Environment Protection Act
Site contamination: What to do when selling
The Environment Protection Act provides that the “appropriate person” may be issued with a “site contamination assessment order” or a “site remediation order” in relation to a site. An “appropriate person” is a person who caused the site contamination. Site contamination exists if there are chemical substances on land which are above permitted background concentrations.
A site contamination assessment order is made against the appropriate person requiring that an assessment of site contamination be carried out where the Environment Protection Authority (EPA) believes that site contamination exists on land. A site remediation order is an order to the appropriate person, giving details of site contamination and requiring the person to whom it is issued to remediate the site within a specified period. Depending upon the level of site contamination, this may be a very costly exercise.
The appropriate person who may be served with a site remediation order will be the person who caused the site contamination at the site or, if it is not practical to issue an order to that person, then the owner of the site, provided that:
- before the person acquired the site, the person knew or should have known that chemical substances were on the land likely to require remediation; or
- before the person acquired the site, the person knew or should have known that activity that caused site contamination had been carried out on the land and the activity is an activity prescribed by regulations as potentially contaminating activity.
Therefore, the appropriate person who may be required to remediate site contamination will either be the person who caused the contamination or the person who acquired contaminated land where that person either knew or should have known that contamination existed or that activity was carried out on the land which is potentially contaminating activity.
It is possible to transfer liability for site contamination under Section 103E of the Environment Protection Act. Liability may be transferred from the owner (seller) of land to a purchaser in relation to all or part of site contamination. However, in order to transfer liability, it must be clear that site contamination actually exists on the land. This is best achieved by having a site assessment carried out. Provided the requirements of Section 103E of the Environment Protection Act are met, then the purchaser will assume the owner’s liability for site contamination. These requirements are as follows:
- Site contamination must actually exist.
- The land being sold is sold subject to an agreement in writing, under which the purchaser assumes liability for either all or part of site contamination. When this happens, the purchaser is taken to have assumed the seller’s liability for site contamination and the requirement to remediate land applies to the purchaser and not the seller, as if the purchaser had caused the site contamination in the first place.
- It is necessary that the seller gives a notice to the buyer in a form approved by the EPA setting out the legal effect of the agreement. A copy of the agreement must then be lodged with the EPA.
However, the protection afforded to a seller will not apply if the buyer did not acquire the land in a genuine arm’s length transaction (i.e. the transaction was a sham). A genuine arm’s length transaction is one where there is no special duty, obligation or relationship between the parties.
The EPA then records on the Public Register details of each agreement which excludes or limits the liability for site contamination. The entire agreement is then lodged with the EPA and is also on the Public Register.
Under these arrangements, the new owner is deemed to have caused site contamination and the EPA can then require the assessment and remediation unless there is some restriction on the buyer’s liability under the agreement.
Where site contamination exists and a site contamination assessment or remediation order is made, it will be a criminal offense not to comply with the orders which may carry substantial penalties.
Sellers who wish to sell land subject to contamination and wish to transfer liability to the purchaser will need to be familiar with the Environment Protection Act and the strict guidelines which relate to a transfer of this liability. DW Fox Tucker will be pleased to advise sellers and buyers on these provisions.
For more information, please contact:
William Esau
Director
p. +61 8 8124 1955
e. Email me
This communication provides general information which is current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Professional advice should be sought prior to any action being taken in reliance on any of the information. Should you wish to discuss any matter raised in this report, or what it means for you, your business or your clients' businesses, please feel free to contact us.