Contaminated Land and Due Diligence

Contamination can present a significant obstacle to development of land. Commercial lenders, property owners and developers can mitigate risk by undertaking environmental due diligence. Site contamination and cleaning up and/or managing the contamination can involve significant unforeseen costs and result in delays in development. Effective environmental due diligence is essential to manage this business risk.

Land in areas with a prominent history of commercial and/or industrial land use, such as inner suburban Melbourne and Sydney, is often contaminated to varying degrees. Historical work management practices and regulatory requirements were less stringent than now. Also, concern for the environment has become more prominent. In addition, the potential environmental impacts caused by past commercial and industrial activities were not readily appreciated or understood.

Development of land with legacy contamination of the soil and groundwater and remnant historical infrastructure (such as underground storage tanks) can cause significant adverse environmental impacts. The risks need to be characterised, managed or mitigated. Also, planning authorities may require an environmental assessment of the land or an environmental audit to be undertaken in order to ensure that the land is suitable for its intended use.

In Victoria, the Environment Protection Amendment Act 2018, which will take effect from 1 July 2020, places new obligations on owners or occupiers of contaminated land. These include the General Environmental Duty, which requires people to take reasonable steps to eliminate or reduce risks of harm to human health and the environment from pollution, the Duty to Manage contaminated land, and the Duty to Notify EPA where contamination poses a significant risk of harm to human health or the environment or where reasonable cost of clean-up/rectification works could be expected to exceed $50,000.

If you intend to acquire industrial or commercial property, redevelop for a residential use or establish the environmental liabilities on a property, understanding the risks is essential. By characterising environmental risks, liabilities can be factored into the development strategy, or inform negotiations for acquisition or divestment.

By screening effectively for soil and groundwater impacts and other EHS liabilities, we can identify the unknown. Our firm understands the time critical nature of transactions and can effectively integrate into your acquisition or divestment strategy to create value.

In view of the impending operation of the Environment Protection Act 2018, land owners and developers should take the following steps:

• Investigate past activities that may have resulted in contamination of the land;
• Identify potential environmental liabilities and the likelihood of contamination; and
• Test soil and groundwater to directly assess the contamination status of the land.

For more information please contact Dr Ross Damiani or Mr Peter Ramsay on 03 9690 0522.