Domestic Environmental Liability

This chapter seeks to identify and analyse realistic risks to lenders and to provide guidance as to how such risks should be assessed and their materialisation avoided. It considers the potential grounds upon which a lender might incur environmental liability under English law. The chapter focuses on statutory provisions which appear to present the most material risks to lenders and, in particular, on the new contaminated land regime. It examines the potential consequences of environmental liability for recovery by a lender and, in particular, its effect on the value of any security and on the borrower’s covenant to repay. The chapter considers steps to be taken to reduce the probability of a lender’s economic or proprietary interests being adversely affected by the imposition of environmental liability. Particular attention is paid to making preliminary enquiries, drafting loan and security documentation and enforcing repayment. The lender should be given the right to demand information and to inspect documents relating to environmental compliance.