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Contaminated Land – Proceed with Caution

Purchasers should be mindful when considering purchasing contaminated land as they may be held responsible in the future for the remediation of land that was contaminated prior to their ownership.

The Regime

The Contaminated Land Regime is a statutory regime that requires the remediation of contaminated land that causes an unacceptable level of risk. Under the regime local authorities must identify the contaminated land and require the persons responsible to remediate the land. Who are these responsible persons? Surely one would think the person who contaminated the land is responsible? Unfortunately this is not always the case.

The Regime is based on two principles: strict liability and retrospective liability. Strict liability does not require the local authority to prove that the person who caused the contamination intended to cause it or was otherwise in fault in order to require remediation. The second principle of retrospective liability requires remediation for previously contaminated land. As a result of these principles the responsible person is not limited to the person who contaminated the land but rather is expanded to include two classes of appropriate persons.

Appropriate Persons

The Regime requires appropriate persons to remediate the land. There are two classes of appropriate persons. The first is a Class A person. A Class A person is a person who caused or knowingly permitted contaminating substances to be in, on or under the land. If the Class A person cannot be found liability will then pass to the second class, Class B. A Class B person is the owner or current occupier of the land. It is possible that a new homeowner may find themselves responsible for the remediation of land that they themselves have not contaminated. It is important that purchasers take steps necessary to protect their position and limit their liability.

Steps your Solicitor Should Take

The Law Society has issued a helpful practice note on contaminated land and the ways in which solicitors can best act for their clients. The Law Society’s advice can be summarised into 5 steps.

  1. Obtain Searches

A purchaser’s solicitor should obtain a local authority search and desktop report search to reveal any potential areas of contaminated land and highlight any other environmental issues.

  1. Make Further Enquires

If any of the searches reveal that the land is contaminated, a purchaser’s solicitor should make further enquiries with the local authority and the seller. It may also be helpful to obtain an independent site report from a commercial provider to assess the cost of the remedial works and consider if the risk is financially wise.

  1. Request an Independent Valuation of the Property

If the property is contaminated it would be sensible to obtain a valuation of the property as the value of the property may have decreased. A purchaser could then negotiate a deduction in the purchase price.

It is important to note that a deduction in purchase price could cause a purchaser to be liable for remediation in the future.

  1. Limit Liability Contractually

A buyer can limit their liability by expressly stating in the contract that the property is NOT sold with information. In such an instance the seller will be liable as a Class A person. It is important that a purchaser is aware that this provision only provides a restricted form of protection as the purchaser may still be liable as a Class B person if the seller cannot be found.

A buyer could also come to an agreement with the seller regarding the liability for contaminated land.

A purchaser should beware of provisions that state there was a reduction in price to meet the costs of remediation or that the property is sold with information, in such instances the purchaser will be liable for the remediation of the land as these provisions excuse the Seller from Liability.

  1. Obtain Insurance Cover

A purchaser should obtain environmental insurance to protect themselves from any losses arising as a result of potential environmental liabilities.

Conclusion

Remediation of land can be a costly and timely exercise. Purchasers should proceed with caution when considering purchasing contaminated land. The above steps are useful in ensuring a purchaser is informed and protected from liability. Often it would be advisable not to purchase contaminated land as it is difficult to limit liability and ensure full insurance coverage for the remediation of contaminated land.

 

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ELS Legal is an international law firm based in London with more than 50 partner offices across the world. As part of the Cathay Associates global legal network, we are the first choice law firm for a number of British businesses and overseas clients.

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