cleaning up your act

Many businesses may be caught out by the rules on contaminated land if they are not aware of some important details.

The regulations on contaminated land are set out in Part IIA of the Environmental Protection Act 1990 and supporting government guidance. They put primary liability jointly on those who cause (the original polluter) or knowingly permit such contamination.

So you don’t need to be the actual polluter to foot the clean-up bill. Those who become aware of contamination on their land, and who have a reasonable opportunity but fail to take steps to deal with it, share liability with any actual polluter.

If the actual polluter can’t be found, the ‘knowing permitter’ could bear sole liability (unless there is more than one). However, where original polluters are strictly liable, whether or not they were negligent or otherwise at fault, a knowing permitter is liable if there is a degree of fault (knowledge, opportunity and failure to act).

If it is not possible to find the original polluter and no knowing permitters exist then liability defaults to the current owner/occupier even though they are entirely blameless.

So, who bears the risk in a landlord and tenant/licensee situation? The legislation and guidance tells us, subject to certain qualifications, that the landlord will be liable.

The rationale being that the landlord holds the reversionary interest and benefits from the capital value of the land (uplifted by clean-up).

In practice, most modern leases reverse this position and impose liability and indemnification obligations on the tenant for not only contamination caused by the tenant during occupation but also any remediation notice served on the landlord in respect of historic contamination of the site.

It is arguable that this may also be achieved by older leases that do not deal with Part IIA specifically but, impose liability on the tenant for complying with ‘statutory notices’, for example.

As for funders, the mere act of lending money to a causer or knowing permitter of pollution will not directly expose the lender to Part IIA liability.

However, funders should be wary about becoming more involved in the borrower’s affairs.

For instance, ’mortgagees in possession’ would appear to be capable of bearing liability as ‘owner’ if the polluter cannot be found (ie because it is insolvent). Great care must be exercised by banks in this situation. It is also conceivable that a bank may be deemed to be a causer or knowing permitter of any pollution if the bank is judged to be exercising sufficient control over a company’s affairs (eg if the borrower is in financial crisis).

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