Contaminated land - environmental reports/searches

Since the publication of the Law Society's warning card on contaminated land in June [2001] Gazette, 14 June, 50, lenders have received large numbers of environmental reports from conveyancing solicitors.

The warning card states that in every transaction solicitors must consider whether contaminated land is an issue.

While the card does not state specifically that an environmental search report should be obtained in every case, the volume of reports now being sent to lenders has significantly increased.In practice, environmental reports are unlikely to help lenders with their decision to lend without specialist advice.

This is because:l The reports do not contain enough information on which to make a judgement about risk;l Even if the reports are property-specific, there are no details of actual contamination or risks from contamination, what might be needed to remediate the site or any indication of the effect on valuation;l The number of properties affected by contamination is likely to be small, possibly less than 5%.

Even if contamination is identified, this is not necessarily a barrier to lending.Therefore, members of the Council of Mortgage Lenders (CML) have decided they do not want to receive environmental search reports from conveyancers.

Any lenders wishing to receive these reports will advise conveyancers in a letter of instruction.

In making this decision, lenders have taken into account the fact that local authority search form (con 29) has been amended to provide information about any land which the local authority has deemed to be contaminated land under the new regime.

Lenders also recognise that a negative answer to local authority enquiries does not guarantee that the land is free from contamination.This approach should not affect a conveyancer's decision to commission an environmental search report for a borrower client, should the conveyancer consider this appropriate in light of the guidance in the warning card.If a conveyancer obtains a specialist environmental consultant's report because of concerns about contamination, a copy of this should be passed to the lender.The CML Lenders' Handbook will be reviewed in the autumn, in consultation with the Law Society.

As part of this review, lenders will consider whether any amendments should be made to the text of the handbook, possibly with lenders indicating in their part 2 if they want to see copies of environmental search reports.

Any amendments made to the handbook will be introduced from January 2002.The CML will keep this issue under review.

If environmental search reports are developed which do assess risk in a way that would be helpful to lenders, the CML will publish further guidance.