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Tackling contaminated land – A barrier to regeneration?

03 Jun 2011

Nicola Tiffen, a partner in the commercial property team of Newcastle law firm Hay & Kilner, looks at ways of tackling contaminated land.

Regeneration is a commonly heard word in the property industry. However it is increasingly being linked with the words ‘contaminated land’ as a result of the historical uses of land for a wide range of industrial, mining and waste disposal activities. This is an issue which if not thoroughly investigated and dealt with appropriately at the outset of a transaction, can have severe financial consequences for every party involved.

Who is responsible?

Local Authorities are under an obligation to actively identify contaminated land and serve a remediation notice on the “appropriate person”. Many assume that the “appropriate person” will be the original polluter and it is true that this must be the primary target of the authority. However, if the culprit cannot be identified or is not traceable, then the current owner or occupier will become liable.  There are no guidelines on how far an authority must go to trace the “polluter”. With the fall back position allowing the authority to pin the responsibility on the current landowner or occupier, available resources may limit extensive investigations.

A Buyer’s Perspective

It is vital that a buyer’s solicitor commissions an environmental search and extensive enquiries are answered, prior to entering into any legally binding agreement, to assess the likelihood of the property being declared contaminated once a site has been acquired. In extreme cases, this will enable the Buyer to either walk away at an early stage or re-negotiate the terms of the agreement to take into account the costs that will inevitably be incurred in tackling the contamination.

A Seller’s Perspective

Sellers are often under the misconception that once they sell a property, they will be released from all liability under environmental legislation. It is, however, possible, to offload contaminated land by incorporating a “sold with information” clause into the contract. This will have the effect of declaring that you as seller gave the buyer sufficient information to be aware of the contamination with the assumption that the buyer would have had an opportunity to adjust the price to take the contamination into account, even if this has not been the case. The legislation expressly provides that in these circumstances, liability is transferred from the seller to the buyer. This can then be written into the title deeds so that liability passes each time the property is sold.

 

A Landlord and Tenant Perspective

A standard lease will usually contain a clause making the Tenant liable to carry out all works required by law and this would include works resulting from a remediation notice. A Landlord should as a matter of course ensure that this provision is included, however, a prudent Tenant will want to add an express exclusion of liability for remediation in relation to historic contamination. For additional protection, it is recommended that a Tenant obtains a warranty from the landlord that there is no contamination.

Ultimately, the laying of the liability in a Landlord/Tenant relationship is down to negotiation and strength of bargaining power. It is clear that pre lease investigations must be as thorough as if the Client was purchasing the property, as the liability on a Tenant is no less than that of a Buyer.

A Lender’s Perspective

An “appropriate person” is one who “caused or knowingly permitted” contamination. On the face of it, this seems to exclude a lender unless they have actively taken steps to control a polluted site. A lender will be excluded from liability if the sole reason for it being an “appropriate person” is that it lent money. However, if an “appropriate person” cannot be found after reasonable enquiry then the current owner or occupier will be liable. If for instance, the “polluter” cannot be traced and the owner of the site is insolvent then the lender becomes a mortgagee in possession through taking steps to enforce their security. The lender can then be targeted for liability for remediation.

In conclusion, we are seeing an increasing number of sites being deemed potentially contaminated and if specialist legal advice is not taken prior to committing to a transaction, the cost damage for any party involved can have severe consequences. However, if the appropriate steps are taken, these issues need not be a barrier to relocation and regeneration.

For further advice please contact Nicola Tiffen at Hay & Kilner Solicitors on 0191 232 8345 or email nicola.tiffen@hay-kilner.co.uk

Please note:
This article is not legal advice; it is intended to provide information of general interest about current legal issues. Please contact us to discuss how the contents of the article may affect you.