Understanding Permits and the Impact to Commercial Transactions

Considering purchasing an agricultural, commercial or industrial property? Have you considered the effect of environmental permits registered at the property, which could cause significant delays in conveyancing and incur additional costs?

Overlooking the complexities of conveyancing of properties with environmental permits can lead to unforeseen financial burdens, significant delays and unknowingly accepting environmental liabilities. By addressing permit-related matters upfront, you can avoid costly surprises and ensure a smoother conveyance. In this blog, we explore some typical environmental permits that apply to commercial or industrial sites. Read on to arm yourself with the knowledge needed to make an informed decision, and navigate the environmental permits with ease.

In England and Wales, any process that has the potential to pollute the air land or water, increase flood risk or adversely affect land drainage¹ should be regulated under the Environmental Permitting Regulations 2016 (EPR, 2016). Such activities require a Permit issued by the Environment Agency (EA) or Natural Resources Wales (NRW) to be operated legally². Some examples of operations that will need an environmental permit include³:

Waste management facilities,
Industrial processes,
Water abstraction and discharge,
Energy generation facilities,
Intensive farming operations,
Chemical storage and handling, and
Groundwater protection activities.

The aim of the permitting system is to reduce pollution and improve air quality, to protect the environment and human health. The permitting process is intended to increase clarity and minimise the administrative burden on both regulators and operators of facilities, and also to encourage the promotion of the best available techniques when operating regulated facilities.

Type of Permits

Depending on the type of activities conducted at a site a wide range of permits, licences, consents, registrations, notifications or exemptions may be required. Under the Environmental Permitting regulations are classified as described below:

Part A1

These are complex operations with emissions to multiple environmental media. They require an integrated system approach to environmental management and are overseen by either the EA or NRW depending upon location.

Part A2/Part B

This applies to activities where the main emission is to air. Part A2 and Part B permits are issued by the Local Authority (LA) which decides whether or not one of these permits will be granted. If the permit is granted, the operator must also state how they will mitigate any pollution this could cause.

Waste Permits

A Site that uses, recycles, treats, stores or disposes of waste from another location will need a Part A1 or a waste permit. Some processes that require this type of permit include operating a landfill, anaerobic digestion, sewage treatment, sludge treatment. There are strict conditions that must be met in order to be compliant involving the quantity and types of wastes in operation⁴. Increasingly, the regulator applies standard conditions for the types of activities performed.

Bespoke Permits

If your operation does not comply with a standard form of permit, often because it is long running and without variation, it is possible to have or apply for a bespoke permit. A standard permit is easier to obtain and comply with, but, if your site is located within an Site of Special Scientific Interest or within a Nature Reserve applying for a bespoke permit might the only option⁵.

Waste Exemptions

Activities on a smaller scale involving waste could be exempt from requiring an Environmental Permit and be covered by a waste exemption⁶. This covers activities including small scale secure waste storage and some treatment and is often found at agricultural properties. The aim of a waste exemption is to ensure the activity does not harm the environment or human health but is more reliant on self- regulation than an Environmental Permit would be⁷.

Each exemption has limits and conditions that must be met. It is the responsibility of operators to ensure they are compliant and that the waste exemption is appropriate for the site’s operation. The majority of waste exemptions are free, and will last for 3 years at which point they lapse. As the waste exemptions are less time consuming and costly than the Environmental Permits it enables small scale waste operations to operate, often as an element of a wider activity. Waste exemptions are common on agricultural sites as it allows farmers to recycle some waste. An example of this is using wood chips or road plannings to improve tracks or bridleways⁸.

Breaching An Environmental Permit

The permitting system is in place to protect the environment and human health, and so breaching an environmental permit can result in severe consequences. Typically, regulation identifies compliance risks and the regulator engages with the operator to rectify the problem. If this is unsuccessful the permit could be revoked. Depending on outcome, particularly if there is environmental damage legal penalties such as fines or directors imprisonment may follow.

A breach of permit has wider implications, including environmental damage which may require remediation costs to be paid and may cause reputational damage that can affect trust and relationships and ultimately the value of the operator. Compliance with environmental permits is essential to avoid these consequences and uphold responsible environmental management.

Water breaches have been a regulatory focus, along with waste permit actions. Recent headlines include Southern Water being fined £90 million after pleading guilty to thousands of illegal sewage discharges into rivers and coastal waters in Kent, Hampshire and Sussex. South West Water was similarly charged in April 2023 when they received a £2.15m fine for pollution offences in Devon and Cornwall over a period of 4 years.

Another recent example of a significant water related case is Dairy Crest Limited, near Camelford, in north Cornwall which was fined £1.52 million for environmental offences⁹ in June 2022. The cheese maker processes and produces whey, but they had trouble processing the waste. Unable to treat the waste appropriately, the effluent was discharged into the River Inny, a tributary of the River Tamar. This killed thousands of fish, coated the river in a ‘noxious black sludge’, and local residents reported foul odours.

As the whey from the manufacturing process is environmentally harmful, it is Dairy Crest’s responsibility to operate under an environmental permit. The permit has specific conditions which must be met to minimise the risk of pollution to the environment. This includes limiting the type and quantity of waste they can release into the environment as well as controlling odour and noise. Dairy Crest was found to have breached the conditions of this permit on multiple occasions.

Consequences Of Unpermitted Activity

Penalties are not just restricted to fines. John Price of Kingsland, was found guilty of seven charges on 20 April 2023. This included using heavy machinery dredging and reprofiling a 1.5km stretch of the River Lugg, which is a Site of Special Scientific Interest and requires an Environmental Permit to be conducted legally. Price was fined £600,000 and served a restoration order which is predicted to cost a further £600,000 and he is to serve 12 months in prison which has since been reduced to 10.

Why Permits are important during the Transaction

Currently, an unsuspecting buyer can inherit significant environmental liabilities in relation to land and buildings. The buyer is therefore advised to conduct their own environmental searches and enquiries before entering into a contract¹⁰.

When selling a property with an Environmental Permit it must either be transferred to the new owner or surrendered correctly. The legal side of permit surrender is to make sure that all the necessary measures have been taken to avoid a pollution risk from the permitted activities and that the site is returned to a satisfactory state.

Buying a site with a historical or current permit comes with extra complications. Purchasing a site with a permit that has not been surrendered according to the legislation could come with additional permit surrender applications- or potential remediation fees. This may include ongoing monitoring or remedial activities that should be fully understood at the point of purchase to ensure that liability is appropriately allocated and the value of the property reflects the necessary commitments.

Groundsure’s commercial reports are specifically designed to make purchasing sites with permits easier by identifying historical or current permits relating to the land or property in question. The Groundsure report will identify the permitted activities giving an indication of the site’s history and any potential residing contaminates. Additionally, a Groundsure consultant would be able to aid in finding out the status of any current and recent permits as to avoid any unexpected surrender or clean up cost.

Summary

Environmental permits are a way for Local Authorities and the EA or NRW to regulate and mitigate pollutants entering the environment. However, when buying a site with an environmental permit it is important not to go into it blind.

If the permit is to be transferred it is important to understand the pre-existing conditions for the operation of the site and to remain in compliance with the permit. If the site has been decommissioned it is essential to find out if the permit has been surrendered correctly to avoid unexpected costs and potential contamination.

Understanding permits and how to appropriately surrender them can be a confusing, expensive and lengthy process. Here is where our expert environmental consultants can help. The following Groundsure reports flag potential environmental permits at a site you are looking to purchase:

Groundsure Review – for conveyancing permitted and complex sites

Groundsure Siteguard – for lenders and valuers

Should you want more detailed support with permits please contact us at projects@groundsure.com or call us on 01273 257 755.

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