Who can be liable for environmental contamination on real estate?

Real Estate

Ireland Small Flag Ireland

Liability is not limited to the polluter although the polluter is likely to be pursued in the first instance. It can extend to the owner of the property affected. It is standard for buyers to make enquiries of sellers and depending upon the nature of the property to commission a full environmental report.

Mexico Small Flag Mexico

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 (eg. 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.

The Netherlands Small Flag The Netherlands

According to the Soil Protection Act (Wet bodembescherming), the polluter that caused the pollution is liable for the decontamination of polluted soil. In practice however, the polluter often cannot be traced or no longer exists. In that case, the owner or leaseholder of the polluted property is held liable for the costs of decontamination. The government is only responsible for decontamination in very exceptional circumstances, which is very rarely the case with a commercial purchaser. Furthermore, even if the government is considered responsible, the government can generally recover the costs it makes for decontamination from the owner/leaseholder.

An exception to the rule that the polluter is liable for the costs of decontamination is made for business parks as defined in the Dutch Income Tax Act (Wet inkomstenbelasting 2001) and the Dutch Corporate Income Tax Act (Wet op de vennootschapsbelasting 1969). Business parks are a broad concept under these acts: almost every site with a company/business on it qualifies as such. If the grounds of a business park are seriously polluted and decontamination is urgent, the owner/leaseholder is responsible for decontamination.

We also note that asbestos in buildings is a form of environmental pollution still frequently encountered. If there is a duty to remove asbestos, the owner/leaseholder is liable for the costs.

Norway Small Flag Norway

The Norwegian Pollution Control Act states that it is prohibited to possess, do or initiate anything that may entail a risk of pollution, unless such pollution is made lawful pursuant to special provisions or otherwise permitted by public authorities.

The "polluter pays" principle is basis for this legislation. However, Norwegian Supreme Court judgements have made it clear that the owner of a property "owns" environmental contamination on the property if no tenant may be held responsible. Warranties regarding environmental contamination on the property will not stop the public authorities from forwarding a claim against the owner of the property.

The Supreme Court has also made clear that a parent company may be held liable for pollution caused by its subsidiary.

Romania Small Flag Romania

Romania applies the principle of “the polluter is liable for damages”; therefore the entity polluting the land has to pay fines and is liable for damages caused to third parties, including to municipalities.

However, a bona-fides purchaser of real estate assets may still be liable for certain clean-up operations for 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.

Russia Small Flag Russia

The 'polluter pays' principle is applicable in Russia, meaning that an owner is not by default liable for pre-ownership contamination, provided it can prove that contamination happened prior to its ownership.

There is no general duty to report to authorities, affected third parties, etc. of any environmental contamination unless the level of contamination may be classified as a dangerous or emergency situation. Investigation of land contamination is mandatory only during geological and engineering surveying prior to development of a design for a new construction project.

Sweden Small Flag Sweden

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.

Switzerland Small Flag Switzerland

Liabilities for environmental contamination are based on public law and cannot validly be excluded.

The primary liability for the contamination of a site lies with the operator of such a site who has personally caused the pollution. In case of several operators, the liability will be split according to their respective causal parts.

In practice, it may be difficult to identify the operator who is responsible for the contamination if the contamination took place years, or sometime decades, before it is discovered. Furthermore, it may be that such operator is no longer in operation and that, in the meantime, the legal entity has been liquidated or has gone bankrupt. In such cases, the Canton will bear most of the costs. Furthermore, the person who legally or concretely controls the site at the time the pollution is discovered may also have to bear a minor part of the costs, even if he did not cause the pollution. The person controlling is in most cases considered to be the owner of the plot, but in certain cases it can also be considered to be other persons, such as the owner of the building lease right of the plot.

In cases of the sale of real estate, in particular when the real estate is located in industrial zones, the deed of sale may provide for an indemnity in favour of the buyer should he be found partly liable for the contamination as the person controlling the site (for contamination which occurred before the sale of the real estate).

Turkey Small Flag Turkey

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.

Brazil Small Flag Brazil

The liability for environmental damage may be ascribed to the polluter (individual/entity directly or indirectly liable for the action that caused the environmental degradation) and to the real property’s owner, who is equally responsible for solving the existing environmental liability. In addition to civil environmental liability, the law also provides criminal liability of the legal entity or individual which/who is charged liable for the damaging conduct to the environment.

United States Small Flag United States

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.

United Kingdom Small Flag United Kingdom

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.

Statutory liability
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.

Bulgaria Small Flag Bulgaria

The polluter-pays principle is a guiding principle at European and national levels. Bulgarian law provides for an obligation for all owners, lessees or other users to keep the property clean and in good condition. Responsible for any pollution of real estate will be the person, who has caused or contributed to it. However, under the general tort law the owner of an object is always liable for any damages to third parties or their property caused by the object, thus the owner may be jointly liable with the polluter to third parties, whose rights have been infringed.

France Small Flag France

The principle is that ‘the polluter pays’. Should the environmental contamination arise from an operated regulated facility (installation classée), the operator of the latter will be held liable.

In the event of successive operators, the last operator is required to restore the land from pollution caused by its own operations. The last operator can only be required to remediate pollution it has caused, not the pollution caused by others. Should the last operator be insolvent or has disappeared, the land owner may be held liable by the local authority only if (i) proved negligent or (ii) played a part in causing the pollution.

In any event, the financial burden of the remediation cannot be borne by the operator more than thirty years after the local authority has been informed that the activity has ceased, unless the operator concealed the dangers and inconveniences caused by 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 no longer exists or cannot be identified, the owner of the land on which it was deposited may be held liable as being ‘holder’ of the said waste should it be 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: (Agence de l’environnement et de la maîtrise de l’énergie or ADEME).

Germany Small Flag Germany

Liability for environmental contamination on real estate in Germany is attached to the polluter in the first place but also arises for the user/possessor or owner. The authorities may, under certain circumstances, decide in their discretion which party they hold liable. Such party may have the right to recover claims from the polluter.

Statutory liability

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.

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), he can be held liable.

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. However, the authority may still hold such seller liable.

Pollution claims may, in practice, be exceptionally complex and resource-intensive for local authorities. It often takes long until remediation notices are served and the authority comes to a conclusion which would be the right party to make remediation claims against.

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.

Hong Kong Small Flag Hong Kong

In Hong Kong, the enforcement of environmental laws is mainly carried out by the Environmental Protection Department which covers air pollution, water pollution, waste disposal, noise, hazardous chemicals control areas, to name a few. Given Hong Kong's uniqueness in having multi-story buildings, the incorporated owners of a building will usually be liable for environmental contamination as each owner holds undivided shares in the land and building. Each owner may be required to contribute to any penalty imposed according to their respective shareholding in the land and building.

Spain Small Flag Spain

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 the commission of such infringement. Please note that generally such laws define who will be considered the infringing party. Additionally, it is worth mentioning the following two Acts:

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, the operators are obliged to take the necessary preventive measures, repair the environmental damage caused or cover its costs. If there are a plurality of operators and their involvement in the damage is proved, they would be considered jointly liable, unless otherwise established by a specific piece of legislation.

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 recorded at the Land Registry for information purposes.

The competent authority must issue a declaration of contaminated land when it becomes aware of land 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 polluted 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 recorded 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 the 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.

Updated: December 11, 2017