22 June 2016
Check your environmental consultants’ report is up to scratch
This may go without saying, but it is imperative to ensure that any environmental site assessment report you commission is complete and that it addresses all aspects of the various requirements that apply including British Standards on ground investigation (especially contaminated land), best practice approaches to site assessment and any relevant planning condition requirements.
It is often assumed that consultants will cover all these issues. Many times, however, they do not. Incomplete environmental site assessment reports are much more widespread than most would like to imagine. Often, consultants fail to identify environmental issues or do not list them as an environmental issue of concern, or worthy of further investigation.
This is often the result of the consultancy sausage machine approach that sacrifices quality for cost savings. Junior or graduate staff - often with little or no relevant experience - complete these assessments with only cursory overview by more senior staff. Where potentially contaminative features are identified, this can lead to a failure to investigate during the intrusive ground investigation phase, unconfirmed contaminant features, such as underground fuel tanks, may cause delays in new construction and entail significant costs for the clean-up operation. Alternatively, a consultant may apply inappropriately conservative assessment criteria to a contaminated site assessment in order to protect their PI insurance or even identify an environmental concern where there is none of significance in order to gain a further commission from the client.
Paperwork related issues can be equally significant. Clients should check whether the reports are ‘final’ or ‘draft’ versions and have been signed off by a reliable author. The report should identify contaminant features but also conclusively state where a site does not include elements such as drums, above-ground fuel tanks and underground tanks and that the consultant has assessed asbestos in soil and soil gases as potential issues. Absence of evidence is not evidence of absence and stating that these risks do not exist is important to demonstrate that they have been investigated.
To mitigate this risk, a review of environmental due-diligence reports should be common practice for all commercial property transactions. This additional review is not time-consuming and should not cause delay but can identify and correct numerous issues that may otherwise have exposed the lender and the borrower to tremendous risks and liabilities.
Lenders and purchasers should protect themselves and their investments by developing a due-diligence-review process both internally and with an outside consultancy of good repute, such as WYG. The goal of this review process is to reduce future liability, expedite the transaction process and prevent additional, unnecessary environmental work.
Reviewing the reports and understanding their contents is the final and most important step in the due-diligence process. If you require assistance either in the preparation of a due diligence report, or in the peer review of a report prepared by a third party, please do not hesitate to contact Neil Fyfe at the WYG Edinburgh office by email or on 0131 247 5750 and 07769 964 755.