1. The Real Estate Development Sector

1.1 Biodiversity net gain ("BNG")

The Environment Act 2021 amended planning legislation (from a date to be set by law, but expected to be January 2024) to require certain planning permissions in England to be subject to a new pre-commencement condition requiring a 'biodiversity gain plan' for the permitted development. The condition would require the developer to submit and have approved a biodiversity gain plan showing how a 10% gain in biodiversity value will be achieved. Importantly, the 10% figure is proposed as a national standard but the consultation is clear that it is a minimum and not a cap – in practice, local standards may require a higher percentage.

There is a hierarchy of approaches through which this requirement can be met. The first preference is to do it on-site. However, recognising that some development sites may be constrained in this regard, developers will be able to propose either (1) achieving the required gain on an alternative site for a duration of at least 30 years, or (2), as a "last resort", purchasing what will be known as 'biodiversity credits', when the system has been set up.

Originally expected to arrive next month, Defra recently confirmed an "updated timetable". BNG requirements will now apply from January 2024 for new housing, industrial and commercial developments and will be subject to certain exemptions, expected to include householders, change of use and projects with a de minimis impact on low or medium value habitats.

While some uncertainty remains about how the regime will operate, Defra have committed to publishing all guidance and regulations by the end of November. This does not give much lead-in time for those grappling with the new requirements, but it does at least ensure that we will not have to wait too much longer before getting some clarity over practical implementation.

1.2 Nutrient neutrality

High nitrate levels in freshwater and coastal habitats can damage protected sites by encouraging the excessive growth of certain plants and algae via a process called 'eutrophication'. This harms water quality, thereby causing die-offs of other plants and impacting on the animals and wider ecosystems linked to that water. Under the Conservation of Habitats and Species Regulations 2017, local planning authorities are tasked with assessing the environmental impact of planning applications and local plans which may affect these protected sites. They can only approve new residential development if it can achieve 'nutrient neutrality', which is when the nutrient loads within the additional wastewater and surface water which will be created by the development are mitigated as part of the scheme, by for instance creating new wetlands to strip nutrients from water or establishing buffer zones along rivers and other watercourses. This requirement is said to have had a significant negative impact on the number of homes granted planning permission.

In August, the Government announced that it planned to introduce an amendment to the< a href="https://bills.parliament.uk/bills/3155" target="_blank">Levelling Up and Regeneration Bill that would remove this requirement in order to allow for the delivery of more than 100,000 new homes. It would then expand the Nutrient Mitigation Scheme run by Natural England, doubling investment to £280 million. However, this amendment has been rejected by the House of Lords, leaving developers frustrated with the uncertainty that they now face.

That may not be the end of the story, however. There have been recent suggestions that the Government, unbowed, are considering a new Bill to address nutrient neutrality requirements. It remains to be seen whether that does, in fact, come to pass.

1.3 CMA report into the housebuilding industry

The CMA launched a market study into housebuilding in February 2023. In August it published an initial update on its work and emerging analysis to date, and opened a consultation on a proposal to make a market investigation reference under section 131 of the Enterprise Act 2002 in relation to the supply of new homes to consumers. We discuss this report in more detail here. Their preliminary findings are that there are two main areas of concern:

1.3.1 Land banking: The CMA is examining whether land ownership at the local market level is concentrated among a small number of market players, both in terms of ownership of developable land, as well as in terms of the holding of permissions to build – and what implications this has for competition to supply new homes in local markets. The CMA acknowledges that large land banks could be a symptom of other problems with the housebuilding market, such as the slowness and unpredictability of the planning process. It also acknowledges the views of many housebuilders that land banks help to ensure a steady stream of projects successfully passing through the planning system.

1.3.2 Estate management: The CMA is concerned about problems in the way in which common amenities in new-build housing estates (such as roads, lighting and public open spaces) are managed by estate management companies. The key issues include a lack of transparency for consumers about the way in which a newly built estate will be managed, including the actual costs/charges involved.

The CMA's final report is due by February 2024.

1.4 The Electronic Communications Code

A structural defect in the Electronic Communications Code (the "Code") has been resolved by the case of Vodafone Ltd v Potting Shed Bar and Gardens Ltd (formerly known as Gencomp (No 7) Ltd) and AP Wireless II UK Ltd [2023] EWCA Civ 825.The Court of Appeal overturned the earlier decision of the Upper Tribunal (Lands Chamber), to confirm that a concurrent leaseholder (i.e. one who takes a later lease from a tenant's landlord, and which sits above the operator tenant), may use the procedures under part 5 of the ECC to renew or terminate the operator tenant's Code agreement, despite not having been party to the original agreement or a successor in title to the original grantor. This is a welcome development for developers, who may use the procedure to remove Code operators.

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