Case Studies

The perfect fit for Cushman & Wakefield's Boots portfolio

When the major high street retailer Boots underwent a vast sale and leaseback of 312 properties,it presented surveyors Cushman & Wakefield with a challenge.

The deal required a speedy turnaround as well as an understanding of any potential environmental and contamination issues that the portfolio presented in line with RICS Guidance. The Enviroscreen report provided the ideal solution and dealt with the latter issue efficiently and effectively for both Cushman's and the client.

There are many benefits of using Enviroscreen. For Cushman and Wakefield it provided a very fast, cost effective and streamlined process which uses environmental specialists to flag potential liabilities helping them deliver a more comprehensive and accurate valuation picture than their competitors. For Boots the Enviroscreen reports essentially provided confidence for a smooth property transaction.

Nigel Harrison, Partner in Project Management & Consultancy at Cushman and Wakefield was impressed with the service: "Enviroscreen provided the information we needed at the right level and quality, and we had all reports back within three days so it was very quick and easy."

While Enviroscreen can be ordered online through Promap, with results delivered instantly, in order to satisfy the large number of reports the Promap Customer Service team manually ordered the reports saving Cushman & Wakefield great amounts of time.

For the Boots portfolio the results found that overall, only a small numbers of properties where potentially at risk from the existence of historic petrol tanks, flooding, radon and historic coal mining activity. This highlights the importance that even on high streets across the country where contamination is expected to be low there are always hidden threats and dangers that may not be obvious to a surveyor.

Cushman & Wakefield now offer Enviroscreen on all portfolio work and valuations to their clients, and have also recently conducted Enviroscreen reports for another UK investment portfolio of over 180 high street properties.

The use of Enviroscreen is becoming more widespread and timely, now that nine major banks and leading SIPP providers have changed their valuation instructions as a result of growing concerns over environmental liabilities with commercial properties. Surveyors acting for Barclays Bank, Anglo Irish Bank, Allied Irish Bank, Alliance & Leicester, HSBC, Clydesdale, Yorkshire Bank, Commercial First Mortgages, Cheval Property Finance, and GMAC commercial are being asked to use environmental screening reports to identify potentially contaminative features and historical land uses, rather than rely on caveats or general assumptions on the environmental risks of a commercial property.

Rupert Dodson, head of valuations at Cushman & Wakefield agrees that lenders changing views on environmental concerns will impact on the work of valuers: "Yes it's true. Increasingly banks want valuers to commission an environmental assessment of the site so that they can have a clear idea of how property or portfolio complies with environmental regulation."

Whether a particular lender insists or not, at the very least, it is now time for all surveyors to consider offering Enviroscreen to their clients. Surveyors hold the pivotal role in lending and transactions relating to commercial work. RICS guidance says they should be playing a more proactive role in environmental and contamination matters. Look to the residential market and you see 75% of lending transactions carried out with environmental due-diligence reports very similar to Enviroscreen. Surveyors now have the tool in Enviroscreen to offer initial screenings by specialists for clients without alternative environmental advice.

High Court ruling on contaminated land puts owners and developers in the spotlight

A High Court ruling has made it clear that property developers, house builders and site owners could be liable for cleaning up contaminated land.

The Judge in the Bawtry case, in which a former gas works was developed for residential housing in 1965 and was recently determined as contaminated land, ruled that the original house builders would have been liable for the clean-up costs if the business had not long gone out of existence. National Grid Gas, the current site owner, is now facing the costs of remediation after the Judge ruled that as the heir to the operations of the former polluter ' the private or nationalised gas companies that operated the gas works ' it was also an 'appropriate person' under Part 2A of the Environment Protection Act.

The ruling is only the second major case to be considered under Part 2A and according to legal expert from Trowers & Hamlins, Andrew Wiseman, it has major implications for site owners and developers:

'This ruling makes it clear that if a site is determined as contaminated land under Part 2A then the site owner or developer could be liable for cleaning up that land. It's a significant ruling, with far reaching implications for the commercial property industry, utilities and local authorities.'

Richard Pawlyn, from the industry's leading provider of environmental screening reports, Landmark Information Group, believes the number of cases under Part 2A is likely to increase: 'Developments on brownfield land, such as this, carry a far greater risk of contamination. There are 418,000 past industrial sites in the UK and given the government's drive to build 70 per cent of new developments on brownfield land it would not be surprising to see a steady increase in cases such as Bawtry brought to court.

'This is yet another example to owners and developers to take notice and our advice to them is simple ' make sure you conduct an environmental search from the outset. Screening reports such as Enviroscreen can protect you by identifying potentially contaminative sites and advise whether further investigation by environmental specialists is required.'

It is not just owners and developers at risk. Contaminated land has obvious impacts on potential property values and Eric Shearer, Partner at Knight Frank, agreed that screening for environmental risk is no longer an option: 'It's absolutely clear that an assessment of environmental risk is no longer optional but has become an absolute necessity in all commercial land and property transactions.'

A recent survey by Landmark revealed that up to one in four commercial properties in the UK's largest cities face exposure to potential environmental risks.

In recognition of the growing importance of contaminated land in commercial property transactions Landmark have developed an online, instant screening tool. Enviroscreen reports use comprehensive data reported from 136 sources to identify potentially contaminative sites within 100m of the site or property boundary. An Environmental Certificate is included that provides unequivocal advice from a Chartered Environmental Surveyor as to whether the site or property is affected by Part 2A of the Environmental Protection Act and whether the site needs further investigation from a suitably experienced Environmental Consultant.

First court case under the Part IIA Contaminated Land regime

The first case in dealing with the statutory contaminated land regime has taken place in the Magistrates Court. The case of Circular Facilities (London) Limited v Sevenoaks District Council involved an appeal under section 78L of the Environmental Protection Act 1990. Circular Facilities appealed against the service of a remediation notice on them.

The history behind the service of the remediation notice was that residential development took place in the 1980s on land which had historically been used as claypits and infilled with organic material. Some time after the residential development had been completed, emissions of carbon dioxide and methane were found on the properties. These emissions were posing a risk to the residents of the houses and as a result of this risk, Seveoaks Council undertook certain remediation works. The council then served a remediation notice on Circular Facilities, which was the landowner at the time of the residential development. The grounds for Circular Facilities appeal were:

The council had wrongly decided that Circular Facilities was the "appropriate person" (ie liable for undertaking the remediation works); The owner of the original site should have been designated the "appropriate person" ; and Because the remediation works had already been done, the court was not able to make an order seeking compliance with the remediation notice (the remediation notice had become redundant). The evidence considered by the judge included the fact that a soil investigation report for the property (which referred to the presence of black organic matter and gases) was available on the planning register and must have been available to Circular Facilities when it purchased the property.

The judge found that the company must have been aware of this information, and further, ought to have been aware of the risk posed by the condition of the site. He considered that Circular Facilites could have commissioned a report on the risk arising from the gases onsite and could have taken measures to remove the risk when the site was redeveloped. The judge accepted that the failure of Circular facilities to deal with the escape of gas was equivalent to permitting its presence, and therefore determined that Circular Facilities was an appropriate person for the purposes of Section 78 of the Act.

He also confirmed that the council was right to exclude the previous landowner in accordance with one of the exclusion tests set out in the statutory guidance. This was because Circular Facilities had actually introduced the relevant pathways (ie the housing development) and the receptors (ie the occupants of the housing development), thus causing a pollutant linkage.

Exclusion Test 6 excludes from liability those who would otherwise be liable solely because of the subsequent introduction by others of the relevant pathways or receptors.