The Contaminated Land Management Amendment Act 2008 (NSW) (“CLMA Act”) came into effect on 10 December 2008 however many of the changes introduced by the CLMA Act did not commence until 1 July 2009.

The CLMA Act has extended the powers of the Environment Protection Authority (EPA) to investigate and manage contaminated land, changed the principles of what constitutes contaminated land and expanded on the circumstances in which contamination must be reported.  For land owners, the significant impacts of the CLMA Act are as follows:

Responsibility for contamination (i.e. polluters):

An owner of land will now be classified as a polluter of the land (i.e. “a person responsible for the contamination”), notwithstanding that the owner may not have actually caused the contamination, in circumstances where the owner of the land knew or ought reasonably to have known that contamination of the land would occur and the owner failed to take reasonable steps to prevent the contamination.  Previously owners of land could be the subject of remediation orders merely by reason of being the owner of the land and not having actual knowledge of the contamination but they were not classified as the polluter of the land. Now, owners of land who fail to prevent contamination of the land fall into the category of the polluter thus increasing the potential for an owner to be issued with orders and penalties. This change requires land owners to give special consideration to the rights it reserves in a lease where the use by the tenant permitted under the lease could result in contamination.

Broader discretion to declare land contaminated

The amendments replace the previous regime of investigation and remediation with similar concepts of preliminary investigation orders and management orders.  Previously, the EPA could declare land to be a remediation site if the EPA had reasonable grounds to believe that the land was actually or possibly contaminated as to present “a significant risk of harm”. Under the new regime the EPA may declare land to be significantly contaminated land where the EPA has reason to believe that land is contaminated and that the contamination is “significant enough to warrant regulation”.    The EPA must, in making a declaration that land is significantly contaminated, take into account much the same matters as it was previously required to consider in making an assessment of “significant risk or harm” however the test of “significant enough to warrant regulation” provides a broader discretion for the EPA to make orders in respect of land.

Management Orders

As was the case under the legislation prior to the CLMA Act, owners of land, although they may not have been responsible for contamination of the land, continue to be persons to whom the EPA may direct a management order in respect of significantly contaminated land.  As a result of the CLMA Act, the EPA can make management orders against multiple parties (provided they each fall within the defined categories of appropriate persons). The CLM Act continues to provide that the EPA should make an order against a polluter over an owner or notional owner of the land but as noted above an owner is at greater risk of being a polluter.

Owner’s duty to notify  

The duty to notify of contamination has been expanded by the introduction of a concept of a person who ought reasonably to be aware of the contamination.  An owner of land that has been contaminated (whether before or during the owner’s ownership of the land) must notify the EPA in writing that the land has been so contaminated where certain prescribed factors or thresholds exist and the owner is aware or ought reasonably to be aware of the contamination. 

As to whether an owner should reasonably have become aware of contamination the following factors are to be taken into account:

• the owner’s abilities, experience, qualifications and training;

• whether the owner could reasonably have sought advice that would have made the owner aware of the contamination;

• the circumstances of the contamination.

This duty should be taken into consideration by land owners when negotiating leases, particularly leases of industrial land.

Indemnification

The CLMA Act now specifically provides that a person who was responsible for contamination continues to be responsible for that contamination whether or not the person has entered into a contract or other arrangement that provides for some other person to be responsible for the contamination or for any harm caused by the contamination.  This provision has the effect that a polluter is not able to pass on the polluter’s liability under the Act for contamination.  It is common in contracts for sale of land, especially industrial land, that the vendor seeks an indemnity from the purchaser in respect of contamination in the land.  Vendors and purchasers should carefully review these provisions having regard to provisions of the Act.  Notwithstanding these provisions it is possible for a Vendor to pass on the costs associated with any contamination but it will not be released from responsibility for that contamination.

Charge on the land

As was the case under the legislation prior to the CLMA Act, where a public authority incurs costs in carrying out the requirements of an order for management or maintenance of contamination those costs will be a charge on the land subject to the public authority registering that charge.  Such charge is not affected by any change of ownership of the land and the charge has priority over every other charge, encumbrance, mortgage, lease or other interest. The creation of such a charge or conduct by an owner which gives rise to the right for such a charge to be registered could give rise to mortgage enforcement rights issues for the owner’s financier.

Covenants

As was the case under the legislation prior to the CLMA Act, the EPA has power to impose restrictions on the use of or to impose public positive covenants on any land that has been the subject of a management order or approved voluntary management proposal for the purpose of the ongoing management of the land.

If you would like any further information on this article, please contact Mark Hickey on + 61 2 9225 2503 or email hickeym@kempstrang.com.au.

Please note that this information is general only. It is not legal advice. It should not be relied on as a substitute for legal or other professional advice.