What are the environmental liabilities the premises being used by a manufacturing business’s needs to meet?
Manufacturing businesses are, by their very nature, often heavy land users. Many of the processes they have historically employed may have contaminated the land they occupy.
In this article I’d like to look at what contaminated land is, how to address it and how manufacturing businesses can mitigate (or allocate) their liability when buying, selling or renting their businesses premises.
What is contaminated land?
Contaminated land is defined as any land which, by reason of substances in, on or under the land, appears to be in a condition that will either significantly harm the environment (including controlled waters) or could cause health problems for the people living in that area.
Who enforces the law?
Local authorities are primarily responsible for enforcing the law. They should undertake inspections and visits of sites in their areas to maintain a register of any contaminated sites.
What can they do?
Where land has been identified as being contaminated, the enforcing authority (the local authority or the Environment Agency) should serve a remediation notice on the relevant “appropriate persons”. This notice will require them to remedy the contamination.
Remediation is not limited to the clean-up of the site. It also includes covering any costs associated with the required investigations and contaminant prevention.
Who is an “appropriate person”?
Liability for the remediation of contaminated land is allocated as follows:
• Class A persons. In the first instance, liability is imposed on those who caused or knowingly permitted the contamination.
• Class B persons. If no Class A person can be found, the liability passes to the current owner or occupier of the site (regardless of whether they were aware of the contamination).
Matters become more when multiple Class A or Class B persons operate at a site and there are very particular rules that must be followed if that is the case.
What are the key offences that could be committed?
Failing to comply with a remediation notice is a criminal offence punishable by a fine, imprisonment or both.
Furthermore, a property owner /occupier may become liable to pay compensation if the contamination spreads from their land and damages neighbouring land.
What should manufacturing businesses do when buying, selling or renting commercial property?
Manufacturing businesses often operate from sites where there is likely to be residual contamination from historical use. Contamination may not be causing any active problems at the time of the sale or lease. It is still important to identify the risk and deal with it accordingly.
Key steps that manufacturers should take when buying, selling or renting property include:
• Do your due diligence
We always suggest buyers and tenants ask the seller or landlord (and their advisers) as to how the land has been used historically. Also ask for details of any visits, inspections or notices served by any party relating to possible contamination. That request should also include any correspondence relating to neighbouring property too.
• Undertake searches
Legal advisers can undertake searches of the registers maintained by the local authority to find out whether a particular property is recorded as contaminated land.
• Commission a survey
Consider commissioning a desktop environmental survey. A Phase 1 report or a Phase 2 report to assess the level of contamination at the site. This also includes the key risks associated with the site.
• Allocate or exclude the risk in contracts and leases
Once you’ve completed your due diligence and have the results of your searches and surveys to hand and decide to proceed with the purchase or rent, you need to make every effort to allocate the responsibility for remediation between the parties. Given the potential cost of remediation, this is vital. However, it’ll also require a bit of commercial bargaining and that will depend on each of the parties’ positions at the time of the transaction.
If there is existing contamination or a risk of damage being caused by existing contamination, the buyers and tenants will probably need to reduce their liability by considering the wording of and obligations in the contracts and leases so the risk either sits with a seller or landlord or is shared by both parties. In these scenarios, buyers and tenants need to be mindful of the strength of an indemnity; the right to enforce or allocate liability may be fine on paper. If the party giving that indemnity cannot pay or cannot be found, it may be worthless. In those scenarios parties often look at retentions or personal guarantees.
If you are a manufacturer are concerned your premises may be at risk of causing contamination or are looking at buying or leasing new premises that could be affected by historic environmental issues, please email Paul.Russell@keebles.com or call Paul on 0114 252 1409.