The Importance of Environmental Due Diligence
When investing in real estate, due diligence is a crucial step in protecting your financial and legal interests. One of the most overlooked but potentially costly aspects of property acquisition is contaminated land and hazardous materials risk. Failure to assess environmental liabilities can lead to unexpected environmental liability, cleanup costs, legal issues, and project delays.
Here’s why conducting environmental due diligence should be a priority for any property investor or developer.
What is Environmental Due Diligence?
Environmental due diligence involves an environmental site assessment to determine whether a property has any historical or existing contamination issues. This process can vary depending on the intended purpose and scope of the of the report, but as a first instance generally includes:
A detailed site inspection to assess likelihood/location of hazardous materials and the potential for site contamination.
Review provided existing documentation (previous environmental investigations, asbestos/hazardous materials register etc.) and comment on previously identified issues.
A desktop review based upon a review of:
relevant government databases to identify any existing environmental notices
historical aerial photographs
relevant soil, geology, and groundwater documentation to assess potential mobility of contamination (if present)
historical and current land title records
publicly available council records.
At Land Risk Environmental, our Environmental Due Diligence reports provide environmental and hazardous materials risk ratings for the site, including recommendations for any additional investigation or management. If further assessments or investigations are required, these can be completed promptly within due diligence windows and can include:
Environmental Site Investigations: Conducting targeted soil, water, and or soil vapour / indoor air sampling to assess contamination levels.
Remediation Planning: Estimating potential costs for cleanup and mitigation if contamination is found.
Future Ongoing Management Options: Preparing of an environmental management plan (EMP) and assisting with ongoing management controls of residual contamination.
The outcomes of these investigations can be reported within the original due diligence report, or as a separate more detailed report depending on the objective.
Why Pre-Acquisition Due Diligence Matters
Avoiding Financial Liabilities – If contamination is present, cleanup costs can be material, often impacting the feasibility of the initial investment. Unsuspecting buyers may be legally required to remediate the site before development.
Regulatory Compliance – Authorities like the NSW Environmental Protection Authority (EPA) have strict guidelines regarding contaminated land. Purchasing a site with contamination issues without due diligence can result in inheritance of environmental liabilities, fines, legal action, or development restrictions.
Securing Development Approvals – If contamination is identified post-acquisition, it could delay project approvals and increase overall costs. Proactively addressing risks ensures smoother planning processes.
Protecting Reputation & Investment Value – Investors and stakeholders are placing increasing importance on Environmental, Social, and Governance (ESG) factors. Proactively managing risks enhances asset value and brand reputation.
How Land Risk Environmental Can Help
At Land Risk Environmental, we specialise in environmental and hazardous material assessments which are tailored to your investment needs. Our expertise ensures you make informed decisions before acquiring or divesting real estate assets, safeguarding your investment from unforeseen risks, and maximising value.
Before your next property purchase or divestment, let’s talk about how we can help you mitigate environmental risks.
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