Wednesday, October 19, 2005

Part V – Due Diligence investigations related to real property - After-treatment measure responsibility under the Swedish Environmental Code

  • As mentioned in the previous post a purchaser of real property in Sweden may acquire a liability for any necessary clean-up and after-treatment measures; provided that the company conducting the environmentally hazardous activities causing the pollution on the real property is not able to pay for these measures.

  • A purchaser of real property has a general obligation to carry out a substantial and thorough investigation of the real property he is buying according to the Swedish Real Property Code (cannot find any English translation!). Caveat emptor! It is not 100 per cent clear that the investigation to be carried out according to the Swedish Environmental Code is equal to the one under the Real Property Code but it is generally assumed that this is the case.

  • It should, however, be noted, as very important point, that no agreement between the seller and the purchaser will influence the purchaser’s after-treatment measure responsibility towards the authorities; even if such an agreement may give the purchaser the possibility to seek compensation from the seller e.g. due to a breached guarantee.

  • The due diligence investigation under the Swedish Environmental Code must first of all include a thorough ocular investigation. Should any land unevenness, rusting barrels or drums be visible, this must cause added investigations e.g. digging and analyzing soil samples. Normally, an investigation under the Swedish Real Property Code could be limited to non-destructive investigation. The purchaser need thus not open up floors or walls or start digging, but if there is an indication that something might be wrong such investigations have to be made.

  • It is also clear that a purchaser has an obligation to find out what kind of business activities have been carried out on the property to be purchased. Any indication that such activities could have entailed a risk for pollution, such aspects must be deemed to cause additional investigations.

  • The purchaser’s investigation under the Swedish Real Property Code may be limited because of information from the seller. This is not the case for investigations under the Swedish Environmental Code. The reason for this is, of course, that in the first case, it is a matter solely between seller and purchaser. Under the Environmental Code, however, such information does not effect the purchaser’s obligation to investigate, because one of the purposes of the Code is to bring about these investigations and thus to reveal pollution.

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