17 February 2016

New liabilities for landlords of waste operators

Waste management is an essential aspect of our economy, so sites must be made available for recycling and other waste operations.  The Department for Environment, Food and Rural Affairs (DEFRA) has recently highlighted a general lack of awareness among landlords of the potential liabilities arising from having waste operations on their land.

DEFRA has estimated the cost of waste crime to the UK’s economy at £568 million annually.  A significant proportion of this falls on landlords, who are left to clear up the mess when waste management businesses become insolvent or abandon their sites, leaving them full of waste.  Although most operators act responsibly, Sky News recently highlighted the problem caused by rogue operators.

Recognising the scale of the problem and following a consultation last year, DEFRA has published a package of proposals that it intends to implement during the course of 2016.  However, rather than protecting landlords as victims of waste crime, the proposals look set to increase the liability of landlords for waste management operations carried out by their tenants.

Landlords’ liabilities for waste left by tenants

The principal risk faced by landlords is that of having to remove waste from their land, at their own cost, if a waste operator tenant goes into liquidation and (as usually happens) the liquidator disclaims the site’s environmental permit.  There are no public funds available to assist landlords and there is no legal recourse against the producers of the waste.

In spite of an additional £5 million being provided to the Environment Agency in 2014 to help fight waste crime, regulators’ budgets are stretched.  In our experience, landlords faced with having to remove waste from their land receive little assistance or sympathy from the Environment Agency.  They may even face threats of enforcement action or prosecution.

DEFRA’s proposals

DEFRA’s answer to this problem is to require the landlord to confirm, as part of the tenant’s environmental permit application process, that the landlord is aware of the tenant’s waste operations and of the liabilities that may ensue.  Such an arrangement, however, would put landlords in the firing line as potential “knowing permitters” of any breaches of the permit or other breaches of waste management law by the tenant.  A regulator such as the Environment Agency can prosecute “knowing permitters” instead of, or in addition to, the actual perpetrator.  There have been cases where landlords have been convicted of the offence of “knowingly permitting” illegal waste operations and such cases may become more common if DEFRA’s proposal is implemented.

DEFRA also plans to tighten the rules to make it easier for the regulator to issue a notice requiring the landlord to remove waste from its land, even if the waste was lawfully brought onto the land by a tenant.

Prior to 2007, in order to be granted an environmental permit, waste operators had to pass a “fit and proper person” test covering various aspects, including in particular their financial provision to meet the obligations arising under their permit.  Such financial provision was usually provided by way of a bond or other security which was available to the regulator in the event of a need to clean up a site. The majority of respondents to the consultation favoured the reintroduction of financial provision for waste operations and DEFRA may bring forward proposals for consultation later this year.

How can landlords protect themselves?

As with any tenant, proper due diligence is important.  How robust are the tenant’s finances?  What is its track record in business?  What is its compliance record?  Does it (and do its directors) have any previous history of enforcement issues with environmental regulators?

It is also important for landlords to ensure that there is proper financial provision in place to cover the cost of cleaning up the site if the tenant abandons it or becomes insolvent.  Waste operator tenants may leave behind thousands of tonnes of rubbish that can catch fire, provide a breeding ground for vermin and give off smells and will soon attract the unwelcome attention of regulators and local residents and businesses.

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