Landlords, don't fall foul of post-Brexit waste crime

Written by: Duncan Spencer and Craig Burman | Published:
For landlords, waste crime normally occurs in one of three forms

Landowners and landlords are increasingly becoming victims of waste crimes and being saddled with the cost of removing waste from their properties.

As Brexit looms, tariffs rise and waste disposal costs increase, abandoning waste begins to look more and more financially attractive to unscrupulous tenants.

Waste crime is classed as the illegal disposal or mismanagement of waste and can range from the illegal dumping of household or industrial waste all the way to fraud involving recycling fees and landfill tax.

For landlords, waste crime normally occurs in one of three forms.

The first of these is when waste is fly-tipped on a landlord’s site.

Fly-tipping is one of the most prolific waste crimes, and one that is likely to increase following a waste disposal cost increase brought on by Brexit. Waste dumped illegally on a site could be more than unsightly – it could also be hazardous and expensive to remove.

Waste crime may also occur for landlords when a tenant cannot afford to clean the site upon leaving a lease.

It is important to note here that not all waste criminals look like criminals. In many cases, commercial landlords liable for large fines have had excellent tenants who, through bad luck or bad business, find themselves unable to pay rent and are forced to abandon operations and waste left on site. As the impacts of Brexit affect the UK, it is entirely possible that the number of businesses folding could increase, making this scenario more and more likely.

Finally, landlords may experience waste crime when a criminal organisation leases premises with the intention of using them for illegal waste activities.

The law firm Schofield Sweeney LLP has been approached by landlords who have been drawn in by tenants with criminal intentions, where a seemingly legitimate tenant negotiates a lease with the aim of filling the site with waste. After pocketing the money received from the waste producer, the tenant abandons the site (and the waste). In most of these cases the legal remedies are very limited.

One recent case saw a landlord saddled with a bill of nearly £350,000 and an Environmental Agency investigation, after a sub-tenant abandoned a property full of fly-infested waste.

In another case a waste crime gang posed as a legitimate tenant and leased a warehouse for storage purposes. After filling it with waste for two months, the gang decamped without a trace. The ‘tenant’ was untraceable, and the cost of waste removal was beyond the means of the landlord. The property was then sold to a purchaser who was willing to clear the site.

Such scenarios are likely to become more common as waste disposal costs increase.

Avoiding catastrophe

Most landlords who find themselves with waste to clear are not aware that a risk exists until it is too late. Often there is limited recourse, unless supporting measures are put in place before hand.

Unfortunately, there is very little financial help on offer from local authorities and environmental regulators. Instead, these landowners are usually asked by the regulator to remove the waste at their own cost and face legal action if they don’t comply.

The impact from these waste crimes has the potential to be catastrophic. Between lost rental revenue, the time and effort involved in sorting out and supervising site clearance, and the cost of removing the waste, the effect of these crimes can bankrupt a business without sufficient financial resources.

Risk management practices

One of the most important ways to mitigate risk is to improve risk management. By incorporating a stringent vetting process for potential tenants and visiting the site frequently throughout the tenancy, landlords can significantly reduce their risk of falling victim to waste crime.

As well as increased onsite diligence, businesses must start to take greater responsibility for the waste they produce.

Waste is a top to bottom liability, meaning that any waste a business produces (including recycling) is its responsibility from the moment it is created, until it is properly disposed of. Businesses must properly vet waste disposal firms and following the process all the way through, making sure the waste is disposed of correctly. If they do not, they can be prosecuted for failures in their duty of care.

Tools are available to help with this process. All the rules and guidelines are found on the Environmental Agency website, and third-party providers are available to help businesses comply with waste regulation. Lists of waste codes, licensed waste disposal companies, and permitted sites are all available online.

Brexit is likely to bring changes in law and policy, and all businesses need to adhere to new rules as they come into effect.

The risks of waste crime are significant. There is much that businesses can do in order to reduce their risk, but the most effective step is mindfulness of the waste chain, from production to disposal. Increased due diligence and maintaining proper procedures and documentation will reduce a rogue operator’s opportunity to take advantage of the system.

The role of environmental insurance

Environmental insurance is another way to mitigate risk. Environmental cover could support a landlord if an incident occurs on their site, by providing financial assistance for waste disposal.

However, environmental insurance is not failsafe. Unfortunately, it is not uncommon for landlords to find themselves underinsured in these situations. For example, one landlord found that the cost of removing fly-tipped waste deposited in the course of just two evenings was twice the cost of their annual insurance cover.

Ahead of Brexit, landowners and landlords need to understand the cover they have. It is entirely possible to have insurance that does not cover the risk of abandoned waste or waste crime, and it is equally possible to have a policy that does not cover the full extent of the liability and clean up – even if it appears to cover “pollution”. The detail (and a chat with your insurance professional) is key.

Most environmental insurers do not automatically cover pollution conditions from fly tipped or abandoned waste. Landlords and businesses should work with their insurance broker, be exacting about their due diligence on policy terms, and ensure that coverage for these risks is requested. It is important to seek advice and work with the insurers to receive clear and positive policy coverage.

This article was written by Duncan Spencer, director at EDIA, and Craig Burman, partner at Schofield Sweeney LLP

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