15 December 2015
Environmental Due Diligence (EDD) is the evaluation of potential environmental liabilities associated with a corporate or property transaction and is part of a wider due diligence process which examines the legal and commercial issues.
An important part of the process is to place a value on the financial implication of the environmental risk before entering into a contract. EDD allows better decisions on price and T&Cs of a sale, or to negotiate appropriate risk transfer devices such as warranties, indemnities or insurance.
Environmental risks may also translate into financial and reputational liabilities so early involvement of one of our environmental specialists can help ensure that all the risks and obligations of a land transaction are fully understood before you commit to acquiring or disposing of a property.
Many risk drivers relate to current, and impending, legislation while potential liabilities can include land quality issues such as soil, groundwater or mine gas contamination, soil vapours, shallow mining, surface flooding and radon. Migration of contamination off-site to third party land or to watercourses can also be a particularly significant liability, especially as it could carry criminal and civil penalties if realised.
While there is a clear downside in neglecting to consider environmental risks, there is also the possibility that environmental liabilities may have been over-stated in previous studies. In these circumstances, EDD can identify where an investment opportunity may have been missed, especially in relation to contaminated land, where changes in best practice, available technologies, environmental regulation and tax regulation could actually make many redevelopment projects viable. Previous poor or inexpert interpretation can also portray a more negative outlook in terms of remedial options and costs than is actually the case. A careful examination of the assumptions underlying existing environmental liability estimates can therefore sometimes yield beneficial results.
Our environmental specialists carry out EDD throughout the UK, for clients including private equity firms, real estate investment firms, land agents, banks, and solicitors acting on behalf of clients. To find out more or discuss a potential project please contact Alistair Jamieson, Regional Manager of the Geo-environment team, on 0131 247 5753 or firstname.lastname@example.org.