Mixed use development sites: consider contaminated land

When you think of where mixed-use development is taking place, your mind doesn’t immediately think "industrial site". Yet this is a trend which we are increasingly seeing.

On reflection it makes sense; mixed-use developments provide an opportunity to overcome London's housing problem, whilst preserving live industrial sites. The combination of new homes and new jobs also supports a growing economy. As well as this, mixed-use sites have the potential to preserve historical sites as seen with Battersea Power Station.

The nature of industrial sites means there is a fair chance that the land will be contaminated; if this is the case remedial works can be expensive and time consuming. Luckily, there are ways in which risks can be mitigated and both developers and funders should not be put off exploring the opportunities to turn industrial sites into mixed use residential schemes.

The Environmental Protection Act 1990 (EPA) sets out at length who will be responsible for remediation of contaminated land and how the cost of such remediation will be apportioned. In short and subject to various exemptions, the responsible person is anyone who "knowingly permitted" contamination or, if that’s not known, the current owner and/or occupier. Therefore, the way in which the development is structured will determine who is deemed a "responsible person" in the eyes of the EPA. However, all parties will have an interest in making sure any contaminated land is dealt with appropriately.

The responsible parties are free to agree to divide responsibility as they wish. One option is to agree that the contractor takes responsibility for any contaminated land on the site; this will inevitability increase the contract sum but will provide reassurance to the developer and funder. In order to ensure there really is a single point of responsibility taken by the contractor all surveys undertaken, for example a geotechnical survey, must be assignable to the contractor and this must be a condition of the engagement with the surveyors.

The parties may wish to appoint an environmental consultant, whose role is to arrange the environmental due diligence and provide advice on any mitigation measures. Such appointments must be carefully arranged and negotiated with the developer and funder's requirements in mind. The appointment will need to ensure everyone who may need to rely on the terms of the appointment is able to. Finally, it is important to ensure the scope of works is sufficient and clearly set out. This will depend on the nature of the site, the industrial use and the proposed plans for the development. Any funder of such developments should insist on a collateral warranty from the environmental consultant in their favour. The developer may also require a collateral warranty in certain circumstances.

Making sure the right searches and reports are carried out is also crucial. For example, if there is a risk of asbestos there are different kinds of surveys depending on the extent of the development. Management surveys aim to find asbestos in existing buildings which could be damaged or disturbed during normal occupancy. Refurbishment surveys are more intrusive than management surveys and seek to identify any asbestos which could be damaged or disturbed during the refurbishment. Demolition surveys are again intrusive and aim to identify asbestos throughout the entirety of the building and its structure. In the case of developing new build mixed use schemes demolition surveys are likely to be the most appropriate and those involved would be prudent to ensure a survey is undertaken.

Whilst there are certainly contamination risks involved in converting industrial sites into mixed use residential schemes, these risks are not insurmountable and developers would be smart to get involved with this growing trend.