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Property lawyers have a duty to advise on contamination risks, despite lack of guidance
While a duty to advise a client on the risks surrounding contaminated land is not explicitly articulated, lawyers in NSW owe a duty to their clients to warn them of the risks associated with purchasing a property, writes Elizabeth Wild.
Elizabeth Wild
In many circumstances, real estate lawyers in NSW have a duty to advise their clients on the risks posed by contaminated land despite there being no explicit guidance on the subject from state and territory law societies or the Law Council of Australia.
The scope and breadth of this duty is not static and will continue to evolve as the understanding of various contamination risks continues to expand.
This makes it advisable for real estate lawyers to properly assess contamination risks during due diligence in a property transaction.
The documents that real estate lawyers typically review during a property transaction, such as 10.7 certificates, are also limited in their content and may not identify contamination issues, other than very significant instances.
A common step is to conduct a legal review of the publicly available data in relation to the property, including any information on EPA public registers. However, this information is not comprehensive, requires specialist analysis and may not provide a full picture of the contamination risks, which can be difficult for lawyers who do not regularly advise on contamination.
Lawyers should, therefore, consider making special inquiries that will assess not only the property being acquired but also the surrounding properties and other useful information, such as the previous activities carried out on the site.
A site-specific contaminated land search or report can be an effective way to discharge the duty owed by a real estate lawyer to their client.
Obtaining searches or reports from specialist data aggregators such as Lotsearch can identify contamination. Lotsearch’s base report, the Contaminated Land Search, includes the public registers related to contaminated land held by state environmental regulators and select federal government agencies.
A more detailed Contaminated Land Screening Report considers a broader set of sources and includes further historical information, including previous business activities carried out on the site and the immediate surrounding area that may have resulted in legacy contamination, such as former dry cleaners, service stations, and old waste sites.
The most detailed report is the Enviro Pro Report, which is targeted towards environmental consultants and specialist environmental and planning lawyers.
If due diligence around contamination raises concerns, retaining an environmental consultant may be considered to undertake a desktop review of the available information or a physical site investigation to identify and characterise contamination.
Broadly speaking, a real estate lawyer is obligated to provide their clients with advice that clearly, accurately, and comprehensively explains the transaction, identifies the risks, and outlines ways to manage or control any risks.
While the principle of caveat emptor (or “buyer beware”) applies to individuals who are purchasing land, and it is at the purchaser’s discretion whether further information or reports are obtained, the purchaser’s lawyer has a responsibility to alert their client to any risks associated with the transaction and any risks that are posed by not obtaining further information.
While there is no explicit duty in legislation or case law that requires a real estate lawyer to advise on contaminated land when providing real estate advice, a duty may be inferred in certain circumstances, namely where such a risk is known or can be reasonably suspected when advising on that is within the scope of the agreed legal services, or where the lawyer professes to have special expertise in contaminated land.
If contamination is known, or ought to reasonably be known to affect the land subject to the legal advice, a lawyer is obligated to inform their client of the risks posed by that contamination.
There are significant risks if a breach is found of a solicitor’s obligations owed at law to a client concerning the disclosure of contaminated land.
These can include professional and reputational damage, possible litigation brought by the client, and disciplinary action by the Office of the Legal Services Commissioner.
While a duty to advise a client on the risks surrounding contaminated land is not explicitly articulated, lawyers in NSW owe a duty to their clients to warn them of the risks associated with purchasing a property, including any physical affectations on the property, such as contamination.
Elizabeth Wild is a partner and head of environment and planning at Norton Rose Fulbright Australia.
