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Polluted Sites as Real Estate Deal Killers?

Posted by on 26 February 2016

A contaminated site can be difficult or, depending on the extent and degree of pollution, even impossible to sell. Five findings from a presentation given by the FRORIEP Real Estate Team on the subject of polluted plots of land.

At events on 17 November 2015 and 20 January 2016 hosted by the Swiss Institute for Real Estate Valuation (SIREA), the FRORIEP Real Estate Team spoke to a full house about polluted plots of land. In front of an animated audience, using practical examples and in response to questions from the floor we presented the legal basics around polluted sites and the consequences of an entry in the register of polluted sites. The conclusion was that, depending on the degree of contamination, polluted sites can have significant consequences, right up to a limitation on disposal of the site and so impede or even prevent the sale of the concerned property. Therefore, a polluted site may turn into a real estate deal killer.

Below are some of the take-aways that were conveyed during the presentations:

What are polluted sites (Altlasten)? Froriep-Altlasten.jpg

Polluted sites are properties contaminated by waste, which presents a threat to the environment or actually impairs it and are thus in need of decontamination. Properties which need to be cleaned up, as well as polluted properties that are not expected to have any damaging or inconvenient impact, are registered on the register of polluted sites (RPS). Contamination through substances such as asbestos or radon does not fall within the scope of the term "polluted sites", because this type of contamination is not the result of pollution by waste.

Can one always rely on an entry in the RPS?

The RPS is dynamic. The entries will be revised based upon new findings. If for example contamination of a property that has not appeared on the register so far is discovered during the realisation of a construction project, investigations will be conducted and the property will be registered – if necessary after imposing a building freeze. The obligation to take investigative, monitoring and decontamination measures does not depend on the registration on the RPS itself, but rather on the actual pollution.

Who executes the measures pursuant to environmental law and who bears the cost?

Generally, the implementation of measures is imposed on the current owner or operator of the property, who has to pre-finance the measures as a so-called "polluter by situation" (Zustandsstörer). These costs may be passed on to the person or entity who was liable for the pollution by their actions or omissions  (so-called polluter by behavior) (Verhaltensstörer). The canton itself is liable for the default of polluters that are not able to bear the costs, for example because they do not exist anymore. The prevention of such contingent liabilities is a major concern of the cantonal environmental authorities.

What impact does an entry in the RPS have besides the obligation to take environmental measures?

In certain cases, particularly where a contingent liability is possible, the authorities may request security from the polluter by situation  as well as from the polluter by behavior in order to cover their part of the costs of the measures to be taken. The disposal of a registered property that may present a threat to the environment requires authorisation by the authorities. The authorisation is usually conditional on the provision of security. This may lead to a limitation on disposal for the owner of the property who is not able or willing to provide the required security. Finally, excavation materials from polluted sites are subject to specific provisions and obligations.

Is it possible to contractually agree on the obligation to take environmental measures and to bear the cost thereof?

In the framework of real estate transactions, such obligations can be contractually agreed upon at the parties' discretion. Careful drafting of the contract is, however, in any case crucial. Further, the environmental authorities are not bound by agreements made by the parties and might not take contractual provisions into consideration when issuing orders regarding the execution of environmental measures or the imposition of liability for the costs of such measures. Rather they will impose such obligations based on the applicable statutory provisions. Contrary to contractual obligations, obligations based on environmental law are not subject to any prescription or limitation period.

Photo Credit: Jessmine/Shutterstock

Topics: Real Estate

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Samuel Ramp

Samuel is an attorney and a certified tax expert in our tax team, advising national and international corporations, entrepreneurs and private clients. Samuel joined Froriep as an associate in 2014 and became a partner in 2016. He advises clients on all aspects of Swiss and international tax law. He focuses on real estate transactions and on financing and restructuring of national and international corporations. Other areas of Samuel's tax practice include tax litigation and tax planning for private clients. Samuel teaches at SIST, the Swiss Institute for Tax Studies (Schweizerisches Institut für Steuerlehre) and Treuhand Suisse.

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Prof. Dr. Isabelle Romy

Isabelle’s practice focuses on international litigation, arbitration and private international law in commercial matters. She is also a leading expert in environmental and construction law in Switzerland, and regularly advises private companies and public bodies in these areas, including in environmental litigation. She regularly acts as an expert on issues of environmental law as well as international procedural law in Swiss courts as well as in proceedings before foreign courts. Isabelle joined Froriep as a partner in 2012 and is currently the office managing partner of our office in Zurich. Before moving to Froriep, Isabelle worked for another leading commercial law firm in Zurich for 17 years, becoming a partner in 2003. Isabelle is a professor of law and has taught at the University of Fribourg and the Lausanne Federal Institute of Technology (EPFL) since 1996. She has been a member of the Sanction Commission of the SIX Swiss Exchange since 2002, and vice-chairman since 2008. She served as a deputy judge at the Swiss Federal Supreme Court from 2003 until the end of 2008. Isabelle was elected to the board of directors of UBS AG in May 2012 and to the board of directors of UBS Group AG in 2014. She is a member of the audit committee and of the governance and nominating committee. She has been a delegate as well as a member of the Fundraising Committee of the Swiss National Committee for UNICEF since April 2015. She has authored many publications on private international law, civil procedure and environmental law (including construction law). Isabelle is fluent in French, German and English. She is a member of the Swiss Arbitration Association (ASA), the Zurich Bar Association and the Swiss Bar Association. Isabelle is praised by Legal 500 2018 as being "highly professional and solution-oriented’ as well as "very experienced in environmental legal issues and international litigation"; according to Who is Who Legal 2017 she "is one of the best practitioners in Switzerland on environmental legal issues" and is highlighted by Who is Who Legal 2018 "for her deep technical knowledge of the field".

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Benjamin Dürig

Benjamin is an experienced transaction lawyer with a focus on M&A and corporate finance transactions, and corporate law. Benjamin advises clients in M&A and corporate finance transactions and is an experienced team leader in complex transactions. He advises listed and non-listed entities, including regulated financial institutions. He has in-depth expertise on the legal issues relating to real estate in and outside of transactions, including regulatory aspects, environmental issues (polluted sites), and complex commercial lease agreements. Benjamin is a regular speaker to various audiences on topics relating to his practice, including international lawyers' conferences, commercial chambers and industry organisations. He joined our firm as an associate in 2009 and became counsel in 2017. Before that, he worked at a Zurich district court and a French-speaking law firm for a number of years. Benjamin’s law degree is from the University of Zurich (2003) and he was admitted to the Zurich Bar in 2007. He is a member of the Swiss Bar Association, the Zurich Bar Association, the Franco-Swiss Chamber for Trade and Industry, and of the International Association of Young Lawyers (AIJA). His working languages are German, French and English.

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