Investment in real estate and the responsibility for the historical contamination of the earth’s surface

Investors acquiring real estate for future investments usually conduct some form of  due diligence, which is an investigation of the condition and the legal status of the real estate. However, rarely is the analysis of soil and groundwater contamination carried out in the due diligence process.

Meanwhile, the question of whether the land the investor intends to purchase is not polluted, should be for him the subject of a thorough investigation, particularly in the case of brownfield investments - for example investments in areas where industrial infrastructure facilities and production activity had been previously located, therefore, the contamination probability (understood as exceeding the permissible levels of pollutants in the soil) is significantly higher.

An additional issue to be clarified is whether the contamination of the ground surface occurred before 30th April 2007 or resulted from activities that were completed before 30th April 2007 or after that date. This issue regulates the legal regime according to which the entity responsible for the occurrence of pollution will be determined, as well as the type of actions to which such entity will be obliged to perform.

In the case of damage done to the natural environment after 2007, there is a ‘polluter pays principle’, specifically regulated by the Act of 13th April 2007 on the Prevention and Remediation of Environmental Damage (Dz.U. [Journal of Laws]. 2014.1789, as amended).

Under the provisions of this law, the obligation to take preventive and remedial action in the event of damage or a direct threat of damage to the ground lies with the environmental user - an entrepreneur, an organizational unit or a natural person, who uses the environment to the extent that the use of the environment requires a permit or that carries out activities that pose a risk of environmental damage (the Act on Prevention and Remediation of Environmental Damage defines a catalog of such activities) or other activities causing immediate damage or a threat of damage to the environment. In such a case, the investor acquiring the property will not be liable for the occurrence of contamination of the land surface of the property he has acquired.

Whereas, if the contamination of the earth’s surface occurred before 30th April 2007 or resulted from activities completed before 30th April 2007, we are dealing with historical contamination and the entity responsible for the remediation is the owner of the land.  Remediation is understood as the obligation to take actions aimed at removing or reducing the amount of substances causing the risk of damage to the soil, ground and groundwater, controlling and limiting the spread of those substances so that the contaminated area no longer poses a risk to human health or the environment, taking into account the present and, if it is possible, future use of the land.

It may therefore be the case that the investor who acquired the property will be solely responsible for removing the damage to the environment that occurred many years before he became the owner of the property, and remediation costs may even exceed the purchase price of the property.

The landlord can only be released from liability if he proves that the land contamination has arisen after he has acquired the property and has been caused without his consent or knowledge by another entity, specifically indicated by him.

Can the investor rest easy in the situation when he has purchased the property without conducting land and groundwater contamination analysis and does not intend to carry out such analysis fearing potential results?

Unfortunately no.

In the first place, anyone who identifies potential historical contamination of the earth’s surface may report this fact to the district governor. Although the law requires that the report be documented, the assessment of the likelihood of historical contamination is subject to administrative recognition. If the district governor determines that potential historical contamination may occur, he has the right to enter the property and carry out the first phase of soil pollution analysis.

Moreover, the district governor may, of its own motion, without any report, enter the property and carry out soil and ground analysis, if he determines the potential for historical contamination on the basis that  before 30th April 2007 there had been activity that very likely led to historical contamination of the ground  (the list of such activities is annex 2 to the ordinance of the Minister of the Environment of 1st September 2016 on the method of surface pollution assessment), as well as based on the analysis of available information on the threat of soil contamination.

The district governor is not the only authority that is entitled to admission to the property to perform soil pollution analysis. Also Regional Director for Environmental Protection has the authority to carry out soil pollution analysis to confirm the presence of historical contamination or to develop a remediation plan, also in areas not included in the list of potential historical contamination.

It should also be borne in mind that in certain situations the owner of the property - who is the user of the land - may be subjected to an administrative decision to carry out soil pollution analysis and to submit its results within a specified period. Such risk exists if two conditions are met: the site was used before 30th April 2007 and the activities were likely to cause historical contamination; and there are indications of historical contamination - by being on the potential historical contamination list created by the district governor or a report from a third party.

How can an investor minimize the risk?

In the first place, the investor should take steps to determine whether the property qualifies as a potential historical contamination area. Within these actions the investor can:

  • request the General Director for Environmental Protection to provide information on whether the site is registered as a site where historical contamination has occurred or where potential historical contamination has been identified - under the right of access to information, as well as The Act of 3rd October 2008 on the provision of information on the environment and its protection, public participation in environmental protection and on environmental impact assessments;
  • on the same legal basis, apply to the district governor, asking if the site is on the list of potential historical contamination areas - it is important to be aware that data transfer by district governors to the regional environmental directors and the register update is conducted every two years. Also the regional director himself has 6 months to register the historical contamination after receiving the update of the list, therefore,  there may be considerable discrepancies between the data within the list and the data contained in the register.

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Your contact

WaMu Wawrzyniec Mucowski Senior Associate, Attorney at Law Tel.: +48 (71) 36 99 546Information