Lawyers across the world have collaborated to create The Chancery Lane Project (TCLP) – a hive mind effort to rework a variety of contracts to address climate change risks and assist in achieving the UK's 2050 net zero target.
Nicola Janus-Harris, Partner and head of our Agriculture & Rural Estates team and Charlotte Brasher, Associate in the team, consider two TCLP template clauses, which focus on lettings of rural and agricultural land.
Georgie's Clause
The focus of Georgie's Clause is the promotion of Carbon Sinks and Ecological Restoration, as a way of encouraging landowners to derive the most value from land which is let on short term arrangements. Georgie's Clause aims to do this by encouraging the land to be used for enhancing biodiversity, offsetting projects and in accordance with the Environmental Land Management Schemes (ELMS).
Tenancy agreements will typically make provision for the land to be protected and maintained in its current state, with tenants being required to comply with statutory legislation as well as good husbandry principles. However, whilst a tenant's obligations do not typically extend beyond that to require them to enhance the environment, there are often restrictions preventing a tenant, even if they want to, from entering into agri-environment schemes at all, or without consent from the landlord.
Additionally, certain environmentally focussed practices, such as re-wilding, could be viewed by some as inconsistent with traditional agricultural good husbandry principles. A tenant could therefore find itself in breach of covenant and at risk of receiving a notice to quit (i.e. a termination notice) if certain environmentally focussed practices are adopted, unless the landlord and tenant are in agreement.
Georgie's Clause therefore seeks to promote climate aligned market practices, such as improving soil condition and increasing the population of insects and pollinators, to improve the environmental value of the land.
This is achieved by the introduction of 2 key documents:
- A Nutrient Management Plan – i.e. a management plan for managing the nutrient inputs to the property; and
- An Environmental Management Plan – i.e. a farm management plan to achieve climate benefits and reduce or mitigate GHG emissions, which will take into account biodiversity objectives so that the property is managed in a way that maintains, and where possible, improves the ecological health
The intention is for each of these documents to be agreed between the landlord and tenant and documented before the tenancy agreement is entered into, giving each party certainty. The drafting can be bespoke to the particular land / property or simply by adopting an industry standard version.
The introduction of Georgie's Clause could be of particular benefit to landowners, with potential increases in natural capital in the land and biodiversity enhancement, which could in turn benefit any tourism activities. Improved soil and water quality could potentially also enable the landowner to enter into and benefit from future ELMS, and protect the value and marketability of the land.
Helen's clause
Helen's Clause deals with grazing land and promotes regenerative farming methods through 'Profit of Pasturage' agreements.
The purpose of Helen's Clause is to allow landowners to generate income via a grazing agreement whilst at the same time being able to ensure the long-term soil value of their land. On the other hand, the grazier (i.e. the individual being given the grazing rights) gets the benefit of well-maintained grazing land, but without having to sign up to a full tenancy and its accompanying obligations and formalities.
Traditional farm business tenancy agreements are drafted so that the landlord has a 'hands off' approach, with the tenant being given control and responsibility for any land management. That land management must be carried out in accordance with statutory legislation, good husbandry principles and any other contractual requirements agreed between the landlord and tenant.
This can be contrasted to a Profit of Pasturage agreement, where a landowner:
- Remains in occupation of the land;
- Grants a grazier the right to take the herbage (i.e. the edible parts of grass which are grazed by livestock); and
- Retains all rights and control of the land, including decisions on farming practices, stock density and organic fertiliser application
We predict that Helen's Clause could be used to promote more joint venture arrangements and could be particularly popular given the recent significant changes to the farming subsidy schemes by giving increased flexibility.
Helen's Clause brings potential benefits to both landowners and graziers. For landowners, this could include potential eligibility for ELMS or local Nature Recovery or Landscape Recovery projects, whilst for graziers, income can be generated by taking a crop for food production and longer term investments in agro-ecological systems might be more viable if landowners are paying the costs of inputs.
Overall, there is no "one size fits all" approach to net zero drafting, and wording will need to be considered and developed which both meets a party's goals and takes into account any context specific requirements.
Next in the series we consider The Chancery Lane Project drafting in the context of modern methods of construction.
