Fly-tipping continues to cause problems for businesses, governments and communities. Defra recently assessed the number of fly-tipping incidents during 2014-2015 at around 900,000 in England alone.1 It comes as a surprise to many landowners the extent to which they can be held liable for the actions of third parties on their land; even if they had no knowledge of the activities, or it was assumed risk was mitigated by a tenant carrying out activities authorised by a regulator. Short-term lets may seem an attractive option for landowners, particularly as unoccupied land can be vulnerable to trespass, deterioration and vandalism. However, as some landlords are finding out to their cost, waste liabilities can be much greater than rental income.
The bottom line is that regulatory liability can be very strict for landowners:
- Whilst a regulator has powers to serve a statutory notice on the occupier of a site to remove illegally deposited waste or abate a nuisance, where the occupier "cannot be found", a notice can be served on the landowner to remove waste or abate the nuisance. It is a criminal offence to fail to comply with a statutory notice without reasonable excuse, and it is no excuse that the occupier "cannot be found" unless the regulator has failed to take any reasonable steps to "find" the occupier.
- In some cases, landowners can also be held criminally liable for the deposit of waste by third parties, where they could be reasonably expected to know that waste was accumulating but took no action. The Court of Appeal confirmed that for a landowner to be guilty of "knowingly permitting" the illegal deposit of waste, it is enough for him to simply know that the waste was deposited, he does not also have to know the deposit was in breach of a permit.2
- Despite the "polluter pays" principle, regulators can in practice be reluctant to take action against tenants who are in financial difficulty, unless there is evidence of serious offending (e.g. organised crime or serious pollution). In circumstances where the Environment Agency successfully prosecutes someone who illegally deposits waste on land, an innocent landowner may be able to recover damages from the defendant following a conviction, to the extent, of course, that the defendant has the financial means.
Even if waste is removed on a voluntary basis, the cost of removal can be considerable. Before any waste is removed, it is important to consult with the Environment Agency, as the landowner could prejudice a regulatory investigation by exercising a right of re-entry and terminating the lease. It is important to seek legal advice in relation to any property claims that a tenant or third party may have over the "abandoned" waste or assets, and whether it is appropriate in the circumstances to keep the lease in place in order to preserve a right of recovery against the tenant or its guarantor, as well as the implications for bringing a lease to an end. Landlords should be wary of accepting the surrender of a lease without first ensuring that any waste is dealt with and documented in the deed of surrender.
Furthermore, neighbouring owners or occupiers could bring civil claims in nuisance or negligence if the waste is having an adverse impact beyond the site boundary. Re-letting or redeveloping an abandoned site may be hampered by clean-up or remediation, which could have an impact on revenue from the site. There could also be an adverse impact on its value and/or marketability.
What can landlords do?
There are several steps that can be taken to mitigate against the risk of abandoned waste:
- Due diligence – Carry out due diligence on prospective tenants, including obtaining information from regulators, as well as credit history checks. Keep due diligence under review during the tenancy. Due diligence is also important when acquiring land.
- Baseline survey – Consider whether it would be appropriate to carry out a survey to assess soil/groundwater condition at the site prior to a tenant taking possession (NB potential liability exposure arises for landowners who become aware of contamination).
- Guarantor – Look to get a guarantor under the lease for all obligations, not just rent, in order to be able to recover clean-up costs if the tenant defaults.
- Deposit/bond – It may be prudent to seek a financial bond or rent deposit.
- Lease conditions – The lease should include obligations on the tenant to comply with all environmental laws, to keep the site in good and clean condition, and to yield it up at the end of the lease in a condition satisfactory to the landlord. Consider seeking an indemnity in favour of the landlord in relation to any breach of these covenants.
- Permitted uses – When drafting a lease, make it clear what uses are permitted. The lease should clarify that no nuisance is authorised, notwithstanding a use being permitted.
- Permits and consents –The tenant should be responsible under the lease for obtaining all permits and licences and ensuring they are renewed/kept in force. Keep a record of when permits expire to ensure the tenant is on top of renewal processes. Do not rely on the regulator to alert you to the tenant's financial difficulties or the accumulation of waste.
- Inspection – Plans should be drawn up to ensure all sites are inspected regularly. With large portfolios where regular inspections are not practical, the risk profile of sites should be established in order to prioritise more regular inspections at higher risk sites, e.g. lower rental yield, sites which are not in prominent locations or sites with sensitive receptors nearby.
- Safety and security – Ensure the site is safely fenced and secure to avoid additional waste being left on site, and reduce the risk of vandalism or trespass, or potential escape of waste.
It is advisable to take action at an early stage to avoid the problem becoming even bigger. If the tenant stops paying rent it is important to investigate, not just to ensure income stream, but also because it may be a warning sign of unauthorised activities or abandonment. If you become aware or have a reasonable suspicion of any illegal or suspicious activity, you should inform the Environment Agency immediately. There is an increased risk of fire from incorrectly managed waste, either because it is unsafely stored, or caused by arson. This can require a more urgent response from the landowner to avoid widespread pollution and damage to adjoining sites and communities, and exacerbate clean up costs. These costs may not be insured.
Be careful who you let to
It is advisable for landowners to be vigilant to the potential risks arising from the occupation of land, whether through tenancy arrangements or trespass. This risk can be managed through a combination of contractual protection, careful due diligence and risk profiling, and regular inspections. It is also important to ensure that when acquiring land, due diligence is carried out and any waste is dealt with as part of the sale process, to avoid an unwanted legacy.