Contaminated land: what to ask

The contaminated land regime (Part IIA of the Environmental Protection Act 1990) came into force in Scotland on 14 July 2000. It has long been a concern of practitioners acting for purchasers of land – and indeed sellers – that costly liabilities may be inherited by buyers even in routine domestic transactions, and it is against this background that the Law Society has now issued an Information Card by way of guidance to the profession as to how to deal with this matter in every land transaction.

Danger of remediation costs

The new regime concentrates on sites that are significantly contaminated in the sense that they will give rise to significant harm to people or property and while this may be true in some cases, most sites will not be so seriously polluted as to fall within this definition. Those that do will attract considerable remediation costs, so its importance must not be underestimated – like an earthquake, the new regime will not strike often, but will cause considerable disruption if it does.

Experience of the English regime suggests that, in the three years since its introduction, only some 40 remediation notices have been served of which only some six apply to domestic property. They include one notice requiring £27,000 worth of clean-up work in respect of a spillage of domestic heating oil, and one notice determining 30 homes located on a former lead mill to be contaminated land.

While the information card focuses on the contaminated land regime, it points out that this is not the only risk faced in property transactions. Equally, if not more important, is the risk that some issue of lesser severity may have an impact on the land, or the occupiers of it.

Such risks include: other legal liabilities for example for water pollution or civil nuisance; structural instability of the site; flooding; radon gas; health effects; delay while removing a source of concern; cost; perceived blight and devaluation of the asset on the open market.

What steps should you take

The information card provides that “in every transaction, you should consider whether contamination is an issue”. This wording is less mandatory than the English version of the information card, but the potential dangers of the regime have been well-known for some time now and it may well be negligent to fail to consider such issues as a matter of routine.

Every transaction, however straightforward, carries a risk of some sort of environmental problem related in some way to contamination or other land-use issues. That risk may be so minimal as to be discountable in the majority of cases, but one cannot know this without some examination of the risk in the first place.

The card suggests several steps which should be routinely considered:

1. Discussing issues with a client. This would require some meaningful discussion of the possible risks and further steps which could be taken to identify and evaluate them, rather than merely mentioning contamination in passing and ticking that item off the checklist.
2. Raising specific observations with the seller. Always raising the same comprehensive set of questions regardless of the circumstances will merely serve to annoy and will not elicit any meaningful responses, so practitioners must exercise discretion.
3. Undertaking searches of the regulatory bodies. In order to ascertain what, if any, information they have about the site history and other potentially contaminative land uses.
4. Obtaining a search from a commercial search company. This is the really new step in the process, and will add a degree of cost to each transaction, which clients may not wish to bear. Many lenders now require such searches (see CML Handbook) but in any event such searches offer a wealth of accessible information (including historical and current land uses as well as information held by the regulatory bodies) at a cost of £20-40. Most searches now come with a risk assessment and one in particular, Envirosearch Residential, features a comment on likely effects on the value of the property, with suggestions as to the further steps that could be taken to investigate any problems revealed. Liaison with environmental surveyors may be necessary.
5. Undertaking site investigations. This is unlikely to be necessary in residential cases, but could be considered in commercial transactions or cases of extreme concern, as the only way to determine the exact extent of a risk is to make intrusive investigations on the site itself, though this is costly.
6. Contractual protections. Not really appropriate in residential cases, this may nevertheless be relevant in commercial transactions as a way of determining responsibility for a liability.
7. Obtaining insurance. Environmental insurance is increasingly available to deal with some of the perceived risks associated with contaminated land, and again, the premiums are now at reasonably affordable levels, roughly £20 to £70. However, practitioners should be wary of pursuing insurance as the only route to dealing with the professional matters referred to in the information card.

Conclusion

Environmental risks are increasingly important in land transactions. Clients are aware of this and have a legitimate right to expect advice in appropriate cases. They would expect their solicitor to be the party to give that advice. It may be negligent to fail to do so, but steps can be taken at moderate cost which would identify potential problems and head off such a risk. Information is available – it would seem good sense to use it.

For further information on environmental searches please visit www.landmarkinfo.co.uk