintroduced pest control and grazing cattle. Ground-nesting bird numbers are now increasing again, but all those steps towards recovery would be likely to be in breach of a conservation covenant had one been put in place 20 years ago.

Part 7 offers only limited statutory defences to a breach of covenant, and it is no defence to a claim for breach that the farmer’s other property would otherwise have been damaged. Thus, if a farmer is faced with an imminent flood, caused perhaps by a beaver damming the local river upstream, which will wipe out his stored grain after harvest, it would be no defence to a breach of covenant if the farmer redirects that flood to a field subject to a conservation covenant prohibiting standing water. Assuming that he damages a nest site for a pair of cirl buntings, he will be facing a claim for damages in excess of £70,000 plus exemplary damages.

Equally of concern is that, in absence of provision to the contrary, the responsible body is free to transfer its interests to any other responsible body unilaterally. Thus, the local farmer may negotiate and agree the outline terms of a conservation covenant with a local developer’s ecologist who he knows and trusts, leaving the complicated details to be worked out as the habitat bank is developed, only to find that the local developer transfers its interests to the ecosystems services department of an international banking conglomerate with no local presence and a for-profit obligation to maximise shareholder returns.

I know that I am presenting a parade of horribles here, identifying all the things that can and might go wrong. However, that is the job of a lawyer being asked to advise a client entering a new and radical agreement.

This brings me to my principal amendment, Amendment 267, which seeks to ensure that conservation covenants are executed by deed and not merely by signed writing. As any law school graduate knows, signed writing in this modern day can be achieved simply by an exchange of email evidencing sufficient intent to be bound to an agreement and no legal advice needs to be given on their execution. Therefore, a conservation covenant tying land to perpetual obligations could conceivably be created by no more than an exchange of messages, which do not even need to state that they are intended to amount to a conservation covenant so long as it appears from the language that a covenant was intended. Amendment 266 addresses that anomaly.

Defra’s draft fact sheet on conservation covenants released last week recognises the danger of entering into agreements without legal advice and states that the Government’s forthcoming advice will recommend that those entering conservation covenants take advice. Will busy farmers even read that guidance? Amendment 267 will ensure that legal advice is sought such that all conservation covenants that are entered into are properly drafted to achieve the effects required.

In conclusion, consider a hypothetical because lawyers love a hypothetical. The typical English farmer is in his late 60s. He is seeing his BPS payments decrease year on year and the margins on which he subsists are rapidly decreasing. He disagrees with his children about to the future of the farm, and he cannot understand the myriad government strategies being trialled elsewhere. However, the farm having been in his family for generations, he does not wish to take the Government’s money to retire.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

I believe that the Government and my noble friend are in agreement on the criteria for selecting a responsible body, whose main purpose or function must relate to conservation. I would be delighted to include him in a future meeting with the noble Earl, Lord Devon, and officials and perhaps we could address some other concerns at that meeting.

[The Earl of Devon (CB)]

My Lords, I am grateful to all noble Lords who have participated and voiced, in general, considerable support for the amendments that I have proposed. It is particularly pleasing to hear support from the Green Party—despite the aristocratic proposer of these amendments—and from other Benches; it is much appreciated. I am pleased to hear that the Government take these amendments seriously and are willing to meet me; I look forward to that meeting.

A number of points were raised. The noble Earl, Lord Caithness, raised the issue regarding landlords and tenants. As I read the legislation, tenants will be able to enter into conservation covenants so long as they have at least seven years left on their tenancy. Of course, what happens on reversion of the tenancy once they have converted a farming field into a bog is yet another complexity that I did not have time to get to in my hypotheticals.

I also appreciate the support from the noble Lord, Lord Lucas, but, contrary to him, I think there is a role for for-profit companies within this marketplace. It is an exciting opportunity for environmental land management to bring in private finance but, if we are to do that, we absolutely must control and manage it, which is what these amendments are designed to do.

I thank the noble Baroness for the Government’s reply; she suggested that covenants can be easily modified or discharged in sites in application to the lands tribunal. In response to the Law Commission’s inquiry, the Bar Council pointed out that even the most modest application to the lands tribunal costs at least £50,000, and I am not sure that a small farmer would be willing to spend that to modify a covenant. She says that, to be registered as land charges, they must be executed by deed. I do not see that in the legislation and, as I understand it, they have effect as land charges even if they are not registered, so they still have this quasi-governmental function. As I understand it, they also continue to permit the responsible body to enforce exemplary damages, whether they are registered or not. Those are very significant impacts.

I am afraid that the noble Baroness may have misunderstood my Amendment 274, because it did change. The amendment is to the provision that applies to the for-profit, non-charitable, non-local authority entities. My aim is to ensure that any entities designated thereunder have conservation as their core function because, at present, the legislation does not permit for that. It is absolutely important that, if we are to have private enterprises involved, they need to be conservation enterprises; they cannot be banks that are just seeking to make a profit in developing an ecosystems services arm.

Finally, as to Amendment 276, while it is right that conservation covenants should be preserved, the reason why large payments will be made under them is because the landowner—the farmer—has to spend a lot of money maintaining the land in that way. If no payments can be made by the Secretary of State when that person takes responsibility for the covenant, there will be income for the land to be maintained in the way that it is meant to be. If payments are not made, the conservation purposes will necessarily fall away or the farmer will once more go bankrupt. There are a huge number of issues to be dealt with here. I do not think it is enough that this can just be packed in at the back end of Committee; we have a lot more work to do and I look forward to meeting the Minister and the Bill team. On that basis, I beg leave to withdraw the amendment.

Amendment 266 withdrawn.