There will be occasions when granting a lease to a waste management company seems a sensible commercial decision, for example where a landowner has an area of land it does not otherwise use or has an empty industrial unit, which may be suitable for waste management operations.
Even where the nature of the waste management operations is understood, there can be significant additional risks for a landlord in entering into such arrangements. However, it will not always be obvious that that the tenant is undertaking waste operations. This article explores the risks arising from granting leases to waste operations and seeks to offer some potential solutions to manage the associated risks.
Before dealing with the regulatory position it is worth considering the commercial issues, which arise for those who operate in the waste industry.
Waste operators operate in a highly regulated area. There are numerous environmental and health hazards with waste, which lead to this regulation.
The waste industry has undergone something of a transformation over the past ten to 15 years. In particular, the landfilling of waste is no longer the standard approach and there has been an increasing movement away from sending the majority of waste to landfill and towards recycling and finding more beneficial uses of waste material, such as using the waste material as fuel to generate electricity.
In order to encourage this move away from landfill, since 1996 waste operators have had to pay landfill tax on every tonne of waste disposed of to landfill. The rate of landfill tax has increased from £7/tonne in 1996 to £80/tonne in April 2014. Government policy is for landfill tax not to fall below this level before 2020.
Finally, waste operators are usually paid by others to remove waste from their sites. In order to make money they need to find disposal routes, which are cheaper than the amount they are paid. To do this, they will often sort the waste into separate categories for recycling or re-use with only the residual waste going to landfill. If they are not competent operators (or, as is sometimes the case, deliberately intend to flout the law), they will end up in a position where they have taken waste, been paid for it and cannot afford to lawfully dispose of it.
Tenants who deal with waste will usually require an environmental permit for the operations that they undertake, such as waste storage and waste disposal. It is the role of the Environment Agency (EA) to regulate this and the EA has the power to prosecute the tenant for carrying out waste operations without, or in contravention of, a permit. This can result in fines, potentially imprisonment for the tenant and/or a court order requiring the tenant to remove any waste that has been stored unlawfully.
A tenant will also need to have the appropriate planning permission for whatever waste operations it undertakes. Often, depending on the nature of the waste which is stored, this can be a specific use class for which specific planning permission is required. As is always the case, the local planning authority can take enforcement action against a tenant who does not have the appropriate planning permission.
Despite the above, there are a number of ways in which a landlord can be found responsible on a regulatory basis for a tenant's unlawful waste activities.
As well as "causing" the unlawful deposit of waste, it is also a criminal offence to "knowingly permit" that activity. In certain circumstances, a landlord could be prosecuted for knowingly permitting the unlawful activities of its tenant (who has “caused” the unlawful deposit of waste). The EA can serve a notice on the landlord under section 59 of the Environmental Protection Act 1990 requiring it to remove any unlawfully deposited waste (as an alternative to serving notice on the tenant) if it has “knowingly permitted” the unlawful deposit of waste. It is a criminal offence to fail to comply with such a notice.
In some circumstances, the EA may require the landlord to clean up the waste if the EA has served a section 59 notice on the tenant and the tenant has not complied with it or successfully appealed it. As landowner, the landlord is ultimately responsible.
In addition, under the Town and Country Planning Act 1990, enforcement notices for breaches of planning legislation are required to be served on both tenants and landlords. If the tenant does not comply with the notice, the landlord can also be prosecuted if it has not done "everything [it] could be expected to do to secure compliance with the notice".
On top of these regulatory risks, there are a number of other potential issues facing a landlord of a tenant that deals with waste, including:
It is highly likely that there will be certain clauses in a normal commercial lease, which will mean that a tenant who is in breach of the law or, for example, is creating a nuisance is in breach of its lease. The potential difficulty facing a landlord, however, is that its remedies may be limited to forfeiture of the lease (which, in turn will mean that it will be responsible for the waste on the site) and/or making a claim in damages (which may be against an insolvent company).
Landlords alive to these issues can take a number of steps to help protect their business, such as:
Taking specialist legal advice where necessary, can help to implement these steps.
About the authors
Michael Barlow, Partner and Nick Churchward are partners at Burges Salmon
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