Australia: Contaminated land and the conveyancing process in NSW and Victoria

Last Updated: 10 July 2013
Article by Chris Rumore

In brief – Polluter or occupier responsible for contamination, remediation and damages in both States

When a site in NSW is contaminated, the polluter is responsible. In Victoria the liability is primarily with the occupier, but the occupier may have rights to claim its losses from the owner or actual polluter. However, identifying the polluter may not always be easy.

Similar principles in NSW and Victorian legislation

Whilst being different in operation, the legislation in Victoria and NSW governing contaminated land contains similar principles.

This article deals with the issues relating to contamination that are common to the conveyancing process in both states.

EPA and local councils in NSW have powers to deal with contaminated land

In NSW the issue of contamination on sites is dealt with at two levels.

The first is the NSW Environmental Protection Authority (EPA), which has powers to deal with contamination under the Contaminated Land Management Act (NSW).

Further, local councils have powers with respect to contamination under State Environmental Planning Policy 55 – Remediation of Land.

NSW landowners must disclose contamination to EPA

There are certain obligations on landowners in NSW to disclose to the EPA various types of contamination and failure to do so can result in prosecution and penalties. However, the obligation only arises where the landowner is aware or should have been aware of the existence of contamination.

Once notified, the EPA will carry out an investigation of the site and may issue remediation orders or enter into a binding agreement with the landowner or polluter with respect to the management and/or removal of the contaminants from the site or adjoining properties.

Councils deal with contamination on change of property's use

When local councils are faced with contaminated land, often they will be dealing with a situation where the existence of the contamination is known but where it does not present a significant risk if the property continues to be used as is.

It is only when the usage changes that the existence of the contamination becomes an issue and council will deal with this as part of its approval processes.

The zoning certificates that have to be annexed to contracts for sale in NSW have a section which deals with whether there is any known contamination or policies dealing with contamination on a site.

Occupier's liability in Victoria can be subrogated to owner or polluter

In Victoria, the relevant legislation is the Environmental Protection Act (VIC). The Victorian Environmental Protection Authority can serve a notice on the occupier requiring a site to be remediated. The liability is primarily with the occupier, but may be subrogated to the owner or actual polluter.

However, if a site has been used for a significant period of time by people carrying out the same or similar activities, identifying the polluter can be somewhat difficult.

Landowner or mortgagee must deal with contamination if polluter cannot be identified

It is true to say that the legislation in both NSW and Victoria focuses on the principle of the polluter being responsible for contamination, its remediation and any damages caused by contamination.

However, if the actual polluter cannot be ascertained, then the landowner or mortgagee in possession is left with the responsibility for dealing with the contamination.

Who is responsible for contamination when a property is sold or leased?

The issue of contamination needs to be addressed in every significant sale, purchase and leasing transaction.

In many instances, the property owner will seek to pass all liability for contamination onto the incoming purchaser or tenant. This is an unfair position for a vendor or landlord to take, as in most instances, they would most likely have significantly more information about the site, its past usage and any contamination issues than any incoming party.

Traditionally, property law provides that the purchaser is liable to make appropriate enquiries before exchange (the principle of caveat emptor).

What happens when contamination is suspected but not confirmed?

A vendor or lessor also has obligations both at common law, under the Australian Consumer Law and Fair Trading legislation to make relevant disclosures of matters affecting a property being sold or leased. The real issue is where the vendor or landlord does not have any specific knowledge of contamination but where it is suspected that some may exist.

In those circumstances, the transaction should be made subject to appropriate investigations. First, it should be negotiated as to who is to carry out the investigations and who is to bear the costs of the investigations. Secondly, access has to be guaranteed by the site owner for the purpose of carrying out the appropriate investigations. Thirdly, the extent of the investigations needs to be considered.

Phase 1 and Phase 2 Environmental Site Assessment (ESA)

Phase 1 investigations are usually just an investigation of the site which is a high level review of the site and records of past usages of the site.

A Phase 2 inspection requires core drilling. Obviously, damage to the property or interference with the rights of any current occupant need to be considered.

However, often without a detailed Phase 2 assessment, a purchaser or tenant cannot be certain as to the extent of the contamination.

Assessing level of contamination at transfer of responsibility for it

Establishing a level of contamination at a particular point in time may also be relevant where the parties agree that contamination up to a particular point in time is the responsibility of the owner and after that time is the responsibility of either the purchaser or tenant.

Without a detailed site contamination assessment, there will inevitably be arguments as to what the pre-existing level of contamination was before the purchaser or tenant became responsible for it.

Further, you need to be cognisant of who orders the site assessments and the basis on which they are ordered, as it should be for the benefit of all parties who may be affected by the outcome of any site assessment.

Owners and purchasers of contaminated land should assess risks carefully

Where there is or there is expected to be contamination of a site, the law in NSW basically says that the polluter is responsible (if the polluter can be identified). In Victoria, it is the occupier.

If the pollution has either occurred over a significant period of time or been caused by a number of former occupants of the property, a party either owning the property and dealing with it, or acquiring an interest in the property (as purchaser or tenant), needs to assess the risks and the extent of the liabilities that could accrue carefully.

These liabilities could extend not only to remediation costs, but also to significant penalties and damages to adjoining site owners.

Chris Rumore
Contaminated land

Colin Biggers & Paisley

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Chris Rumore
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