There is always a danger that the lease documentation does not accord with what was agreed by the parties. Thus, T may agree to an agreement on liabilities clause which makes L liable for the entire aggregated liability of the parties should they become liable under the Contaminated Land Regime, only to find that T’s repair covenant in the lease might oblige it to remediate prior to a statutory notice being served, with the service charge provisions then allowing L to recover its costs.

The key is to give a wide construction of all the lease provisions and to think through how they might potentially affect T. Remember that T will normally be deemed to accept the property in its actual condition, and it will be for T to demonstrate that it was not intended that he should take on these environmental liabilities. In particular:

demise: the definition of the scope of the demise is important. A demise that excludes everything below the floor (eg foundations, subsoil, substrata, etc) clearly reduces T’s potential exposure of preexisting contamination. These are ‘pie-crust’ leases. But remember that T will need additional access rights to carry out any repairs, etc. Plus there are some difficulties with pie-crust leases. Firstly, carving out the foundations of a building requires that appropriate rights of support and use are granted in relation to service media and, secondly, the effect of such leases has yet to be fully subjected to judicial scrutiny;

repair: a covenant to keep in good repair may oblige T to clean up any pre-existing contamination (unless that can be regarded as an ‘improvement’). So, if there is a danger of contamination do consider whether the repair clause should be drafted to expressly exclude such liability;

statutory compliance: any covenant to comply with applicable laws and notices could extend to Environmental and Health and Safety Regs. So, it could make T liable for remediation work even if a remediation notice was served on L. So limit the compliance obligation to statutory requirements arising out of T’s use of the property;

nuisance: T might adopt L’s nuisance if he has the power to remove the cause of the nuisance but fails to do so. This could extend to preexisting contamination. Accordingly, a covenant not to cause or permit any nuisance should expressly exclude any liability for contamination and any other actionable nuisances which are present at the commencement of the term. This will not preclude T from being liable to a third party (civil) claim, so add in an indemnity from L against any such claims;

T’s indemnity: if T provides L with the standard indemnity against loss and damage arising from their acts or omissions, or breach of covenants, there may be a potential to be liable for pre-existing contamination or actionable nuisances. Accordingly consider expressly excluding environmental liabilities which should be L’s responsibility;

service charge: if it is a multi-tenanted building, T should be wary of assuming liability through the service charge provisions. If that is a potential danger, then seek to cap the service charge or specifically exclude the recoverability of such costs (if possible).

This guidance comes from the stunningly good A Practical Guide to Environmental Issues in Commercial Property Transactions by Helen Loose and Nick Stalbow (Ashurst; £49.95). In our opinion, it is by far the best book on this topic and is essential reading for any L&T practitioner.