Environmental rectification work post completion If an environmental report, asbestos survey or disclosures by the seller highlighted non-compliance or capital expenditure requirements, the sale contract can include clauses for the seller or buyer to carry out further investigations and remedial works following completion. Post completion actions can include: • carrying out a new asbestos survey to update an asbestos register or to assess the need for asbestos remedial work • removing or encapsulating asbestos containing materials • making improvements to septic tanks or drainage systems • decommissioning or removing underground storage tanks • fire safety improvement works, and • intrusive ground investigations, gas testing, groundwater monitoring or remediation work See Precedents: Asbestos indemnity and Environmental rectification work clause. Transfer of environmental permits An environmental permit may be required under the Environmental Permitting (England and Waste) Regulations 2016 (EPR 2016), SI 2016/1154 for certain activities including waste operations, manufacturing sites, mining waste, radioactive substances and discharges to surface water or groundwater. Transferring an

The majority of the completion and post-completion tasks will be undertaken by the property lawyers: • filing the Stamp Duty Land Tax returns • preparing the land registry applications • sending the title deeds to the lender as security (if applicable) • complying with pre-completion undertakings • preparing

Heads of terms The transaction will begin with agreement of the main commercial terms including details of the parties, purchase price and any specific provisions regarding occupational leases, surveys, planning or required works. The commercial terms will usually be negotiated directly between clients or with their accountants or other professional advisers. If there are known or suspected environmental concerns, the heads of terms may include: • disclosure of existing environmental report(s) to the buyer • requirement for a reliance letter so the buyer will get the benefit of the environmental report(s) • mechanism for the seller, buyer or both parties to carry out environmental

Buyer beware A buyer can inherit significant environmental liabilities in relation to existing contamination and take on responsibility for other environmental issues such as asbestos in buildings and Japanese knotweed. See Practice Note: Environmental issues in property transactions—acting for a buyer. ‘Caveat emptor’, meaning ‘let the buyer beware’, is a common law principle meaning the seller is under no duty to disclose material facts to a prospective buyer. See Practice Notes: Property—enquiries before contract and Misrepresentation, misstatement and non-disclosure in property matters. A buyer can face liabilities for land contamination and water pollution in the following circumstances: • as innocent new owner if no causers or knowing permitters can be found • becoming a knowing permitter by reading an environmental report or continuing to permit the land to be contaminated • taking on legal and contractual responsibility for the seller’s environmental liabilities if the sale contract contains the sold with information exclusion test, payments for remediation exclusion test, an agreement on liabilities or an indemnity • taking

Environmental liability transfer acting for a seller If a property has known or suspected contamination issues or if the seller has caused pollution, the seller will want as clean a break as possible from potential environmental liabilities following the sale. The contaminated land regime (Part IIA to the Environmental Protection Act 1990 (EPA 1990)) places the primary responsibility for contaminated land on Class A persons—‘causers’ or ‘knowing permitters’. If no Class A person can be found, the current owner or occupier will be liable as the Class B person. See Practice Notes: • Contaminated land—who may be liable? • Contaminated land—identifying Class A and B appropriate persons After the sale, the seller will no longer be the Class B owner. If no action is taken to transfer Class A liabilities however, the seller will potentially retain legal liability for contaminated land as Class A causer or knowing permitter. In addition to EPA 1990, Pt IIA liabilities, a seller can retain other environmental liabilities after the

Environmental issues to consider Since environmental liability concerns can delay or frustrate transactions, the parties should consider if any environmental issues need to be raised at the heads of terms stage, such as: • will the seller be providing any environmental reports? • does the buyer need to commission any site investigations? • has the seller provided asbestos documentation such as a recent survey, updated register and an asbestos management plan? • is there any need to transfer or apply for environmental permits? • what is the agreed position for contaminated land liabilities—if the property is ‘sold with information’, will the buyer take responsibility for liabilities under the contaminated land regime only, or for ‘all liabilities and losses under environmental law’? • is there any need for environmental insurance? For a general overview of environmental issues in property transactions, see Practice Notes and Checklist: • Environmental issues in property transactions—acting for a buyer • Environmental issues in property transactions—acting for a seller • Environmental issues in property transactions when acting for a seller—checklist Land

Commercial Property Standard Enquiries The Commercial Property Standard Enquiries (CPSE) have become the industry standard pre-contract enquiries for commercial property transactions: • CPSE.1: General pre-contract enquiries for all commercial property transactions • CPSE.2: Supplemental pre-contract enquiries for property subject to tenancies for commercial use • CPSE.3: Supplemental pre-contract enquiries for commercial property on the grant of a new lease • CPSE.4: Supplemental pre-contract enquiries for commercial leasehold property on the assignment of the lease • CPSE.5: Enquiries before surrender of a rack rent commercial lease • CPSE.6: Supplemental pre-contract enquiries for property subject

The tenant covenants and service charge provisions will determine whether the tenant has to pay for works relating to the land, buildings and fixtures such as: • energy efficiency improvements • asbestos surveys and remedial work • improvements recommended in fire risk assessments • maintenance of above ground and underground storage tanks

In the due diligence phase, tenant’s solicitors will assess whether the property is compliant with law and suitable for its intended purposes, including any proposed assignment or subletting. The tenant solicitor’s searches, the landlord’s replies to Commercial Property Standard Enquiries (CPSE) and any additional enquiries should investigate any risks associated with environmental, safety and energy issues. See Practice Notes: Environmental due diligence—leases,

Landlords need to ensure that the land and buildings are returned in a satisfactory state at the end of the term. Depending on the types of activities undertaken by the tenant, from an environmental perspective this can include obligations on the tenant to: • clean up any contamination caused by the tenant and return the land to its baseline condition • provide an updated asbestos register and asbestos management plan and if necessary carry out asbestos remedial work to make the premises compliant with the Control of Asbestos Regulations 2012, SI 2012/632 • ensure that the premises are legally compliant with regards to fire safety, electrical safety and other health and safety obligations • pay for energy improvements to make the property compliant with the minimum energy efficiency standards (MEES) Timing In the same way that a tenant or landlord may need to prepare

Pre-contract searches Pre-contract searches are usually carried out by the tenant’s solicitor but may be carried out by the landlord’s solicitors if they are to give a certificate of title. This can include: • local search • index map search • drainage and water search • highways search • environmental desktop search For further information, see Practice Note: Pre-contract searches. Environmental desktop searches The Law Society Practice Note on contaminated land recommends that in all conveyancing transactions, solicitors acting for tenants should consider whether land contamination is an issue. This can involve the following steps: • suggest that a desktop search is obtained to investigate historic and neighbouring contaminative uses • raise environmental enquiries with the landlord’s solicitors or regulators • explain the liability risks to the client • add appropriate protections in the lease See Practice Notes and Checklist: • Law Society practice note on contaminated land • Property due diligence—contaminated land—checklist • Environmental investigations—types of searches and investigations • Leases—tenant protection clause for existing contamination Negative

Who takes responsibility for contaminated land liabilities? If historic land contamination is a concern or the tenant’s activities involve polluting activities, the parties will need to consider who takes responsibility in the lease for potential contaminated land liabilities. Standard clauses in leases If a lease is silent on environmental issues, there are a number of non-environmental clauses that could potentially have environmental liability implications. The table below highlights some of the common lease clauses to look out for. Lease provision Implications Extent of the demise Check if the definition of ‘premises’ includes land (including surface water and groundwater), above ground storage tanks, underground storage tanks and pipes. Covenant to comply with statutory obligations If the landlord or tenant is served with a statutory notice or is asked by a regulator to carry out works (eg the landlord is threatened with a remediation notice or works notice), the landlord can use this covenant to contractually pass the costs onto the tenant, even where the tenant