Turning Contaminated Properties into Profit

Is your property too risky to sell before remediation contamination?

A long-held view (particularly by Government agencies) is that contaminated property transaction is too complicated to sell as contaminated, and the environmental liability risk is too hard to manage in selling the property in a contaminated condition. But now there are useful tools used by various agencies that unconventionally help mitigate risk on contaminated property transfer and responsibility for contaminated property remediation.

Many liability transfer products from environmental consultancies in Australia have failed over the years due to only certain States having legislative clauses that allow transfer of contamination responsibility in their Environmental Acts. Generally the polluter (or most solvent) will still have to pay and may be pursued, however, developers and other purchasers generally have a much faster need for remediation to be complete, and end up funding remediation themselves, later trying to recover cost (with the risk of not being able to recover it).

In 2015/16 aversion to selling contaminated properties due to environmental liability risk is archaic. One of many now-common mechanisms to manage this risk is to withhold remediation cost (plus more) in managed ESCROW or similar funds, which are only able to be drawn by the purchaser for remediation expense, and final balance drawn only after completing remediation (or a small portion is withheld for ongoing environmental management).

There is an untapped treasure trove for State and Federal Government Agencies sitting in the asset disposal of their unused contaminated properties. Modern risk control practices have the potential to unlock hundreds of millions of tax-payer dollars for government agencies today and allow developers to move forward and businesses to divest and sell their portfolio sooner and more confidently.

The benefit to our industry and communities is that added confidence in using these well-established methods should now give confidence to investment in remediation to expedite the clean up of 160,000 contaminated sites in Australia.

For assistance with the strategy for your contaminated property or portfolio, contact [email protected]