Potential Environmental Liabilities with Industrial Properties in the United Kingdom

By Jayne, Michael; Syms, Paul | Journal of Real Estate Portfolio Management, September-December 2003 | Go to article overview

Potential Environmental Liabilities with Industrial Properties in the United Kingdom


Jayne, Michael, Syms, Paul, Journal of Real Estate Portfolio Management


Executive Summary. Part IIA of the Environmental Protection Act 1990, implemented April 1, 2000, introduced a new 'contaminated land' regime in England, imposing 'strict liability' and raising issues for everyone involved in leasing and managing industrial properties, having potentially adverse effects on both income and value. The Royal Institution of Chartered Surveyors (RICS) provides guidance on the valuation of properties affected by contamination (RICS, 1995), as well as the role and responsibilities of the surveyor when undertaking property inspections (RICS, 2000). This advice is broadly based and does not identify the many 'pitfalls' that may confront a surveyor. This study examines practices in the United Kingdom and identifies areas where changes may be needed in order to arrive at 'best practice.'

Introduction

Although the United Kingdom has a long history of environmental legislation reaching back into the nineteenth century, for example the Public Health Act of 1875, tackling land contamination from the legislative perspective is a relatively new phenomenon. The Control of Pollution Act of 1974 sought to control certain activities that caused damage to the land and to the wider environment, which included the introduction of a system of licensing for the disposal of waste materials to landfills. While the design of landfill sites and the potential for environmental damages or impairment were to some extent encompassed by this legislation, it did nothing to remedy the damage that had been caused by around two hundred years of industrial activity in many of Britain's cities and major towns.

The need for legislation to address the problems caused by historic industrial and other activities that had damaged the land was identified by a Parliamentary select committee during hearings in 1989 (House of Commons Environment Committee, 1990) and the first attempt at introducing legislation occurred in the following year as a section in a piece of major environmental legislation (section 143 of the Environmental Protection Act 1990). This section did not, however, purport to tackle the issues relating to land contamination. Instead, its objective was to establish a register of land that was, or had been at some previous time, used for a potentially contaminative purpose or for a number of such purposes. Local authorities, city and district councils, were to be responsible for compilation of the registers in their areas, using historic map and trade directory data (records of this type for much of the U.K. date back to the mid nineteenth century and in some areas even earlier), town planning and environmental compliance records, as well as anecdotal evidence.

Although the section 143 registers were intended only to contain records as to factual land use, both past and present, without any physical examinations being undertaken, they were widely regarded, by inference, as condemning vast tracts of land as being 'contaminated' on the basis of seemingly little evidence as to fact. This situation led to widespread objections from the real estate industry and especially from those organizations, such as the rail and gas companies who envisaged that their real estate holdings would become valueless as a result of being put on the register. The Asset Valuation Standards Committee of the Royal Institution of Chartered Surveyors (RICS) feared that "registers of contaminated land will result in some property assets of big companies having negative values," (Estates Times, 1991).

These concerns did not relate solely to 'industrial' type premises, as the list of 'potentially contaminative uses' included a number of activities that might be regarded as 'high street' uses, such as dry cleaners, printers and electrical repairers (DoE, 1991), which might have resulted in many shopping centers being included on the registers. Therefore, after two years of debate, at times very public and quite heated, the proposed registers were abandoned in March 1993 and the policymakers promised a review of land contamination, with the intention of returning with new legislation at a later date. …

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