In brief – Sellers of contaminated land must
disclose; buyers must investigate and negotiate
It is increasingly common these days for purchasers buying land
for development to be faced with the problem of contamination. If
contamination is present or suspected, it is prudent for a vendor
to disclose as much material as possible in the contract about the
contamination to avoid the purchaser rescinding the contract or
claiming substantial damages, including loss while remediation is
Purchasers should also make their own enquiries and conduct due
diligence for actual or suspected contamination. This problem is
now encountered not only with commercial and industrial land, but
also with land intended to be used for residential development. For
example, this can happen because the land was previously used for
farming or as a landfill site.
What the vendor has to disclose
If you own and decide to sell land where there may be some known
contamination, you should specifically disclose this in the
contract, including any remediation work that has been carried out
together with notices received from any authorities.
The purchaser is then fully aware of the condition of the land,
what has been done with it in the past and what is required to be
done in the future.
Vendors sometimes encounter trouble when there is some evidence
of contamination which is not disclosed in the contract. If the
purchaser learns about the contamination after completion, the
purchaser may have a claim against you as the vendor.
If a purchaser makes an enquiry about the presence of
contamination and you do not make full disclosure, then the
purchaser can sue you successfully for misleading or deceptive
What the vendor has to decide
It can be quite costly for a vendor to clean up the land
pursuant to a site remediation plan. In some instances, remediation
work may require a development consent from Council which may take
time and incur significant costs.
If you are a vendor, you need to make a decision as to the best
course of action when you are deciding whether or not to sell.
Vendors may have to agree to lower the price
You may have a situation where the purchaser wishes to purchase
the land knowing all about the contamination and will carry out the
necessary remediation works after completion. On this basis, it is
likely that you will have to agree to lower the purchase price or
agree to other conditions.
What the purchaser should investigate
If you are considering buying land and there is some evidence
that it may have been exposed to some contamination, prior to
making an offer you should make enquiries with Council or any other
authorities including the Environmental
Protection Authority (EPA) and do any necessary searches.
If you are unsure about the contamination of the land, you
should ask the vendor to include specific warranties in the
contract regarding the existence or extent of contamination.
You should also ask for an indemnification clause to be included
in the contract, supported by guarantees, where the vendor
indemnifies you for any loss or damage if contamination is found
Get an environmental site audit
When a deal has been negotiated, the parties are usually keen to
have an immediate exchange of the contracts. Sometimes there is not
enough time to carry out all of the necessary enquiries.
If you are a purchaser, you should request the insertion of a
specific clause allowing you to obtain an environmental site audit
at your own cost.
If the site audit shows that the land or improvements are
contaminated by chemicals or dangerous or hazardous substances
which would need to be remediated to render the land
environmentally acceptable for either commercial or residential
use, you should be entitled to rescind the contract or to have the
price reduced in accordance with some pre-agreed formula.
Both vendors and purchasers need a feasible remediation
Contamination continues to be an alarming issue for both vendors
and purchasers of land. The key is for each party to work out a
feasible plan if it involves remediation.
The vendor usually wants to sell the land and a purchaser buying
contaminated land is always faced with some level of risk which
must be balanced up against the use and development of that land in
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