Establish Legal Contracts and Closing

Key takeaways

• WBP engaged multiple lawyers to evaluate a range of potential legal issues, including the single legal entity structure, long-term agreements, landowner tax, and sales contracts.
• WBP’s OpCo, a Limited Liability Partnership, is the primary entity for most contracts.
• Certain legal agreements, such as conservation covenants and S106 agreements, must also be signed with the underlying landowners, which have all retained land ownership.
• WBP recommends combining incumbent and new legal advisors to leverage specialties.
• WBP also recommends gathering all land title information early – including unregistered land and bank charges – to avoid delay in negotiations and due diligence.
• Common points of WBP contract negotiation have included option agreements, payment terms, sunset clauses and certification of unit sales.
• For some of its sites, WBP has also ‘stacked’ BNG units and nutrient credit sales, through careful negotiation of its legal agreements.

 

Overview of contracts and legal advisors

WBP has developed several contracts, including:

• For BNG:
  • Conservation covenant
  • Heads of Terms
  • Sales and options agreements for biodiversity units
  • Broker agreements
• For Nutrient neutrality:
  • S106 and S33 agreements
  • Heads of Terms
  • Option and sales agreements
• Limited Liability Partnership (OpCo) agreement (LLPA)

 

WBP engaged legal firms Lux Nova Partners, BCLP and Morrison Foerster for various aspects of the project, including project structuring and developing contracts. The landowners also retained their pre-existing property lawyers for property law and land ownership matters.

Glenn Anderson, Strategy Lead and one of the founding landowners of WBP, notes that it’s unlikely one law firm can handle all aspects of a natural capital project, especially one as multifaceted as WBP.

WBP has used various payment structures for legal services. Early legal support was funded by government funding (see Milestone 1) and through pro bono legal support provided due to the Project’s environmental focus and its relationship with TNC. Much of the early work on sales-related tasks were based on success fees, with payment due only upon completed sales, due to the Project’s early adopter status. As WBP and its associated markets have matured, payment structures have shifted to a traditional fee basis.

 

BNG contracts

Conservation Covenants

WBP began work on its conservation covenant in early 2024. Initially, an S106 Agreement with the Local Planning Authority (LPA) was considered, but the LPA had no experience with habitat banks and no template Section 106 agreement for that purpose.

All parties therefore decided it would be best for WBP to develop a conservation covenant with a Responsible Body (RB). The chosen RB had an initial draft conservation covenant and defined processes for due diligence. Its fee structure included due diligence fees for WBP’s Habitat Management and Monitoring Plan (HMMP) and land ownership, the legal fees for the RB’s own legal counsel to negotiate and review the covenant, and the annual monitoring fees for WBP to pay over 30 years.

David Short, a Partner at law firm Lux Nova, was engaged for WBP’s contract negotiation. While there were few contentious points in negotiations, some aspects of the covenant needed in-depth discussion.

This process took around three months, with WBP’s first conservation covenant signed in November 2024. Short comments that six to eight weeks is now a more typical timespan for negotiating and signing a conservation covenant charge for BNG.

Based on negotiating conservation covenants for landowners with several RBs, including for WBP, Lux suggests the following areas to focus on:

• “There will be provisions around maintaining an internal register of units sold and units available and keeping the RB updated – this is reasonable but it needs to be practical;
• Reducing (and making practical) any provisions around the landowner providing proof to the RB of how the unit sales income has been spent or retained;
• Ensuring there are workable fair enforcement and step-in mechanisms to address non-delivery scenarios of the HMMP (habitat delivery);
• Checking that the term (number of years) of the agreement is correctly defined, including when the legal obligation starts.”

 

Sales, options and brokerage agreements

WBP, with Lux Nova’s help, developed two sales agreement templates.

The first template is for unconditional sales, where the developer pays for the units and the seller allocates them on the national register immediately. These contracts were relatively straightforward to develop, with minimal negotiations from buyers to date. WBP now uses this template for simple transactions without legal consultation.

The second template developed is for option agreements, where developers ‘reserve’ the units before purchase, such as before planning permission is granted. Developers typically pay a 15-20% deposit and reserve the units for three to six months. These agreements are more complicated, for example with large, multi-phased developments that take several years. For these, WBP expects to engage legal support more often.

WBP is also trialing different brokers and platforms to sell its biodiversity units. Short notes there can be differences in the underlying legal agreements that are important to review, such as exclusivity rights over units (see Milestone 4).

 

Nutrient neutrality contracts

S106 and S33 agreements

To offer local developers nutrient mitigation solutions (in the form of nutrient credits) WBP has worked with its LPA (Breckland Council) to develop S106 agreements relating to land reversion and septic tank replacements.

The first S106 agreement started from a draft produced by the Council’s lawyers on land reversion, leading to extensive negotiations, including:

• Legal obligation timing – The parties agreed that the legal obligations would come into force only on the first credit sale (rather than on signing the agreement) to reduce market risk. However, immediate developer demand made this irrelevant.
• Permitted activities – Defining the prohibitions in a way that ensured the nutrient mitigation (through ceasing fertilizer use) whilst allowing daily land management and nature restoration activities. There was close liaison with technical advisers on the wording of restricted and permitted activities, to ensure environmental integrity without unnecessary restrictions or tax risks,
• A workable system for WBP to maintain a register of credits – issuing Certificates of Allocation to purchasers and Notices of Allocation to the LPA (and other relevant LPAs) when credits are sold.

This first S106 agreement took several months, but subsequent agreements were much swifter to execute, with all parties more familiar with the process and benefitting from the template.

WBP also had to sign S33 agreements— similar to S106 agreements— with three additional LPAs in the same catchment. When sales to developers in neighbouring LPAs were discussed, these LPAs needed to ensure enforcement rights, as the S106 agreements are only with Breckland Council. While Breckland Council is expected to be the primary enforcer if necessary, the S33 agreements grant these LPAs a legal right to enforce, thereby allowing them to accept WBP’s credits in their planning processes.

Figure 1: Map of Norfolk Nutrient Neutrality catchments

 

Sale agreements

WBP completed its first nutrient credit sales in November 2024, using a Credit Purchase Agreement drafted between the parties’ lawyers. WBP now have templates for different kinds of nutrient credit sales and for different areas. While many sales are straightforward, others require legal advice on factors like payment terms and timescales.

 

Stacking of BNG and Nutrient Neutrality

WBP is selling both BNG and nutrient credits from some of the same sites – often called ‘stacking’ credits that was affirmed by government guidance in 2023.

Short comments that it was relatively easy to reflect the necessary legal obligations to bind the land in the separate agreements (conservation covenants for BNG and S106 Agreements for nutrient credits). In general terms, the S106 includes ‘negative’ requirements of land reversion for nutrient neutrality, and the conservation covenant includes ‘positive’ requirements of habitat creation for BNG.

However, WBP needed to review any restrictions being placed, such as grazing by livestock on grasslands. For the land used for permanent nutrient credits (enforced up to 2125) WBP worked with the LPA and its technical advisor (Nutrient Neutral) to ensure certain areas could have low density livestock grazing. This reduced the number of permanent nutrient credits (compared to no grazing) but ensured its HMMP for BNG could be implemented on those areas, with the livestock acting as natural managers for the grasslands.

Both the conservation covenants and S106 agreements include general wording on WBP’s intent to derive multiple benefits from sites, without explicitly mentioning BNG or nutrient neutrality sales.

 

Use of the OpCo structure

The WBP landowners and its partners agreed to host all operations of WBP in a single legal entity, choosing a Limited Liability Partnership (LLP) as its OpCo (see Milestone 6).

Sales and service contracts are all signed through the OpCo. The LLP agreement for the OpCo, which is between the landowners and the OpCo, has detailed governance procedures for how decisions are made and contracts are signed, such as where contracts need all landowners’ signatures.

However, some agreements have to be signed by the landowners themselves, as opposed to the OpCo. This applies to conservation covenants and S106 agreements, as the land ownership remains with the landowners.

WBP’s OpCo was incorporated in April 2022 after two years of internal discussion and legal counsel,  primarily from BCLP and Morrison & Foerster. Short notes that WBP’s OpCo structure is extensive, and required agreements over factors like:

• how income and expenses should be shared (see Milestone 5),
• what happens when a landowner sells land included the Project,
• succession planning and flexibility for successive generations,
• permitted and restricted activities on the land.

Though WBP does not involve land transfers, much time was also spent on clarifying land ownership, such as with unregistered land. WBP recommends that project developers gather evidence of land ownership early to readily hand to the relevant RB / LPA and their legal teams, and register unregistered land as soon as possible.

WBP also found that one of its proposed sites had a bank charge, meaning it was being held as collateral for one of the landowners’ lenders. Ultimately, WBP decided to take the site out of legal agreements, as this was more straightforward than negotiating the site’s new value with the bank. Short comments that other landowners may try and get the bank to release land from the charge, but recommends identifying any bank charges early on.

 

Managing contracts going forward

As the Project develops, Anderson notes that WBP is becoming more proficient in negotiating and executing contracts, which is becoming an almost daily occurrence.

The primary focus for WBP relating to the contracts is governance and compliance, ensuring that record keeping is up-to-date and tracking credit sales to the physical boundaries of the Project. For BNG, WBP has developed a highly complex dynamic model that can track the location of credit sales and factor in things like the temporal multiplier in the BNG metric, where units increase in number over time from establishment.

Anderson also observes that having a dedicated RB is proving highly beneficial, to ensure all information and reporting is up-to-date and meets best practice standards.