Bell & Scott Property Update, August 2007

Welcome to the August 2007 issue of Bell & Scott’s Property Update.

In this month's issue we comment on the final decision in the appeal by National Grid Gas plc (formerly Transco) against the High Court’s decision to impose liability on it for clean up costs required on a housing estate. We also update you on: (i) a stay of execution for removal of empty property rate relief for commercial premises; (ii) the continuing need to be aware of asbestos in buildings and; (iii) government strategies to combat the housing shortage throughout the UK.

Recent Decisions

Following the High Court’s decision in favour of the Environment Agency in May 2006 – please follow the link here to our case comment in the June 2006 issue of Property Update - Transco appealed to the House of Lords.

The case concerned eleven houses to be built on the site of a former gasworks. A coal tar pit was discovered in the back garden of one of the properties and, as there was a major aquifer used for water extraction under the site and the coal tar was likely to contaminate this, the site was cleaned up by the Environment Agency. The Agency sought to recover the cost of that clean up from “an appropriate person” as they were entitled to do under the Environmental Protection Act 1990. They identified Transco and the house builder as the “appropriate persons” to pursue. Those were the parties that they considered had either “caused or knowingly permitted” the continued presence of the coal tar in the ground. As might be anticipated, they did not seek to recover the cost of the clean up from the house owners. Payment for the clean up, therefore, had to come from a previous owner or the public purse. Given that the companies who had constructed the houses had since been dissolved, the Agency had to look to Transco for the whole cost of the clean up.

Transco, for their part, argued that the contamination had been caused by earlier gas companies, whose existence pre-dated the privatisation of the gas industry in 1986 and the nationalisation of the gas industry in 1948 and that these liabilities had not transmitted to Transco.

The case turned on an interpretation of the wording of the nationalisation and privatisation legislation, each of which transferred the liabilities of the gas company in question insofar as these liabilities were in place “immediately before” the transfer date. As the liabilities in question were only brought into effect by legislation drafted in 1995, the Court held that it could not be argued that these liabilities were in place in 1948 and 1986.

The Court also considered that the basis on which the Government had invited subscribers to buy shares in British Gas (i.e. that the liabilities passing would only be those existing immediately before the transfer) was very important. The Court felt that it would not be fair for the Government (via the Environment Agency) to impose liability on a private company (thereby reducing the value of the shareholders’ investment) that distorted the basis on which the subscribers had originally been invited to subscribe.

Stephanie Mackenzie , Associate and Environmental Law specialist in our Strategic Land Team, comments:

Privatised industries will breathe a sigh of relief on reading this judgement as, whilst their exposure to claims will turn to an extent on the wording of the privatisation legislation in question, Transco seems to have escaped liability for its predecessor companies’ polluting activities. It is no surprise that Transco appealed this case: the implications were massive for it and other privatised industries.

For developers, however, the news is less good. There is a tendency in the market to look to the principles behind the contaminated land regime legislation and assume that “the polluter pays”. Whilst it would be a logical assumption that statutory successors of companies who ran gasworks a hundred years ago would retain their predecessor’s liability, as they had taken on the assets of the polluting company, this approach has been firmly rejected by the House of Lords. There is no higher court to which this decision can be appealed and the only chance of change is if the wording of the contaminated land legislation itself is changed. Whilst this decision is very recent, such a change is not considered likely.

The case also demonstrates that the Environment Agency will often be unwilling to pursue house owners for the cost of remediation. In this case, the cost was £66,000 per household and it will ultimately be borne by the taxpayer. Whilst there were developers here, they had been dissolved in the intervening period. Had they still been around, the Environment Agency would have pursued them as “knowing permitters” of the continued presence of the coal tar residue in the ground. As the party who often creates the link between the pollutant and the affected parties (the householders in this case), developers, who may or may not have deep pockets, will often find themselves as the preferred target for the enforcing authority to pursue.

A wise developer will take from this case a reminder that, if they buy sites with a history of industrial use with plans to develop them, they cannot always rely on the “polluter pays” principle. This advice applies even when the original polluter was not a privatised company and the matter should always be discussed with your solicitor to ensure that you are not taking on more risk than you assume you are. Contractual protection can often be built into the documentation if contamination looks like being an issue and the results of environmental investigations dovetailed with the passing of environmental risk.

Case referred to: R (on the application of National Grid Gas plc formerly Transco plc) v The Environment Agency [2007] UKHL 30.

A full text of the decision is available on the British and Irish Legal Information Institute website accessible here.

News

More consultation needed on empty property rate relief

The Westminster Government has, for the moment, toned down its threat to remove business rate relief on empty commercial properties in England and Wales.

The Department for Communities and Local Government has now launched a consultation on the proposed reform of relief from non-domestic rates for empty properties. This consultation seeks views on detailed aspects of reform and, in particular, new anti-avoidance measures and potential changes to the exemptions from empty property rates.

At present there are no proposals to follow suit in Scotland.

The consulation paper with email address to which responses should be sent is accessible here

Research shows that asbestos still exists in between 500,000 and 1.5 million buildings in the UK, according to figures given by the Health and Safety Executive (“the HSE ”).

Asbestos was widely used in the UK between 1950 and 1980 due to its resistance to heat, making it a useful insulation material used in the building trade. As awareness of the potential risk to health from asbestos increased, governments, from the early 1970s, began to introduce selective bans on asbestos-containing products. By 1999, the use of all forms of asbestos had been made illegal. Nevertheless, asbestos is still present in many buildings with the HSE estimating that only 25% of asbestos-containing materials have been removed.

It is generally accepted that asbestos only presents a danger to health when it is disturbed causing the fibres to be released into the atmosphere. For this reason, it is often best practice to leave asbestos where it is. However, there are strict rules which regulate how the asbestos in buildings should be monitored and managed, and the HSE is concerned that the rules are frequently ignored or flouted.

The rules are contained in The Control of Asbestos Regulations 2006. The Regulations impose legal duties on owners, landlords, tenants and managing agents to manage the risk to health and safety posed by asbestos in properties under their control. The duties include legal requirements to: (a) take reasonable steps to find asbestos-containing materials in premises and check their condition; (b) presume that materials contain asbestos unless there is strong evidence to suppose they do not; (c) keep an up-to-date written record of the location and condition of asbestos-containing materials; (d) assess the risk of exposure to asbestos-containing materials; and (e) prepare and put into effect a plan to manage the risks arising from asbestos.

The HSE suspect that many managers have conducted surveys to identify and locate asbestos in their buildings but fail to pass the information on, as required by the Regulations, to the maintenance workers who need it most.

The Control of Asbestos Regulations 2006 can be accessed here

If you would like to receive advice on your duties under the Regulations please do not hesitate to contact us.

UK Governments commit to more housing

The Westminster Government has announced its commitment to further action to make housing more available and affordable. New measures to support delivery of housing supply and to reform social housing and social housing regulation will be brought forward in a new Housing and Regeneration Bill for England and Wales. The Bill will establish a new homes agency to support regeneration and the delivery of new social and affordable housing. In addition, the Bill will provide an opportunity to modernise powers on establishing new settlements like eco-towns and it will simplify the ways in which the new agency will be able to facilitate the delivery of these projects.

In Scotland, following the Scottish Executive’s publication of its Report into the Housing Market in June, the new administration has announced that it will consult on its proposals for social housing, inviting people throughout Scotland to join the debate and offer their ideas on the best way ahead.

A Housing Supply Task Force, chaired by Stewart Maxwell, the Minister in charge, will be set up to tackle the obstacles, such as land supply and planning issues, which have been hampering the delivery of more housing. The Task Force will have a wide membership drawn from local authorities, house-builders, the housing association movement, and housing interest groups. In addition, a Scottish Housing Support Fund will be created to provide additional help for the many people who struggle to afford a first home of their own.

You can access the Report into the Housing Market here