Environmental Risks in Real Estate

The UK reportedly has thousands of potentially contaminated sites that have yet to be assessed by local councils. Last year’s popular Netflix drama, Toxic Town, revisited one of the UK’s largest environmental scandals in the former steelworks town Corby, Northamptonshire.

In January 2026, I partnered with Groundsure to host a webinar entitled “Environmental risks in real estate – how to protect your clients’ interests” which covered key environmental risks and issues that commercial property lawyers may encounter within real estate transactions (including freehold purchases, grants of leases, or acting for lenders). I also covered the steps to take in order to protect a client’s interests.

1). Contaminated land:

Contaminated land remains one of the most complex and potentially costly environmental issues encountered in property transactions. The starting point for solicitors is the Law Society’s Practice Note on Contaminated Land (January 2020), which confirms that, when acting for a buyer, tenant or lender, solicitors should always consider whether land contamination may be an issue and, unless instructed otherwise, undertake a local authority search.

The CON29 local search, and, in particular, paragraph 3.13, asks the local authority whether contaminated land notices have been served, whether the land appears on (or is proposed to appear on) the contaminated land register, and whether consultation is taking place prior to the service of remediation notices. A positive response will likely require further investigation. A negative response may mean the site has not yet been inspected, or that investigations are ongoing, or that any contamination does not meet the statutory threshold.

Under Part 2A of the Environmental Protection Act 1990, land is only ‘contaminated’ from a legal perspective if there is a “contaminant linkage” of these elements:

• Contaminant (i.e. a substance that could cause significant harm or significant pollution)
• Receptor (for example a person, ecosystem, river, etc.), and
• Pathway (i.e. a route by which the contaminant can reach and affect a receptor).

Additionally, the contaminant linkage must be causing significant harm or significant pollution of water, (or a significant possibility of significant harm or significant pollution).

Where contamination could potentially be an issue, environmental reports play a key role. Where risks are identified, a Phase 1 Environmental Assessment may be required, combining desktop analysis with a site visit. If concerns remain, a Phase 2 survey involving intrusive sampling may be necessary – with knock-on time and cost implications for transaction timetables.

Liability remains another crucial consideration. Primary liability rests with Class A persons – those who caused or knowingly permitted the contamination. If no Class A persons can be found, liability passes to Class B persons, namely owners or land occupiers. As a result, an entirely innocent purchaser or long leaseholder can potentially inherit significant remediation liability.

Contaminated land liability can be partly managed by contractual wording, but parties to a transaction should consider it from the outset (ideally within terms sheets). In cases where unexpected environmental risks are revealed during due diligence, a buyer, tenant or lender should consider whether asset value is affected. 

2). Environmental permits and consents: 

Environmental risk is not confined to land conditions. Many commercial activities may require environmental permits or other consents. Common examples include infilling land, using septic tanks, operating petrol stations, washing down commercial vehicles, operating spray booths and running dry‑cleaning businesses.

• Permits and consents may have a significant impact on transaction structure and timing 
• Some permits are non‑transferable, meaning a purchaser must obtain a new permit before continuing operations 
• Others are transferable with the regulator’s consent, which can take weeks or even months. Therefore, cost and timescale should be considered at an early stage.

Operating without a required permit or consent may be a criminal offence – which can result in potentially unlimited fines and, in serious cases, imprisonment.

From a practical perspective, solicitors should raise targeted enquiries through CPSEs (particularly, section 16 of CPSE1), and review environmental reports carefully and consider direct engagement with regulators.

3). Asbestos management: 

Asbestos remains a significant risk for non‑domestic premises. The key duties arise under regulation 4 of the Control of Asbestos Regulations (CAR) 2012, which imposes obligations on ‘dutyholders’. Depending on repair and maintenance obligations, this may include landlords, tenants, licensors, licensees or freeholders, and there can be more than one dutyholder for a single building.

The dutyholder must ensure that a suitable and sufficient assessment is carried out to establish whether asbestos is present or liable to be present. This is usually achieved through an asbestos management survey undertaken by a competent specialist in accordance with the UK’s Health and Safety Executive (HSE) guidance. Where asbestos is identified or presumed, an up‑to‑date asbestos register and a written management plan must be prepared, implemented and regularly reviewed.

• Non‑compliance with asbestos management duties is a criminal offence carrying unlimited fines and potential imprisonment 
• Recent prosecutions demonstrate that regulators will take enforcement action where dutyholders fail to manage asbestos appropriately 
• Costs of remediation can be substantial, depending on the extent, type and condition of the asbestos.

In addition to regulatory risk, asbestos carries long‑term civil liability risk, given the latency of asbestos‑related disease. Claims by non‑employees, such as contractors or other visitors, may not be covered by insurance where asbestos exclusions apply, leaving businesses directly exposed.

Other environmental issues commonly encountered include:

•  Japanese knotweed. It can potentially cause nuisance claims and negatively impact upon value. Management plans and transferable guarantees are key due diligence points
• Minimum Energy Efficiency Standards (MEES). These prohibit continued letting of sub‑standard commercial properties (i.e. those currently with EPC ratings below E).  Reviews should be completed to check whether any of the limited exceptions or exemptions apply. Non-compliance may have financial and reputational consequences for landlords
• Climate change. This presents physical, legal and transitional risks. Solicitors should clearly define the scope of their advice and recommend specialist input where climate risk may affect insurability, value or marketability. 

 If you’d like to watch the webinar, contact us at: searchesteam@groundsure.com