#10501 - Protection Against Liabilities And Environmental Requirements - Advanced Property Law

ADVANCED PROPERTY LAW AND PRACTICE WORKSHOP 2 Revision Notes: Protection Against Liabilities + Environmental Requirements PROTECTION AGAINST ENVIRONMENTAL LIABILITIES ! Protection from liability really forms a part of the key work of 'environmental risk management'. ! Surveys & Reports !These form a key part of ensuring that all current and future risks are protected against. ! Enquiries of the Seller Always request specific environmental information from the seller, such as: ! (a) historical, present or potential pollution incidents, hazardous substances, enforcement actions, or complaints by third parties in relation to environmental matters at the property, and ! ! (b) environmental permits, licences, consents held or required for the property, or any activity at the property Enquiries of the Local Authority This is standard, using forms CON 29R and CON 29O ! Enquiries of a Regulator Only need to do this if serious liabilities have been identified in the desktop survey !! Desktop Survey --- always do for commercial property ! These don't involve a physical inspection, so are very quick (sometimes just a few hours), instead they involve trawling through publicly available material such as maps and databases to learn about historical land use, pollution, floods, neighbouring uses, incidents etc. !1. Environmental Desktop Reports !2. Commercial Risk Screening Reports * these are less detailed than environmental desktop surveys and usually don't include a review of high detail maps and are often based mainly on computer models of available data. !The result of a desktop survey should confirm what concerns you had from enquires to the seller. ! Phase I Report ! The same as a desktop survey but with a site visit and sometimes interviews with employees. ! Phase II Report --- detailed site investigation !These are usually commissioned after Phase I if a Phase I highlighted specific risks: ! includes all the Phase I + soil, gas, water and groundwork sampling and risk assessment * Tools for Limiting the Parties Potential Liability ! The following options should be based on the enquires and desktop/Phase I/Phase II reports. !When considering the following options, always think about: ! ! ! ! ! ! [?] is the contamination actual or contingent? [?] what documents need to be amended? e.g. agreement for sale [?] are there any options you can rule out straight away? Commercial Options Withdrawal from the Deal Altogether: * if cleaning up land means the deal doesn't make commercial sense i.e costs too much then this is a last resort option Carve out the Contaminated Land and Purchase Only the Non-contaminated Land: * depends on whether the land that is left is usable for the clients purposes/aims * this can reduce the capital value and rental income of land that is carved out * will the land become landlocked? (think easements etc.) * this is generally more viable when large pieces of land are in consideration where there would be sufficient suitable land remaining Legal Solutions Protection for Both the Buyer & Seller: ! ! ! ! Negotiate a Price Reduction = Payment for Remediation (Exclusion Test 2): * this is really a commercial option too Buyer's Perspective * the buyer can cover all or some costs of remediation by paying less for the property * the buyer will also certainly be classified as a Class A as they knowingly permitted the contamination as they obviously will be aware of the contamination * make sure the reduction is actually enough to cover costs (as far as possible) Seller's Perspective * reduction reflects some/all of the costs of cleaning up the site: * if 2 or more parties in Class A = payment for remediation exclusion, also = sold with information * seller will have essentially paid off the buyer in advance and will escape any potential future lability * seller should ensure the test(s) it has relied on are reflected in the agreement so its position is protected Parties Agree an Apportionment of Liabilities: * this is really more a contingency option than a contractual agreement * the parties want to agree provisions that are only triggered in the event that parties are found liable for contaminated land in the future * the terms should be included in the agreement for sale * lenders may require this (up to 100% liability) from the buyer for certainty so they know they do not have any future liability --- this will be hotly negotiated!