To Pay or Not to Pay

Regardless of who actually causes contamination, it is the owner or perpetual usufructer who usually has to pay for it to be cleaned up. However, interim administrative regulations do provide ways of limiting or avoiding this liability

Soil contamination may remain hidden for many years and may migrate with groundwater to adjacent properties. Affected land may change ownership several times, ending up in the hands of purchasers who are blithely unaware of the damage. The scale of the problem in Poland is significant, although relatively under-researched.  By way of comparison, there are an estimated 60,000 contaminated sites in the former German Democratic Republic. Contamination frequently pre-dates environmental protection legislation and occurs particularly in present and former industrial zones.  Other areas for concern are old pits for hazardous industrial waste and underground liquid fuel tanks etc.
Unfortunately, clean-up costs can be very high. For instance, if you have a leak of just over one hundred litres of oil derivative, after a few years the cost of remediation may set you back hundreds of thousands of zloty.  And contamination is often much worse than this in practice.

Who is responsible for land reclamation?
The Environmental Law of April 27, 2001 introduced the principle that the person 'holding the land', i.e., the owner, perpetual usufructer, or in some cases the lessee, is normally responsible for reclamation.  Following the US and EU examples, the idea of going after original contaminators was abandoned, as they often no longer exist or are insolvent.
However, until October 2002, the provisions imposing the reclamation obligation on landholders were incomplete, as permissible concentration levels for contaminants had yet to be set; the Environment Minister's Ordinance on land quality standards changed this state of affairs in principle.  The new provisions set out maximum permissible contamination limits for three land types. Group A includes land under special protection (e.g. national parks), group B includes arable land, forests and developed and urban land, while group C encompasses industrial sites, communications sites and mining land. Concentrations in excess of permissible limits are deemed contamination. Detailed limits are listed in the Appendix to the Ordinance.

Is the land reclamation obligation enforced in practice?
In practice, of course, a lot of time might go by before the environmental protection authorities identify contaminated areas.  At present, enforcement of land reclamation provisions occurs when the owners of adjacent properties find out about the contamination and inform environmental authorities. Similarly, ecologist groups might start exerting pressure with respect to land reclamation.
Once a starosta (local authority chief exec.) obtains information on contaminated land, he is required to issue a reclamation order.  If the landholder fails to meet its obligations, the starosta, engaging specialist companies, will undertake reclamation in its own capacity and recover all costs from the landholder under the procedure for recovery of tax liabilities.

Am I liable for the mess someone else causes?
The answer is 'Yes'.  The land reclamation obligation rests with every landholder and is not subject to prescription until the person ceases to hold the land. Consequently, those who already hold contaminated land are in the most difficult position. In such cases, the possibility of limiting or avoiding liability for reclamation resulting from legal-administrative regulations may be based on the following three principles:
nany person who acquired land before or on October 1, 2001, will not be responsible for contamination caused by third parties prior to October 1, 2001 if he/she reports such contamination to the relevant starosta by June 30, 2004. If the starosta does not reject such a report, the clean-up obligation would be released.
nany person controlling contaminated land (including a purchaser after October 1, 2001) may avoid liability if he/she proves that the contamination was caused by another party after the current controlling person gained control over the land.
nif the controlling person proves that the contamination was caused before September 1, 1980, the scope of the required clean-up may be reduced to prevent danger to life, health and further spread of contamination.
In addition to the administrative remedies outlined above, civil law remedies may be used in order to seek compensation for liability. This, however, would not prevent clean-up orders being imposed by the administration.
Managing liability for contaminated land is time-consuming and requires specialist technical and legal assistance (such as laboratory research, determination of liable parties, and representation before administrative bodies). As the deadline for reporting contamination is June 30, 2004, and related counter-measures take a long time, now is the right time to begin risk management procedures.

Planning to buy land?
Land purchasers are another high-risk group. We would like to underline the fact that the aforementioned provisions limit the legal protection of those who purchased contaminated land after October 1, 2001 (the effective date of the Environmental Law). This way the legislator shifted the burden of land monitoring onto the purchasers of the land. Anyone  negligently buying contaminated land becomes liable for its clean-up.  Therefore, each property transaction involving possible contamination should be preceded by an environmental audit, identifying the risk of and actual contamination.
A legal due diligence is also needed for gauging risk levels.  This involves examination of contracts, title and mortgage registers, and any documents evidencing land history.  In particular, one should examine contracts concluded by the seller from the point of view of regulation of liability issues.  Analysis of pending administrative proceedings is also desirable in some cases.
If contamination is found on land offered by the seller, the buyer should not be deceived by a mere promise that he/she will carry out post-sale reclamation.  Once the land is purchased, the clean-up liability rests with the new owner from an administrative point of view.
One solution is to require the seller to report such contamination to the local starosta prior to purchase.  The starosta then issues an administrative decision requiring the seller to carry out reclamation.  Even then, the buyer may still incur liability at a later date if the scope of reclamation is extended in the future. Therefore, you should not waive any contractual collateral security.
When purchasing potentially contaminated land, you must regulate the scope of the parties' liability. Lawyers consequently need to go beyond due diligence analysis, and negotiate representations of the parties and contractual clauses. The buyer might require seller representation, for instance, stating that there is no hidden contamination, and contractual clauses under which the seller undertakes to reimburse the buyer for any reclamation costs, for which he becomes liable due to pre-existing land conditions.

Before you fund environmental salvation ...
The issues raised in this article are not just theoretical considerations; they relate in varying degrees to a good deal of current and former industrial real estate.  It is clearly the purchaser who should take the risk factor into consideration in the first instance. But so should any institution financing a transaction and seeking collateral security on land.  Nevertheless, cases will arise where one party is perfectly aware of the problem and gets rid of contaminated land, while the other party goes ahead regardless.  In such cases, the unfortunate upshot is that the 'unlucky' buyer blindly assumes liability for costly reclamation processes that will eventually be enforced, doubtless for the good of mankind, but not necessarily to the benefit of the entity forced to pay. z

Bartosz Clemenz
The author is an attorney in the law firm Salans D. Oleszczuk