Environmental liabilities for landlords and tenants and the impact on the valuation of industrial buildings

Purpose – The purpose of this research is to review the response of professionals involved in the letting and management of industrial buildings to the implementation of Part IIA of the Environmental Protection Act, 1990 which, has imposed a regime of “strict liability”, in terms of contamination, has implications for the owners, occupiers and managers of such properties and may be affecting rental and capital values of industrial premises. This research explores the current awareness of all parties to these changes. Design/methodology/approach – The study reported in this paper examines current practices in the UK and identifies areas where changes may be required, or be desirable, in order to arrive at recommendations as to “best practice”. The work was undertaken in three phases, a questionnaire survey involving leasing and managing agents, real estate owners, lawyers and bankers; a consultation stage with representative organisations including the Royal Institution of Chartered Surveyors (RICS), the Environment Agency, British Property Federation, British Bankers Association, British Insurance Association, the Law Society and the Confederation of British Industry (CBI) and interviews with a representative sample of persons from the survey. This paper reports on the questionnaire survey phase. Findings – The research identifies considerable variation in how professionals are responding to current environmental legislation. Many seem to leave “environmental” matters to the lawyers, or to rely on standard lease terms. The paper suggests areas for improving best practice. Research limitations/implications – The research was primarily concerned with aspects of lease management rather than with valuation but it has identified the need for further research in areas such as rent determination and assignment pricing. Originality/value – The research has identified areas of practice in need of review by professionals in this field from which conclusions as to “best practice” have been drawn.