Danger Lurking Underground - buying land with contamination issues

Property

Much of the land in New Zealand has been used for more than one purpose. Previous uses can have unanticipated consequences for prospective owners. For example:
• Sites of early dry cleaning operations which used various chemicals, have now become the sites of central city office buildings.
• Rural land may now be built on, although there may be residual effects from farm chemicals in the soil or offal pits, hwhich could have potential long lasting effects that future users need to be aware of.

Building on contaminated sites
Before a building consent is issued, the Council will want to check the history of a site, often requiring soil tests.  The building consent can be issued with appropriate conditions both to protect those working on the site while building work progresses aswell as future users.

In previously industrial areas, various light manufacturing and office warehousing have been built pre and post-earthquake and often on sites that are well known to have been contaminated.  This activity has increased following the Canterbury earthquakes, as it is not considered a good environmental option to excavate sites and move contaminated soil to other sites, creating problems elsewhere.  Requirements to cover areas of contaminated land with asphalt are often put in place, and rules to protect workmen on building sites become part of the building consent process e.g. requirements to wear protective clothing, gloves, masks etc.

Buildings once completed: Future protection
There can be strict requirements to protect future users of new buildings, e.g. drainage contractors who may in future have to dig contaminated ground under a new building or its hardstand areas to repair drains.  They need to be aware of contaminated ground and the nature of the contamination.  Requirements to enforce these protections are usually required to be registered on the title and specific site plans prepared to protect future workers if there is a need to disturb the contaminated soil on the property.

Lender’s viewpoint
Such notices remain on the title, and while obviously necessary and sensible, may be off putting.  The known and potential effects need to be taken into consideration by current and future owners and landlords.  It can have a significant effect on successfully financing a purchase.

Any bank approached to lend on such a property will want to be sure that the council-imposed requirements showing on the title are being followed.  Any prospective purchaser will need to think carefully as to the implications once they are the owner and may understandably anticipate some problematic issues regarding future ease of use of the land including leasing.  It is all too easy in years to come, to forget and not warn any workers entering such a property if they need to disturb the soil.  We have seen examples of such oversight. 

Unit titles properties
Where there is more than one building, such as a group of unit titles with a Body Corporate ownership, some owners may not be owner occupiers, and there will be several different landlords who are part of a body corporate.  The body corporate manager should be responsible for ensuring compliance.  To do so however, the body corporate manager needs to be informed of the legal requirements registered on the title, and this is easy to overlook.  There will be some additional costs in managing the building as a consequence.

Things to remember

  • If you are the owner of a building with underlying contaminated land and with a notation on your title, or are looking to buy a property which has such a notice on the title, be careful to ensure you comply fully with the health and safety requirements and have adequate procedures in place to ensure compliance is not overlooked.  Forgetfulness or ignorance will not be an acceptable excuse if there is an injury to a tenant or worker who is not warned of the sites specific safety requirements.
  • If you are looking to buy a building with a notice on its title, especially if it is a unit title and therefore one of a number of units, you need to check that the body corporate manager and other owners have been complying with the legal requirements and the systems they have in place for future compliance.
  • A trading bank will almost inevitably refuse to finance a purchase if the safety compliance reports and work to enforce them has been or continues to be overlooked.  An assurance as to future compliance could be offered to the bank and they may make this a condition of lending.  Proof will be required on or before settlement, and this may be hard to obtain if the property is only one Unit Title in a unit development.  The other owners may not be prepared to agree (or if they do, to do so promptly), to authorise the cost of necessary reports or contracts with providers to authorise erection of signs and all other work needed to ensure future compliance.
  • Notices on titles show up as part of doing title due diligence, and can be investigated then by asking for proof of compliance by the vendor.
  • It is important to understand the nature and previous uses of the land you own or are considering buying.  The potential future costs of owning such land, will, if you are a purchaser, need to be fully considered before you decide whether to proceed.

Our property experts have considerable experience in advising clients in this situation and would be happy to assist you.

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Copyright © Cavell Leitch. All rights reserved. Redistribution is only permitted with express written permission. For enquiries please contact us. This article by its nature cannot be comprehensive and cannot be relied on by clients as advice. It is provided to assist clients to identify legal issues on which they should seek legal advice. Please consult the professional staff of Cavell Leitch for advice specific to your situation.