MONEY MATIERS
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Filthy acre?
Your company is expanding. An attractive deal is being offered on a nearby industrial estate and the property seems in good order. But iust as you're about to sign the contract you read an article in the local paper about landfill sites and the thought occurs to you that the estate may have been built on a former rubbish tip. Do you sign the contract and keep your fingers crossed, or do you investigate further?
FI nvironmental issues are climbing up the political agenda. Tony Blair's
recent commitment to green politics at the United Nations Earth Summit in New York is a reminder that more environmental legislation is on its way. Purchasers ignore these signals at their peril.
When the provisions of the Environment Act 1995 relating to contaminated land come into force (a date has not yet been given) local authorities will be able to serve remediation notices on polluters requiring them to clean up the land.
Polluters will not always be the people who caused or knowingly permitted the pollution. Where an original polluter cannot be found, the owner or occupier of the land can be served with a notice. There are also circumstances where an original polluter can be excluded from liability, for example, where the polluter has sold the property on arm's-length terms to a purchaser who has sufficient information to be aware of the contamination.
Blighted
Even if the legislation is not brought in to force for some time, you may find your property blighted and worth considerably less than you paid.
So what can you do to protect yourself from being saddled with heavy clean-up costs or an unsaleable asset? This is a matter of risk assessment.
The first step must be to undertake an investigation of the site. This can take a number of forms. There is already much information in the public domain which can assist such as registers held by local authorities, the Environment Agency and the former utilities companies. Other information can be
obtained by raising specific enquiries before cone-act of the seller relating to current and previous uses, the nature of substances stored at the property and whether there have been any investigations by the environmental authorities.
Having assembled this information, the decision can be taken whether to commission a formal environmental survey. This will vary according to the property concerned and the time and money available. At one end of the scale are desk-top surveys where an analysis will be made of documentary evidence relating to a particular property, including the sort of information described above, and also maps and planning permissions. This may take a week and cost a few hundred pounds.
At the other end of the scale is a full environmental investigation where the site is inspected and samples taken for laboratory analysis. This may take several months and cost thousands of pounds.
Investigation
If a full investigation is carried out, the terms of the contract with the environmental consultant should be considered by your solicitor with one eye on future disposals of the property. What will be the limitation period under which claims can be brought? Will you be able to assign the benefit of the appointment to a future purchaser? Is the consultant adequately insured so as to be able to meet any claims?
Should the survey reveal a potential problem, the deal with the seller may need to be reworked. It might be possible to include a term in the contract requiring the seller to buy the property back if some eventualities come to pass or for a retention in the purchase price. You could ask for warranties as to the truth of the information given in replies to the enquiries raised by your solicitor and for the seller to indemnify you against the costs of complying with a remediation notice.
You may also be able to agree a price reduction to reflect the degree of risk, but be aware that this will allow the seller to be excluded from liability for any pre-existing pollution because it will have been treated as having made payment for the remediation.
It might also be worth looking into the possibility of there being in force any insurance cover in relation to historic pollution. Insurers no longer cover pollution but some older polices did provide such cover and it might be possible to seek an assignment of the policy.
There is a market for insurance against future pollution, but cover will only be available after extensive investigation by the insurers.
Whatever the nature of the property you are buying and the level of investigation you consider appropriate, what you should not do is simply cross your fingers. There is a price to be paid for a greener Britain, but it need not be paid by you.
C by Bryan Emden and Philippa Aldrich Bryan Emden is a partner and Philippa Aldrich an assistant solicitor in the commercial property department of City law firm Fox Williams