Contaminated land liabilities

Advice from Law Society of Scotland leaflet on what enquiries solicitors should make on contaminated land

The Journal, April 2003, page 32

Solicitors should be aware that environmental liabilities may arise and consider what further enquiries and specialist assistance (both legal and technical) the client should be advised to obtain.

Contaminated Land

1.    The contaminated land regime was brought into effect in Scotland on 14 July 2000. It applies to all land, whether residential, commercial, industrial or agricultural. It can affect owners, occupiers, developers and lenders. The legislation, which is contained in Part IIA, Environmental Protection Act 1990 and regulations and statutory guidance issued under it (see the Contaminated Land (Scotland) Regulations 2000 SI 2000/178 and the Scottish Executive Circular 1/2000, July 2000) is retrospective. It covers existing and future contamination.

2.    Local authorities must inspect and identify seriously contaminated sites. They can issue remediation notices requiring action to remediate contamination, in the absence of a voluntary agreement to do so.  In certain cases (“Special Sites”) responsibility for enforcement lies with the Scottish Environment Protection Agency (“SEPA”).

A negative reply to the standard local authority enquiries from the local authority may merely mean the site has not been inspected. It does not preclude a future inspection. It does not necessarily mean there is no problem.

Compliance can be costly, and may result in expenditure, which could exceed the value of the property.

Liability falls primarily on those who “cause or knowingly permit” contamination (a Class A person). If the authority cannot identify a Class A person, liability falls on a Class B person, the current owner, or occupier of the land.  Class B persons include lenders in possession.  There are complex exclusion provisions for transferring liability from one party to another.  Some exclusions apply only on the transfer of land, or the grant of a lease. The applicability of any relevant exclusion needs to be considered before entering such transactions.

In every transaction you should consider whether contamination is an issue.

Conveyancing Transactions

In purchases, heritable securities and leases, solicitors should address the issue of advising the client in relation to:-

1.    Potential liabilities associated with contaminated land, taking into account the client’s own knowledge and expertise;

2.    Raising specific observations with the seller at least if a substantive response is likely.

In all commercial cases, and if contamination is considered likely to be a risk in residential cases, (e.g. redevelopment of brown field land) solicitors should consider:-

3.    Advising the client to consider making enquiries of statutory and regulatory bodies (under the changes to the Council of Mortgage Lenders Handbook), in all residential transactions the solicitor will need to ensure that the contaminated land questions for local authorities are on the property enquiry certificate and to consider undertaking an independent site history investigation, e.g. obtaining a site report from a commercial company.

In commercial cases, if there is a likelihood that the site is contaminated solicitors should consider:-

4.    Advising the client to consider instructing an independent full site investigation;

5.    Advising the client to use contractual protections.

For unresolved problems, solicitors should consider:-

6.    Advising the client to withdraw;

7.    Advising the client to consider obtaining insurance (increasingly obtainable for costs of remediation of undetected contamination and any shortfall in value because of undisclosed problems).

Specific Transactions

1.    Leases

Consider the effect of the terms of the lease and advise.

2.    Heritable Securities

Comply with the standing instructions of the heritable creditor.

In enforcement cases consider and advise client on the risk of the client becoming liable whether as a Class

A or a Class B person.  

3.    Share Sales and Asset Purchases

Consider recommending the obtaining of specialist technical advice on potential liabilities, use of detailed enquiries, warranties and indemnities.

Other Relevant Legislation

Other legislation and common law liabilities (e.g. nuisance) may also be relevant when advising on environmental matters including:

The Control of Pollution Act 1974

The Health and Safety at Work etc Act 1974

The Environmental Protection Act 1990

The Radioactive Substances Act 1993

The Environment Act 1995

The Town and Country Planning (Scotland) Act 1997

The Groundwater Regulations 1998

The Pollution Prevention and Control Act 1999 and the Pollution Prevention and Control (Scotland) Regulations 2000, SI 2000/323