Newspaper article The Journal (Newcastle, England)

Issue Can't Be Ignored

Newspaper article The Journal (Newcastle, England)

Issue Can't Be Ignored

Article excerpt

It must be tempting for landowners to avoid the issue of environmental due diligence when selling their land, as abnormal costs such as contamination, ground instability and flood risk will mean a lower sale value for them.

But they would not be doing themselves any favours. They could even be devaluing their land even further if they don't face these issues head on.

Whilst cash flow and profit potential are important, so too is the need to accurately assess environmental risk. The pollution risk from historic contamination and the potential clean-up liability is increasingly likely to frustrate the exit for investors and lenders in the future.

Environmental risk assessment is a major issue. It cannot be ignored. Arguably historic land contamination is just as important as commercial risk.

The introduction of new legislation in 2000 and the impact of the Landfill Directive that have driven up remediation costs have dramatically changed the attitude of purchasers and their lenders. They are now almost guaranteed to call for some degree of environmental due diligence but they may leave it to the last minute after all price negotiations have completed so that they can drive the price down even further.

This can cause delays and may result in vendors making large price concessions to keep the deal alive. A responsible and financially astute approach to land contamination begins with an understanding of the environmental due diligence process.

Due diligence is a series of acts and investigations carried out by the purchaser/vendor or funder and their advisers to gain maximum information. Environmental due diligence should:.

* Highlight unknown liabilities;

* Ascertain financial implications on ongoing legal compliance;

* Quantify the potential reduction in value of the land.

The principle underlying the acquisition of a company and/or land is largely caveat emptor ( let the buyer beware. …

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