Who can be liable for environmental contamination on real estate?
Real Estate (3rd edition)
The person/entity causing soil pollution or environmental contamination is responsible for removing such pollution or contamination. However, if this person/entity cannot be reached, the owner of the real estate will be held responsible. In addition, there is a factual assumption that the current owner caused the pollution or contamination, in particularly if the owner held the property for a longer period of time. The owner may have warranty claims against the seller, depending on the agreed representations and warranties and the limitation period.
Environmental liability may be attributed under civil, administrative and criminal courts, with the application of administrative and criminal sanctions, in addition to the obligation to redress the damages caused. The lack of conviction in one of these courts does not necessarily exempt the liability under the remaining spheres.
Regarding to environmental liability for contamination on real estate, the Brazilian environmental legislation established the propter rem nature, in the civil sphere, meaning that whoever acquires a property with contamination and/or environmental liabilities of any nature, visible or not, is also liable for their recovery, jointly with others considered to be polluters (e.g. previous owner of the property). Due to the objective nature (strict liability, i.e., irrespective of fault) of environmental civil liability, demonstration of the chain of causation between certain behavior (action or omission - e.g. no previous environmental assessment of the property) and the resulting damage suffices to trigger the obligation to redress the environmental damages, irrespective of fault (negligence, misconduct, or recklessness) and/or good faith from the buyer of the property. Nonetheless, in this case, the buyer may have a right of recourse against the other parties involved if it proves that it has not contributed to the damage caused to the property, also depending on the allocation of responsibilities in the contract for the acquisition of the property.
Unlike the environmental liability in the civil sphere, in the administrative and criminal spheres, the buyer may not be held liable for facts that were previous than his/her property or tenure rights over the real state. Punitive measures can only be imposed to whom committed the infraction or crime, respectively, set forth on the legislation. This results from the subjective nature of administrative and criminal environmental liability, which, contrary to what occurs in environmental civil liability, depends on wilfulness (intent) or fault (imprudence, negligence or inability) on the part of the individual or legal entity.
17.1 Environmental liabilities are not always dealt with in sale contracts, but where they are it is typically by way of a representation and warranty that the seller is not aware of any environmental damage or incidents in respect of the property.
17.2 The Development and Planning Law (2017 Revision) empowers the Central Planning Authority to serve a remediation notice where it considers that the amenity of an area is adversely affected by reason of, inter alia, the ruinous, dilapidated or other condition of any structure or by the condition of land due to the deposit of any refuse or spoil. The remediation notice can be served on the owner or occupier of the land or building or the person responsible for causing the condition of the land or building.
17.3 The National Conservation Law (2013) establishes a council whose role is to promote the conservation of natural resources, including preservation of wetlands and wetland resources, habitats and conservation of wildlife. The law provides for the creation of protected areas on Crown land or on private land with the agreement of the proprietor of the land. Developers should consider any potential effect this law might have on development plans, and should make inquiries when purchasing raw land to determine whether any conservation agreements have been entered into with respect to the land.
17.4 In addition, polluters, owners and occupiers could be the subject of a civil action for environmental harm.
17.5 There are no statutory provisions that expose a lender to environmental liability, but there is potential liability for any lender that takes possession of premises after default on its security.
The owner and the occupier of immovable property can be held responsible for environmental contamination. Liability is not limited to the polluter.
As a general rule, the contaminator is liable for environmental contamination of real estate. The public authorities may issue an enforcement notice for the contaminator to remove the contamination and re-establish the property to its state prior to the contamination. To the extent that the owner of the real estate is not identical to the contaminator, the owner must grant the contaminator access to the property and allow the contaminator to clean the property. Prior to acquiring a property a potential buyer must, however, make sure that an enforcement notice has not been filed and not yet complied with, as a new owner may otherwise under certain circumstances be liable to comply with such enforcement notice.
French law has adopted the "polluter pays" principle.
Facilities that are likely to present a risk to human health and safety, protection of the natural environment, or other legally protected interests fall within the scope of the classified facility regime and are either subject to a declaration, registration or authorization.
The obligation to clean up a site where a classified facility was operated is binding upon the last operator if the site has been definitely closed. The last operator can, however, officially transfer its obligation to clean-up the land to a third party with the prior consent of the préfet (who is the local representative of the state). For obtaining this consent, the third party must provide a memorandum describing the rehabilitation to be carried out in order to render the land fit for its future use, show that it has sufficient technical capacity and provide financial guarantees for the performance of the works.
The owner of the land should not, therefore, be required by public authorities to carry out clean-up measures if it has not been involved in the operation of the site.
If the operator of a classified facility no longer legally exists or has become insolvent, the owner of the land is liable for cleaning-up the land or for removing the waste but only if it is proved that it acted negligently or played a part in causing the pollution.
Should the pollution arise from waste, the former operator of the registered facility could be held liable if the waste was produced from operating the facility. If the producer of the waste no longer exists or cannot be identified, the owner of the land on which it was discarded may be held liable as being "holder" of the said waste but only if proved negligent or has committed a specific fault.
If, as a result of the operators’ insolvency or disappearance, the rehabilitation of the land cannot be carried out, the state may entrust such rehabilitation to a specific agency named Agence de l’environnement et de la maîtrise de l’énergie (ADEME).
If a land is located in an area registered as being concerned by risk of soil pollution, the seller or landlord must inform the purchaser or tenant of such a situation. If it fails to do it and if a pollution is found that renders the land unfit for the use indicated in the deed of sale or in the lease, the purchaser or tenant has the right to asks either the reimbursement of a part of the price or a reduction in the rent within 2 years as from the discovery of the pollution.
The purchaser can also require the rehabilitation of the land at the expense of the seller if the cost of this rehabilitation is not disproportionate by comparison with the sale price.
ursuant to German law, in the first place the actual polluter is liable for environmental contamination on (or in or below) real estate (no matter whether it is the owner or not). German environmental laws generally establish a "polluter pays" principle for clean-up of contaminated land and pollution of waters. If the state of the land (or waters in on or under the land) is such that there is actual significant harm, or a significant risk of significant harm, to the environment, the regulator must designate the land as "contaminated land". It must also serve a remediation notice on the responsible person to clean up the contaminated land / waters. Competency lies with the local or state authorities.
However, also the owner and/or occupier may be held liable for environmental pollution, even if it did not cause it. When disposing of real estate, a seller typically wants the buyer to assume any and all liability for the condition of the property and grant the seller a comprehensive indemnity. Nevertheless, under applicable environmental law, even a former owner may remain liable and be called upon by the public authorities. In addition, under certain circumstances, German law even allows so-called "piercing the corporate veil" (i.e. provides for a liability under public law of shareholders in a corporate entity which would otherwise be protected from liabilities in the company by civil law).
The authorities may, within limits, decide at their discretion which party they actually hold liable – in particular if the actual polluter cannot be determined or is not sufficiently solvent, the risks for the property owner increases. A party which was held liable, but did not cause the pollution, may have a statutory recovery claim against the actual polluter.
Pursuant to the provisions of the environmental legislation (article 29 of Law 1650/1986), any individual or legal entity that pollutes or damages the environment is liable for compensation, according to the “polluter pays” principle, unless he/it proves that the damage is due to force majeure or to an intentional act of a third person. Furthermore, interim measures prohibiting the operation of a polluting facility may be applied until the introduction of suitable measures against the pollution and/or degradation of the environment.
Moreover, Directive 2004/35/EC, which establishes a common framework at EU level for the implementation of environmental liability based on the "polluter pays" principle, aiming to prevent and remedy environmental damage caused directly or indirectly by activities involving protected species and natural habitats, water and soil, where contamination poses a serious risk to human health, was transposed into Greek law by Presidential Decree 148/2009, the latter was subsequently amended.
Parties who own and/or hold a real property, upon occurrence of environmental damage / environmental hazards, are jointly liable for such damage or hazards, unless proven otherwise.
The owner may be exempted from joint and several liability if he identifies the actual user of the real property and proves beyond doubt that he/she/it is not liable.
Notwithstanding the above, the parties are free to regulate in a contract their relative liability towards each other and liability for acts of third parties. A buyer of a real property would typically seek to exclude its liability and claim compensation / indemnification for pollution that occurred prior to the completion of the transaction.
There is no specific Act which concerns pollution of real estate. Toxins which pollute soil and human life are regulated by the Environment Protection Act, which uses the term “environment” in a wide sense, as well as by various rules framed under this Act.
Under the Environment Protection Act, the main rules to be complied with are (i) no person carrying on any industry, operation or process shall discharge or permit to be discharged any environmental pollutant in excess of such standards as may be prescribed; and (ii) no person shall handle or cause to be handled any hazardous substance except in accordance with such procedure and after complying with such safeguards as may be prescribed.
Whoever (person or company) contravenes any provision of the Act is liable. Therefore, liability may extend beyond the polluter to others who have permitted the environmental pollutant to be discharged or the person who has caused a hazardous substance to be handled without complying with prescribed safeguards. The person in whose name the property may be standing in the Government records is also held liable.
Liability for environmental contamination is not limited to the polluter although the polluter is likely to be pursued in the first instance by the relevant authority. Liability can extend to the owner of the property affected.
Certain statutory bodies are required to publish periodic reports which identify specific properties which are hazardous or which do not comply with certain environmental requirements. However, Ireland has no dedicated register of contaminated land. A potential buyer would always be advised to carry out its own due diligence where non-compliance with environmental law is a concern.
In the absence of an exception under a relevant law, the landowner is liable, in principle, for damage caused to third parties arising from the real estate. Therefore, a buyer may be responsible for environmental contamination (including soil pollution) of the real estate.
A common problem in real estate transactions (particularly those relating to land) is soil contamination. If the soil is contaminated and does not conform to the standards prescribed by the Ordinance of the Ministry of the Environment, or the site is classified as harmful to human health or as posing a threat of such harm, the land will be designated as an area requiring action under the Soil Contamination Countermeasures Law. The landowner will be required to take the measures necessary, such as, for instance, the removal of the contaminated soil, to remedy the contamination. The measures to be taken will depend on the class of hazardous substances found on the land as well as on the state and degree of contamination. If the pollution meets certain requirements, the owner may claim the cost of removal against the polluter. A prefectural governor may order the polluter, rather than the owner, to take the required countermeasures if (i) it is clear that the soil contamination was caused by the person other than the owner, (ii) where it is appropriate to require said person (hereinafter including his successors by inheritance, merger, or split) to take an action for removal and (iii) the owner has no objection to such an action being taken.
When you buy or sell real estate, the seller and the purchaser can agree upon the allocation of any liabilities which may arise from environmental issues regarding the subject properties, by the making of relevant representations and warranties and indemnification provisions and other related terms in their agreement.
Kenya’s environmental legislation broadly gives responsibility to all persons for their contribution to environmental contamination. The owner of premises or the operator of a project are, however, specifically obligated to ensure compliance with environmental laws, including directions given to them by relevant authorities in the course of carrying out a development which is likely to have environmental consequences. An owner in this case includes a lessee or other occupier of land.
Under Mexican environmental laws and regulations, owners and any possessors of real estate are jointly and severally liable for soil pollution and other environmental issues, irrespective of any claim they might have against the polluter. Owners and possessors must carry out, jointly and severally, the remediation activities (i.e. clean up) necessary to prevent pollution of the property.
Conveyance of polluted real property requires previous authorization by the Federal environmental agency (SEMARNAT) and any environmental authority shall request remediation from the owner (seller), possessor or buyer, even if the environmental issue was caused by a third party. Although the parties may agree and distribute environmental risks under the transfer agreement, governmental agencies are entitled to bring actions against either party (and other possessors or third parties) for remediation of the land.
Environmental liability is not limited and, therefore, buyers have to undertake comprehensive studies and due diligence to the land’s environmental conditions before closing the transaction.
Eco-responsibility is a principle of political action. On the instigation of H.S.H. Prince Albert II, the environment and subjects related to sustainable development are among the most important political priorities in the Principality.
Specific regulations have been adopted by Law no. 1.456 dated 12 December 2017 and codified. Monaco has for example adopted the "polluter pays" principle.
The primary liability for the environmental contamination on real estate is a civil liability that falls to the operator of the concerned site who has caused the pollution without having to identify any fault.
The legislation above also establishes administrative and criminal penalties and sanctions on activities prohibited under the environmental code.
Romania applies the “polluter pays” principle; therefore, the entity polluting the land must pay any fines and is liable for the damage caused to third parties, including to municipalities.
Purchasers can potentially be liable for the actions of the former owner if they cannot prove that the environmental damage was caused by their predecessors. To assess and limit the extent of environmental liabilities before entering into a transaction, an environmental due diligence exercise is highly recommended.
However, a bona-fides purchaser of real estate assets may still be liable for certain clean-up operations due to the pollution caused by a former owner, as the environment authority may refuse to grant an environmental permit for new activities without certain clean-up and containment operations undertaken by the new owner.
Under Russian environmental law, the person that actually contaminated, polluted or harmed the environment is liable for the respective violation. Therefore, the buyer of real estate does not generally assume the obligation to pay fines/compensations for environmental damage that occurred before real estate transfer, unless the breach is continuing. However, in case of share deal the buyer will be liable for environmental damage that occurred before the transaction.
Under the Environmental Protection Act, the polluter pays principle applies. This means that polluter is responsible for the elimination of any excessive pollutants and related consequences and is liable for all costs of measures taken in order to prevent or reduce pollution or environmental risk. Allocation of liability in respect of environmental clean-up is commonly regulated by the contract, as typically one of the representations and warranties of the seller is a declaration that the object of sale is free from any contaminants. Should such a declaration of the seller prove to be false and it is established that the object of sale is encumbered with a factual defect (contamination), the buyer is entitled to demand that the seller remedy the breach at its own expense, demand a proportionate reduction of the purchase price or withdraw from the contract.
Liability for environmental matters can be established by statute, criminal and civil law. Under each law, the basic principle is that the polluter pays. This section refers to the statutory liability only.
When committing an infringement defined in the relevant environmental laws and regulations, the infringing party will be considered liable for such infringement. Please note that generally such laws define who will be considered the infringing party. Additionally, the following two Acts are worth mentioning:
a) Act 26/2007
The Environmental Liability Act 26/2007 establishes a framework of environmental liability based on the "polluter-pays" principle, to prevent and remedy environmental damage. This Act applies to environmental damage, as defined therein, caused by any occupational activity carried out by operators, and to any imminent threat of such damage occurring by way of any activity. According to Act 26/2007, operators are obliged to take the necessary preventive measures, repair environmental damage caused and cover its costs. If there is a plurality of operators and their involvement in the damage is demonstrated, they would be considered jointly liable, unless otherwise established by a specific piece of legislation. In certain cases, liability may escalate to the parent company. Liability established in Act 26/2007 is compatible with liability resulting from other acts governing environmental matters, in the terms established therein. This Act 26/2007 establishes the obligation on operators subject to it to deposit performance bonds in significant amounts to comply with the obligations to prevent and remedy environmental damage.
b) Act 22/2011
In addition, the Spanish legal regime for polluted land is primarily regulated at a State level in Act 22/2011, of 28 July, and Royal Decree 9/2005, of 14 January, establishing the list of potentially contaminating activities and the criteria and standards for declaring such land polluted (note that legislation approved by the Spanish Regions will also have to be taken into account). According to Act 22/2011, operators of potentially contaminating activities are under a general obligation to provide information to the authorities periodically in order to enable them to determine whether the land is contaminated. In addition, the owners of lands where potentially contaminating activities have been carried out are obliged to declare this fact in the sale and purchase public deed executed for their transfer. This fact must also be registered at the Land Registry for information purposes.
The competent authority must issue a declaration of contaminated land, when it becomes aware that land has been contaminated due to human activities, that meets the criteria and standards contained in Royal Decree 9/2005 (for instance, where there is significant presence of the contaminating substances listed in the different Annexes of the Royal Decree). The declaration of contaminated land by the relevant authority triggers an obligation to undertake the necessary actions in order to clean up and restore the land within the timeframe and in the terms that may be established by such authority.
The declaration will be registered at the Land Registry and will only be cancelled by the Registry once a new declaration from the relevant authority has been made, and after the necessary actions have been undertaken to remedy the contamination and the land is no longer considered polluted.
Lastly, any polluted land subject to a declaration will be included in the catalogue of polluted land managed by the relevant regional authority. Once the relevant regional authority has verified that the land has been duly cleaned up, it will issue a further declaration stating this fact, and this will also be reflected in the above-mentioned catalogue.
Liability for remedying polluted land primarily lies with those operators that have carried out the activities causing the contamination. If there were multiple polluters, all of them would be obliged to remedy the damage caused, on a joint and several basis.
The owners and occupiers of polluted land, in that order, can be held secondarily liable for the clean up and restoration of polluted land, regardless of whether they were negligent or at fault. Furthermore, subsequent operators of contaminating activities, among others, may also be found liable on a secondary basis, for any financial liability arising from the application of remedy actions. Any party found secondarily liable will be entitled to recover from the polluters the costs incurred in remedying the polluted land.
Lastly, it is worth mentioning that actions to clean up and restore the land may also be undertaken voluntarily by any party, without the need for a prior declaration of polluted land by the relevant authority. In this case, the project for restoring the land must be previously approved by the relevant authority.
Swedish environmental law is based on the “polluter pays” principle. The polluter is liable towards the public authorities to investigate possible pollution/contamination originating from the polluter’s activities and to take appropriate actions to remediate such pollution (to a reasonable extent, considering e.g. the polluter’s contribution to the pollution and the permissible land use at the time the polluting activities were conducted).
The property owner’s liability is secondary to the polluter’s, and the property owner may only be liable in the event there is no polluter to hold accountable, e.g. because of bankruptcy. In such case, all current and previous owners who have acquired the property after 1 January 1999 (the date on which the Swedish Environmental Code first entered into force) are jointly and severally liable. The property owner’s liability will not exceed the potential liability of the polluter.
Thailand’s Enhancement and Conservation of National Environmental Quality Act 1992 has begun to adopt the principle ‘the polluter-pays’. The key concept is that a person who pollutes the environment must be responsible for the damages caused.
Under the Act, the owner or the processor of the point which is a source of pollution is subject to relevant pollution control and mitigation regulations, and non-compliance with the Act will result in fines.
The main environmental legislation in Turkey is the Environment Law, adopted on 9 August 1983.
The ground principle of the law is that persons who harm the environment must compensate. However, mainly because of the unsuccessful implementation of the law and the absence of relevant sub-regulations, environmental obligations have not been strictly applied until recently.
Environmental insurance is available. However, these insurance packages are more related to industrial environmental obligations and do not attract commercial real estate purchasers.
Environmental Cleaning Tax (Çevre Temizlik Vergisi) is regulated under the Municipality Revenues Law (2464) and is paid by the owner or tenant who uses the property.
Liability for environmental contamination on real estate in England and Wales can arise under a number of key statutes and under the common law (case law). Liability will normally attach to the polluter. However in certain circumstances the owner or occupier of land which has been contaminated can also be held liable.
Contaminated land regime: This establishes a "polluter pays" principle for clean-up of contaminated land and pollution of waters. If the state of the land (or waters in on or under the land) is such that there is actual signiﬁcant harm, or a signiﬁcant risk of signiﬁcant harm, to the environment, the regulator must designate the land as "contaminated land". It must also serve a remediation notice on the responsible person to clean up the contaminated land / waters. The regulator will be the local authority or, in certain circumstances the Environment Agency (for sites in England) or Natural Resources Wales (for sites in Wales).
Statutory Guidance on the EPA allocates clean-up liabilities among diﬀerent "appropriate persons". The primary liability to clean up is imposed on the person who caused or knowingly permitted the land to be contaminated (the "polluter"). If that person cannot be found, then the owner or occupier for the time being may be liable.
Even if the owner or occupier of land was not responsible for contaminants initially being present (and is therefore not at that stage regarded as a polluter), it can become liable as a polluter at a later stage as a result of its action or inaction. It is possible that an owner or occupier could be held to have "knowingly permitted" land to be contaminated where it knew, or should have known, that the land is contaminated, and then fails to clean up the land when it has suﬃcient control to do so.
Under the Statutory Guidance, liability can be passed between parties to exclude a polluter (e.g. a seller of real estate) in certain circumstances, such as where the land is sold to a buyer with full information as to the contaminated state of the land.
The application of the EPA contaminated land framework has in practice been exceptionally complex and resource intensive for local authorities. A combination of this, and the progressive removal of funding to local authorities to implement the regime, has meant that few remediation notices have been served since the regime came into force. In practice, most contaminated land has been remediated as a result of requirements imposed through planning permissions to redevelop land.
Water Pollution Works: This also imposes liability on persons who cause or knowingly permit pollution of controlled waters (e.g. groundwater or rivers) to carry out clean-up works.
Environmental Damage Regulations ("EDR"): The "operator" of certain, mainly industrial, activities is required to prevent environmental damage from those activities. Environmental damage includes the contamination of land. Where damage does occur, the operator has a duty to remedy the damage and potentially provide compensation for it. There is also an obligation to notify the regulatory authorities where there is an imminent threat of environmental damage. Under the EDRs, the operator is the person who operates or controls the activity. Generally, this will be the person holding the permit to carry out the activity. There are separate sets of EDR covering England and Wales.
Common law: The most likely causes of action are in nuisance and negligence, for example, for contamination that has escaped onto neighbouring land. Responsibility arises from the possession, control and use of the land where the contamination originated, and liable parties can include a combination of owners, occupiers and polluters, such as landlords, tenants, contractors and operators.
Federal and state law including the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, commonly known as "CERCLA" or "Superfund", impose liability on parties that own, operate or occupy (or have previously owned, operated or occupied) contaminated property regardless of fault. While parties to a purchase agreement can allocate responsibility for clean up between them, this will not serve to prevent claims from the government under such laws. Purchasers, however, may avoid liability under CERCLA and under most state laws if they satisfy the bona fide prospective purchaser defense. This defense requires that a purchaser conduct "all appropriate inquiry" into the environmental condition of a property prior to its acquisition and exercise "appropriate care" with respect to any environmental condition thereat. To qualify for the defense, the purchaser cannot be affiliated with any other party that is potentially liable for clean-up costs. The standard for "all appropriate inquiry" was promulgated by the U.S. Environmental Protection Agency and generally is the process of evaluating a property's environmental condition and assessing potential liability for any contamination. While there is no one size fits all for "all appropriate inquiry," in the typical case it means commissioning a type of environmental assessment of the property commonly known as a Phase 1 Environmental Site Assessment. "Appropriate care" means that the purchaser took reasonable steps to stop any continuing releases, prevent any threatened future release, and prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance. Most states have comparable defenses under their respective environmental statutes.
The Indonesian Environmental Law adopts the “polluter pays” principle, under which each individual or company that causes environmental damage is responsible for the relevant actions committed. Therefore, in general, every person who is responsible for businesses or activities that cause environmental pollution or environmental destruction, and inflict loss on any other party or the environment, must pay compensation or take remedial action (such as installing or improving waste treatment units, restoring the original environmental function, or eliminating the causes of the environmental pollution or damage).
In addition, the Indonesian Environmental Law provides a strict liability regime, which states that every person who uses, produces or manages hazardous and toxic materials (that is, B3) or causes a serious threat to the environment is strictly responsible for the losses suffered, without any requirement to prove wrongdoing.
Moroccan environmental law is based on the “polluter pays” principle, which means that, in practice, the person responsible for the pollution will be liable towards the public authorities to investigate possible pollution/contamination originating from the its activities and to take appropriate actions to remediate such pollution.
Therefore, if an owner discovers pollution on the property he owns, the latter must prove that such pollution was generated by the previous owner or by a tenant prior to the transfer of ownership of the property in order to avoid being liable for such pollution.
It is worth noting that natural or legal person storing, transporting or using hydrocarbons or toxic and dangerous substances – or any operator of a classified installation that has caused bodily injury or material damage directly or indirectly related to the exercise of the abovementioned activities will be deemed liable without the need of evidencing a fault.