News & Insights // Commercial Contaminated Land


The Olympic Stadium is now taking shape and looks set to be a spectacular centre-point for the 2012 Olympics in Great Britain. However, the development of the site has not been quite as straight forward as it could have been when compared with the impressive progress that the Olympic Village is making. At the opening stages of the development, construction could have been halted before it even began, and the reason for this? Contamination issues associated with the land on which the site was to be built. 

Since the introduction of the Environmental Protection Act 1990 (now embodied in the Environment Act 1995) Local Authorities have been given responsibility for identifying and forcing the clean-up of land that has been deemed to be 'contaminated'. Local Authorities have been actively seeking sites to be 'cleaned-up', serving remediation notices where necessary and ensuring that any contamination within the land does not impose any health and safety risks. 

The responsibility for the clean-up rests with the owner of the land and as a result the Law Society issued a warning card relating to Environmental issues and how they should be considered in a conveyancing transaction. 

Desktop Environmental searches have long been included as a standard 'usual and necessary' search conducted by the conveyancing profession when acting on the purchase of a property. These searches are accepted as industry standard and the nature of risk highlighted can range from minor (but potentially costly to remedy) to something that could affect the quiet enjoyment of the property or land. Where a search indentifies a potential contamination issue the purchaser has 3 options:
To withdraw from the purchase of the property on the basis that potential remediation costs of the land will outweigh the value of the property

Purchase the property making an allowance for any estimated clean up costs further down the line
Purchase the property with the benefit of a commercial contaminated land insurance policy
The first option of withdrawing from the purchase when option 3 is available clearly seems quite dramatic and doesn't allow client satisfaction unless it's as a result of a major issue identified with the land that would create very high remediation costs or delay in completing building or development works. 

The second option likely to be less desirable to the prospective owner as it takes a risk that remediation will be required or enforced which has to be costed into the purchase. 

The advantages of proceeding with option 3, an insured solution, are two-fold. The purchaser is able to proceed with the transaction but also does not need to make allowances for any financial restraints posed by the threat of enforcement action (other than those incurred in complying with any planning conditions set). A contaminated land insurance policy has, historically, provided cover for both remediation costs incurred in complying with an enforcement notice served by the Local Authority together with any diminution in value of the site as a result of such an enforcement notice being served. New policies on the market now also provide cover for third party property damage and/or third party bodily injury as a result of the identified contamination, where required. 

Previously, purchasing contaminated land insurance was both a time consuming and expensive option with cover only being offered on a bespoke basis for commercial properties. However, a new breed of commercial contaminated land insurance has recently been brought to the market which is now available on a scheme basis with cover available online for lower value commercial risks up to £1m. In making commercial contaminated land policies as accessible as those already used for residential transactions, commercial property transactions can now benefit from increased cover and reduced premiums as another area of the conveyancing market takes advantage of the electronic superhighway to provide workable market solutions. 

As is often the case with conveyancing transactions, be they residential or commercial, there remains a place for bespoke policies for transactions that don't fit "standard criteria", and there are always underwriters available to discuss whether the individual cases fall within the scheme or not, but now the market has a choice to opt for a cost efficient time efficient solution to this sometimes difficult issue. 

Commercial Contaminated Land insurance is now available through Conveyancing Liability Solutions as part of the Commercial ConveySure® suite of defective title and legal indemnity products. CLS is the Landmark Information Group approved insurance provider. To find out more please contact our legally qualified underwriters: underwriters@clsl.co.uk or 01732 897530 or go online at www.clsl.co.uk 

Clair Rickaby
Underwriter and Product Development Manager
CLS
clair.rickaby@clsl.co.uk