Audit System Offers Certainty in the Redevelopment of Industrial Sites - International Law Office

Recent amendments to the Environment Protection Act 1970 (Vic) will have a significant impact on commercial property transactions in Victoria, particularly for prospective purchasers and developers of industrial sites.

The Environment Protection Authority (EPA) has established the Environmental Audit System as an authoritative means by which planning authorities, site owners, purchasers and others can be given assurance regarding the condition of a site and its suitability for a proposed use. It requires a planning authority (ie, a local council) to request developers of land that is suspected of being contaminated to obtain a certificate or statement from an EPA-appointed environmental auditor before development can go ahead.

The need for an audit frequently arises in the context of site redevelopment, for example where a potentially contaminated site (eg, land used in relation to industry, mining, or storage of gas or chemicals) is turned into a site for sensitive use (eg, housing, day-care facilities or schools). The audit must be undertaken before sensitive, construction, building or works commence.

Three documents are central to the Environmental Audit System:

• the environmental audit report;
  
  
• the certificate of environmental audit; and

• the statement of environmental audit.

The environmental audit report evaluates the environmental quality of the site and assesses the clean-up action (if any) required. If the report does not require any remedial work to be carried out a certificate will be issued, which verifies that the condition of the site is not detrimental or potentially detrimental to any beneficial use of that site. A statement will be issued if the condition of the site is presently or potentially detrimental to one or other beneficial use of the site. This statement will also state beneficial uses to which there is no detriment (ie, for which uses the site is suitable).

An occupier or representative of the site occupier, as well as a prospective purchaser or other person with written consent from the occupier, may request a certificate or statement from an auditor as a means of assurance regarding a site's condition. This usually occurs as part of commercial due diligence or other related processes, where the condition of the site and its suitability for use is of paramount significance.

Current occupiers are required to notify prospective occupiers if a report has been issued. Vendors and landlords should be aware that failure to obtain a certificate requires them to provide a copy of the statement to any prospective occupier (purchaser or tenant). Failure to comply with this requirement entitles the incoming occupier to recover any reasonable costs incurred in compliance with the terms and conditions of the statement from the previous occupier within 12 months of becoming the occupier.

For further information on this topic please contact Katerina Petrogiannakis or Toby Mittelman at Arnold Bloch Leibler by telephone (+61 3 9229 9779) or by fax (+61 3 9229 9889) or by email (kpetrogiannakis@abl.com.au or tmittelman@abl.com.au).