Contaminated Land – Scotland

Scotland's Court of Session has ruled on an important case concerning the ability of a commercial landlord to carry out intrusive site investigations on potentially contaminated land.

Kwik-fit entered into a 25 year lease of premises in Edinburgh in 1993. In 2007 their Landlords wrote to them to say that they wished to carry out intrusive testing of the ground in order to ascertain if contaminants were present in the soils and underlying groundwater.

In common with many leases, the lease in question was silent with regard to either (a) such “environmental” rights of entry for the Landlord, or (b) the tenant’s liability for cleanup of past contamination.

The Landlord asked the court to declare that the phrase in the lease entitling the Landlord “to enter upon the premises generally to inspect and examine the same, and to view the state of repair and condition” was sufficient to cover the right to sink boreholes, and the court agreed that it was.

This seems a fair result especially considering the potentially contaminative nature of garage premises, although that consideration did not feature in the court’s judgment.

Instead, the court felt that it was appropriate to interpret the above phrase so as to include the right to carry out intrusive testing because it felt it would not be sensible to limit the power of inspection to merely a superficial visual inspection “particularly in a long lease, when the condition of the premises may materially alter over time”.

The reference to the length of the lease raises potential doubts about whether a basic right to view the state of repair of premises would also extend to intrusive testing in a SHORT term lease.

The case is a reminder of the need for Landlords to consider environmental issues carefully whenever granting (long or short) leases and to ensure that the lease wording caters for issues such as intrusive testing.

It is also a reminder that the decision on this narrow “inspection” point has no bearing at all on what the actual liability position will be as between Landlord and Tenant if subsequent cleanup is required, which reinforces the advisability of such liability issues being bottomed out commercially prior to a lease being finalised.

The case can be accessed at this link.

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