1.1 This section provides guidance on the valuation of hereditaments built on or affected by contaminated land and list maintenance matters flowing from this. It also discusses land contamination issues generally.
2.1 Contaminated Land is defined by the Section 78A(2) of Part 2A of the Environmental Protection Act 1990 which was inserted into this Act by Section 57 of the Environmental Act 1995. Part 2A in turn did not come into force until 2000. The Part 2A definition of contaminated land was extended in 2006 to include radioactively contaminated land.
The legislation provides -
"78A (2) The following provisions have effect for the interpretation of this Part.
(2) Contaminated land is any land which appears to the local authority in whose area it is situated to be in such a condition, by reason of substances in, on or under the land, that-
a) significant harm is being caused or there is a significant possibility of such harm being caused; or
b) pollution of controlled waters is being, or is likely to be, caused;
and, in determining whether any land appears to be such land, a local authority shall, subject to subsection (5) below, act in accordance with guidance issued by the Secretary of State in accordance with section 78YA below with respect to the manner in which that determination is to be made.
(3) A special site is any contaminated land-
a) which has been designated as such a site by virtue of section 78C(7) or 78D(6) below; and
b) whose designation as such has not been terminated by the appropriate Agency under section 78Q(4) below.
(4) Harm means harm to the health of living organisms or other interference with the ecological systems of which they form part and, in the case of man, includes harm to his property.
(5) The questions-
a) what harm is to be regarded as significant,
b) whether the possibility of significant harm being caused is significant,
c) whether pollution of controlled waters is being, or is likely to be caused,
shall be determined in accordance with guidance issued for the purpose by the Secretary of State in accordance with section 78YA below."
3.1 Within the rating context, it is likely to be contended, in any appeal, that the hereditament has been constructed on, or is affected by, contaminated land. This raises two essential questions:
Is the land contaminated?
And on the assumption that it is contaminated, what effect would this have upon the hypothetical tenancy and rateable value?
4.1 The policy to adopt is based on market reality so far as this is compatible with the statutory requirements and existing case law. In essence: If the market is not affected by such a situation why should the rating hypothesis?
(i) The level of contamination
The Local Government Finance Act 1988, requires all properties to be valued on the basis that it is the hypothetical tenant who is responsible for maintaining the hereditament and perhaps more importantly, refers specifically to the physical state of the property as a matter that is required to be taken at the material day when determining rateable value (Sch 6 para 2(7)(a) - matters affecting the physical state or physical enjoyment of the hereditament).
Unless the remedy of contamination could be termed repair, it is considered that the VO is obliged to have regard to the actual circumstances of the property as at the material day. Consequently establishing the facts on this day will prove to be essential.
(ii) The effect on value
The issue essentially is what assumptions can one make with regard to who (landlord or tenant) is responsible for any contamination and what effect would that have upon the hypothetical tenancy and the rental bid?
4.2 There is, perhaps, a range of values to consider in connection with contamination in terms of both extent and severity. At one end of the scale there may be a property that is not particularly affected by contamination and some areas may be largely unaffected. At the other extreme is property that is so severely contaminated that it is incapable of beneficial occupation and therefore not rateable.
4.3 This raises a number of questions:
a) If the property is contaminated, is that contamination such that it would reduce the open market rental value of the property?
b) Does the fact that a property is in a contaminated condition automatically lead to the assumption that a reduction in rental value (and rateable value) is appropriate?
c) Is the condition of the property such that a tenant would materially discount his rental bid to reflect the fact that the land is contaminated?
4.4 The case of Robinson Brothers (Brewers) Ltd v. Houghton and Chester le Street AC 1937 is pertinent in this respect:
Lord Justice Scott: every intrinsic quality and every intrinsic circumstance which tends to push the value up or down must be taken into account when valuing a hereditament for rating purposes.
It is likely that any appellant will wish to use this case particularly so if the rental evidence on the appeal property is of assistance. The VO should seek to rely on other rents and assessments in the locality that may show the general effect of any contamination.
4.5 All properties should be valued as if they were vacant and to let and therefore whether the subject property is occupied or not is irrelevant. The hypothetical tenant will come fresh to the scene and will see a hereditament, which may or may not be built on land, which is, or was, at one time contaminated. What would he do in such circumstances?
4.6 If the land is contaminated the polluter may be the owner or occupier or the previous owner or occupier. The general rule under the contamination legislation, in such matters, is that the polluter pays. If that party cannot be found the current owner or occupier may be liable. The incoming hypothetical tenant cannot be held responsible for pollution he did not create and it is likely that the hypothetical landlord would be liable to undertake any necessary works to comply with the statutory obligations. It is therefore highly unlikely in such circumstances that the landlord would agree to a reduced rent.
4.7 There is however, the question of stigma. Rents in the open market may reflect that factor. The VO should make comparisons, if there are any, with those in the locality to see if the market reflects this.