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26 February 2016

Polluted Sites as Real Estate Deal Killers?

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  Environment 

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