Developers top tips - ground investigations and contamination.
Updated: Jan 21
Developers need to make sure that the ground conditions of a development site are satisfactory and that the land has not been contaminated by obtaining a ground investigation report before purchase (unless there is an existing report on the site which can be relied on but do check the age of the report and what it covers).
Developers should be aware that liability for contaminated land can and does arise frequently. It can prove expensive if a developer unknowingly buys contaminated land and has to pay for clean up. Under the current legislation, a buyer of a contaminated site may be liable for the clean up even if the contamination was caused by the the seller or a previous owner.
Every Local Authority has a duty to inspect its land in its area for the purpose of identifying contaminated land. If a site is identified as contaminated land, the Local Authority or Environmental Agency will be under a duty to notify the owner or occupier, carry out a formal consultation exercise (unless its an emergency, then they will clean up at cost) and serve a remediation notice setting out the clean up or further investigation or require works to be carried out. The notice must specify reasonable steps to be carried out, having regard to costs and seriousness of the harm.
The person responsible for complying with the remediation notice will be the person who caused or permitted the contamination - the polluter pays. If no such person can be found, the current owner or occupier for the time being is liable. The seller can also transfer liability to the buyer if they are the polluter if they can satisfy the tests under environmental laws. The tests are not set out in full here but its useful to know a seller can exclude liability if they either make a sufficient payment to the buyer for remediation or they sell the land with sufficient information about the contamination.
If a person fails to comply with a remediation notice, they will be guilty of an offence and liable on conviction to a fine. They will also be liable to the Local Authority or Environmental Agency for the cost of clean up.
Its very important therefore that a developer investigates the land for potential contamination. A developer can protect their position by:
(a) excluding liability for contamination in the contract and explicitly stating that the seller retains liability;
(b) obtaining an indemnity from the seller;
(b) raising pre-contract enquires with the seller;
(c) obtaining environmental insurance cover;
(d) commissioning an environmental search containing environmental data on the site including past uses; and
(e) commissioning a ground investigation report. This will require a Phase 2 Environmental survey taking soil and water samples on site.
This list is not exhaustive and is intended for general guidance only as it does not constitute legal advice. We recommend you obtain legal advice prior to purchasing.
21 January 2021
MY BUSINESS COUNSEL