Australia & New Zealand
Valuation and Property Standards


12.0 Australia Real Property Guidance Notes

12.1 ARPGN 1 Land Contamination Issues

ARPGN 1 Land Contamination Issues 12.1 (PDF 75 KB)

1.0 Introduction

  • 1.1 Purpose

    • The purpose of this Guidance Note is to outline information, issues, and approaches relating to contamination of land. The Institute recommends that it be used by Members as a guide for the valuation, assessment or reporting of land which is contaminated or whose contamination status is unknown or uncertain. Land includes improvements, structures or additions to the land.
  • 1.2 Status of Guidance Notes

    • Guidance notes are intended to embody recognised 'good practice' and therefore may (although this should not be assumed) provide some professional support if properly applied.
    • While they are not mandatory, it is likely that they will serve as a comparative measure of the level of performance of a Member. They are an integral part of the Valuation and Property Standards Manual.
  • 1.3 Scope of this Guidance Note

    • This Guidance Note applies to Members reporting on property and it deals with broad examples of environmental contamination and their potential effect on value and marketability. It offers guidance on general concepts and concerns, and suggests approaches that are considered to have merit. It does not purport to provide a definitive coverage of the environmental issues, which may arise, or the manner in which Members should deal with these issues. Many issues of land contamination are poorly defined and involve complex or unresolved matters. Formulaic approaches to the valuation and assessment of contaminated land, are not adequately developed.
    • The appropriate procedures will vary according to the circumstances of each property being valued or assessed. Members should apply their own skill and judgement in applying the information contained herein to their own practice.
    • This Guidance Note should be used in conjunction with other guidance notes and practice standards that
      are either over-arching or directly applicable to the type of property, purpose or issues involved.
  • 1.4 International Valuation Standards

    • This Guidance Note recognises the International Valuation Standards 1 and 2, and the International Valuation Application 2 by the International\ Valuation Standards Committee and it is intended to be consistent with the concepts and definitions contained in those standards, however, there may be departures from IVSC Standards to reflect Australian & New Zealand law and practice.
  • 1.5 Member Involvement

    • Members are able to provide appropriate skilled advice in relation to valuation and property matters with the assistance of and in accordance with this Guidance Note and bearing in mind the limitations referred to herein.
  • 1.6 Marketplace More Aware

    • Increased environmental consciousness within the general community, environmental protection legislation, litigation associated with pollution and land contamination, and incidents where property users suffer financial loss directly or indirectly from such cases, have made the marketplace more aware of the potential adverse effects of chemical, radiation, noise and other contaminants in air, groundwater, soil and the overall environment.
    • The market can overreact and prices may be artificially depressed. Further, limited information about a particular contaminant that is thought to be present on a property can cause a secondary ffect on values. Conversely, the market seems to be increasingly aware that contaminated properties can be redeemed and redeveloped into viable assets.
  • 1.7 Advice about Commercial Impact

    • Clients, whether they are property owners, vendors, purchasers, financial institutions, receivermanagers, holders of major or minor property portfolios, etc, will often look to Members of the Institute for advice and guidance on how land contamination affects their financial security and asset value. Although Members cannot and should not promote themselves as authorities who are fully capable of measuring, recording and providing detailed scientific advice on behalf of the client, they should be able to provide some level of advice to the client about the commercial impact of suspected or evident contamination.
  • 1.8 Problems Requiring Further Investigation

    • Members of the Institute should take all reasonable care in these matters. Members who attempt to mitigate their responsibilities by adding a disclaimer saying that the property has been valued or assessed without regard to the question of presence of contamination are not providing the level of best practice expected by clients and may not satisfy the standards of practice required by the courts. Therefore, the Institute recommends that its Members become sufficiently knowledgeable about the contaminants, laws and regulations associated with this topic and their effect on property values to meet the above standards. This involves Members qualifying advice, where appropriate, so as to properly inform the client of potential problems which may require further investigation, and thereby meet the Member's professional obligations.
  • 1.9 Can Affect Full Spectrum of Property Types

    • Members will rarely be in command of enough information or evidence to completely rule out the possibility of land contamination. They can, however, through careful research and observation, provide advice about suspected contamination and the potential consequences on a property's Market Value. Environmental contamination can affect the full spectrum of property types, and should be considered in all property valuations and assessments.
  • 1.10 Definition of a Contaminated Site

    • As defined by the Australian and New Zealand Environment and Conservation Council (ANZECC) and the National Health and Medical Research Council (NHMRC), a contaminated site comprises 'a site at which hazardous substances occur at concentrations above backgound levels, and where assessment indicates it poses or is likely to pose an immediate or long term hazard to human health or the environment'. Point of reference.
    • Members are encouraged to actively foster professional association with consultants specialising in the identification and treatment of contamination.

2.0 Types of Contaminants and Examples

  • 2.1 Wide range

    • There is a wide range of potential environmental contaminants, varying from liquid and solid chemicals to corrosive gases and radioactive substances.
  • 2.2 Physical Contaminants

    • Each contaminant must be considered for its potential physical and non-physical impact.
    • Examples of physical contaminants include asbestos, hydrocarbons, lead, mercury, arsenic, cyanide and pesticides, but are not limited to these substances. Mining by-products can include nutrients and arsenic compounds amongst others.
    • Unexploded ordinances have been another environmental difficulty associated with former defence force lands. Organic compounds such as formaldehyde are problem sources. Coal tars from coal-using powerhouse operations, asbestos, or PCBs can cause toxicity problems. These are but some examples.
  • 2.3 Non-Physical Contaminants

    • These are contaminants that include non tangible, physical substance. However, they should be considered as 'real' as physical contaminants'
    • A typical problem could be forms of radiation, intense radio wave transmissions and excessive heat.
  • 2.4 Radon

    • Radon is a naturally occurring radio-active gas that is responsible for about half our exposure, which is unavoidable, to background radiation. The inhalation of radon and its decay products increases the risk of lung cancer. Radon emanates from particular radioactive materials in the ground and, to a small extent, from building materials. It disperses in the open air, but elevated levels may be found in spaces like poorly ventilated basements and caves, although such levels have not been found to be a health hazard in Australia.
  • 2.5 Toxins in the Internal Home Environment

    • These comprise a long list of substances, including insecticides, lead based paint, wood preservatives, polishes, weed killers, bleaches and numerous other substances. Certain timber related or artificially produced materials used for home insulation, furniture and fittings may release formaldehyde or other traces of preservatives that create health problems for some individuals.
    • (Many of these home toxins are not structural but transient and may be removed through relatively low cost means.)
    • Unless specific circumstances exist such as the use of these products in commercial quantities, comments on domestic use in a valuation report are considered excessive.
  • 2.6 Changes in Lists and Definitions of Hazardous Substances

    • Lists and characteristics of substances constituting hazardous waste and amounts of substances considered detrimental change frequently as new information becomes available. Such information is often available from State or local environment agencies. Preliminary lists are provided in Appendices 1 and 2. The ANZECC/NHMRC Australian and New Zealand Guidelines for the Assessment and Management of Contaminated Sites, January 1992, also contain a substantial list.
  • 2.7 Environment Related Court Cases

    • Environment related court cases, particularly the Federal Court, have the potential to affect value if judgements establish new areas as a result of previous activities or management. Where doubt exists, this case law may prove appropriate investigation.

3.0 Identifying and Quantifying Contamination

  • 3.1 Information on Possible Contamination

    • Information on possible contamination of the site is crucial to the property professional. The two main sources of such information are a Historical Land Use Survey and a scientific Survey of Environmental contamination as would be
      conducted by an Environmental Engineer/Auditor.
  • Three Phases of Investigation

    • Phase 1: Preliminary Site Investigation
    • A Phase 1 is the preliminary assessment of any contamination on the site. It includes the following steps:
      • • An investigation of site history
      • • A physical site inspection
      • • A basic sampling and analysis to determine the presence of contamination
      • • A report prepared
    • Phase 2: Detailed Site Investigation
    • If the Phase 1 investigation shows further investigation is required, a detailed site investigation is carried out to assess:
      • • The concentration of various contaminations
      • • The volume of soil to be remediated
      • • The leachability and mobility of contaminants
      • • Any contamination of groundwater
      • • Any possibility of off-site migration of contaminants.
    • Phase 3: Health and Environmental Assessment and Determination of Remediation Plan.
      • The results from Phase 2 investigation provide information to determine the potential 'human exposure and environmental impact' of the contaminants on the existing and intended land uses. If the intended use will cause unacceptable impact on the environment, then, depending on the conditions, a partial or full remediation, or other land contamination management strategy has to be implemented. A health and environment risk assessment has to be carried out, and a site specific remediation plan has to be prepared. (Footnote 4)
  • 3.2 Phase I Survey : Background Research & Historical Land Uses

    • Previous owners and employees can be a good source of information on the property's history. Local councils can provide a wealth of information on more prominent properties, and a search of titles can provide some indication of former use. Many state governments have aerial photos that can assist in identifying some former uses.
    • Government departments such as those involved with mining, public water supply, environment and health, may have regulating records and other useful information.
  • 3.3 Look for Signs

    • It is important to look for signs that suggest a former use, if not a present use, which may have lead to, or caused, some form of contamination.
    • Following the preparation of a site history, there will need to be a complete detailed site inspection. There are often tell tale signs on the site that can indicate the possible presence of some forms of contamination. The member should look for disturbed or coloured soils, disturbed vegetation, the presence of any chemical containers, or chemical odours, and view the quality of any surface water. In addition, surface soils or earth fill may have been introduced to the site from other
      locations. The potential for contamination from off-site sources should also be considered. An Environmental Assessment Checklist is provided in Appendix 3. The ANZECC/NHMRC Australian and New Zealand Guidelines for the Assessment and Management of Contaminated Sites include a useful chapter on identifying and quantifying contamination.
  • 3.4 Members Role

    • Members should be aware however, that their role and expertise is limited to the detection and preliminary identification of discoverable contamination by reasonable site inspection and enquiries of appropriate authorities. and subsequent reporting. Detailed identification quantification of contamination should be left to those who specialise in that field. Where, however, information is available to the Member, this should be provided to the client together with a statement of the source (whether it be a neighbour, former owner or environmental expert) and an appropriate qualification.
  • 3.5 Register of Contaminated Sites

    • Some States compile a register of contaminated sites which is maintained by the relevant State environmental authority and is available for public inspection. Where the Member discovers or suspects that a site may be contaminated it would be prudent to inspect the Contaminated Sites Register in applicable States. This will help to provide the Member's client with useful information, thereby enhancing the level of service provided and discharging the Member's professional obligations. Members should not be over-reliant on these registers as they are not exhaustive, especially in those States where they are not formally required by legislation. Absence from a register should not be taken to imply that a site in not contaminated. Even in the absence of a register of contaminated sites, Department of Environment staff may still be willing to provide relevant information regarding some sites.
  • 3.6 Potential or Actual Contamination Issues

    • A Member conducting an inspection of a property for the purpose of providing a valuation or other report should be aware of the potential of site contamination of any property. During an inspection for this purpose, the Member should attempt to identify from on-site observations any potential or actual contamination issues and report accordingly, recommending further expert advice where appropriate. Other site factors to initially consider include site layout and contours, storage areas, geology, water features and nearby developments which may affect the subject land.
  • 3.7 Report by Suitably Qualified Expert

    • Phase 1 of Investigation.
    • A report on the site history of the property, provided by suitably qualified expert, may address the following issues:
      • • present and past land uses;
      • • processes and/or activities carried out on the site;
      • • major processes and/or activities that were carried out near the site;
      • • locations within the site of each process and/ or activity;
      • • duration of each process and/or activity;
      • • waste disposal activities;
      • • source of contamination and effluent migration pathways;
      • • presence and purpose of underground tanks;
      • • signs of spills of hazardous materials.
    • Phase 2 of Investigation
    • If, after carrying out an investigation and inspection, the Member is concerned or suspects that the property is or could be subject to potential contamination that could either restrict the future use of the site or militate against a financial consideration, the Member is obliged to recommend that the client seek more detailed advice from appropriately qualified professionals.
    • Such advice should be formed having regard to both the current and future use of the site. A Phase 2 Investigation by a specialist environmental engineer or scientist or other suitably qualified professional may include any or all of the
      • • historical land use survey;
      • • environmental risk inventory;
      • • evaluation of special contaminants such as asbestos, PCB s, acids, poisons such as arsenic, and radionuclides;
      • • remote sensing surveys;
      • • identification of on-site toxic vapours;
      • • surface soil and water samplings and laboratory analysis;
      • • sub-surface soil sampling and laboratory analysis;
      • • groundwater sampling and laboratory analysis;
      • • a site plan specifying locations of contaminants
      • • a health and safety plan.
    • The survey may include, in terms of a particular purpose or specific conditions of a site, a recommendation as to whether or not the contamination has reached an action level where remediation or risk reduction levels are necessary.
    • Phase 3 of Investigation
    • Subsequently, it may be necessary for the appointed environmental consultant to move into a third phase of consultancy including site characterisation, the preparation of a preliminary remedial action plan with cost estimates, the conduct of negotiations with regulatory agencies, the design of remediation systems and continuing management, and the development of suitable future monitoring arrangements.
  • 3.8 Whether Expert Engaged

    • A Member needs to be aware of the process of the Phase 1 investigation sufficient to advise a client as to the need for the engagement of a suitably qualified expert. The Member should also take detailed field notes that may or may not be used in the final report but will nevertheless stand as a record that the valuation or assessment was carried
      out having regard to the potential presence of contamination.
  • 3.9 Not Expert

    • The Member should not hold himself or herself out as an expert in issues of site or other contamination.
  • 3.10 Recommending a Survey of Environmental Contamination Where Detailed Information Cannot Be Obtained

    • Ultimately, only through scientific testing can the level of contamination be verified properly. Such testing can be both expensive and time consuming and cannot in itself provide a complete guarantee that contamination is not present.
    • Where contamination is suspected and where detailed information cannot be obtained, the Member should assess on the basis that a property is free of contamination, and qualify that value on the basis that some contamination may be
      present that could have an impact on the value.
    • The following provides an example of the type of qualification which may be appropriate in these circumstances:
      'From our inspection of the property we consider that there is (or could be) a potential for (detail past/current contamination) to exist and would recommend that advice should be obtained from a suitably qualified environmental expert. Please note that our valuation has been assessed on the basis of no on-site contamination. Should the above mentioned environmental advice reveal any contamination our valuation may require revision'.
    • The greater the perceived risk of contamination being present, the stronger the 'qualification' and the more specific should be the accompanying advice.

4.0 Remediation Practices and Techniques

  • 4.1 Remediation Techniques Rapidly Changing

    • The practice of remediation of environmentally contaminated property is rapidly changing. New techniques are being developed, new standards are being set, both by the professions themselves and those who legislate standards.
  • 4.2 Remediation Defined

    • Remediation has been defined as an 'act of attempting to moderate the severity of the contamination of soil, groundwater, service water or buildings by various measures anad methods'. Note that remediation can include measures that alleviate the effect of contamination without destroying or removing the contaminants, as with 'clean-up' technologies.
  • 4.3 Influence on Value

    • The influence of remediation or clean-up on value will depend on such factors as whether the contamination is contained (restricted) on-site, technology available the EPA controls affecting it, the length of time required to make good to permit development and use of the land and the possible need for further analysis and monitoring after the remediation process. The risks associated with achieving remediation in accordance with the defined plans may have to be factored into the value assessment.
  • 4.4 Remediation Techniques

    • Remediation techniques could involve removal of affected soil from the site and replacement with clean fill, the extraction and 'airing' of hydrocarbon-affected soil from lower depths, the pumping out of contaminated groundwater or chemical neutralisation, eg. the use of lime to neutralise high acid content, and a wide variety of other measures. One difficulty with soil removal is that local authorities tend to be reluctant to allow disposal of contaminated soil.
  • 4.5 New Technology

    • The new technology that is becoming available may potentially reduce the extent of the negative effect of contaminants on property and its value.
    • Technology that permits safe, efficient and inexpensive clean-up of contaminants tends to minimise impact on value.
    • However, clean-up costs can still be prohibitively expensive because of difficulties in disposing of contaminated soil,
      toxic waste and chemicals. Members should keep abreast of technological advances relating to this topic. The ANZECC/NHMRC Guidelines (Footnote 5) provide a site-specific approach to the management of contaminated sites, and indicate that remediation can be tailored to the actual proposed use of the land. Such awareness will assist the Member in advising appropriately on the potential risks associated with contaminated sites and the need for their clients to seek further information from appropriately qualified experts.
    • Nevertheless, as previously referred to, Members should avoid giving advice outside their area of expertise.
  • 4.6 Clean Up Methods

    • As far as the removal of the contaminant source is concerned, there are different clean up methods. The common ones include:
      • • On site treatment
        • The contaminants are destroyed or broken down while the soil remains in-situ or excavated on site, eg. bio remediation, land farming, vertical mixing and chemical fixation.
      • • Off site treatment
        • The contaminated soil is excavated, removed from the site and taken to a depot for treatment, eg. high temperature incineration, soil washing, thermal absorption, particle-size separation, chemical treatment like base catalysed dechlorination (BCD), ball-mill pulverisation and super-critical fluid extraction.
      • • Off site disposal
        • The contaminate soil is excavated and removed from the site for disposal at a controlled landfill.
        • Given that it is a controversial issue to allow transport of a contaminated soil on public roads, it is unlikely that the authority will approve this remediation method today.
      • • Containment on site
        • This method is to keep the contaminated soil insitu and to restrict access to it and prevent leaking and leaching by suitable means, eg. encapsulation and capping (Footnote 6).
        • In addition to the above, recycling may also be an acceptable remediation method, eg. silver is recovered from recycling silver bromide used in the photo processing industry. However, given the high cost of recycling, this method is feasible only for end products with high value.

5.0 Impact on Value:

General areas of Cost Impact

  • 5.1 Responsible Party

    • Depending upon the relevant legislation, it is usual that the responsible party bear the clean-up costs of contaminated properties. Where responsibility cannot be determined, the chain of title is generally followed with the current owner most likely to be liable. Members should refer to their relevant state legislation when determining the responsible party and the chain of responsibility.
  • 5.2 Effect on Present and Future Utility

    • Remediation costs can range from mild instances requiring low expenditure with little impact on value, to severe cases where virtually no use of the property is possible for the present or foreseeable future and prohibitive costs are needed to correct the problem. The degree to which contamination affects the present and future utility of the property must be quantified before a value can be readily assessed.
    • Due to the specialist work involved in assessing the type, extent and cost of remediation, Members are strongly advised not to provide their own estimate.
  • 5.3 Initial Survey Costs

    • The first cost associated with environmental contamination is the cost of discovering the extent of any problem.
  • 5.4 Cost to Remedy

    • The cost of remediation of a particular problem can be major, but care needs to be taken not to understate or overstate the impact on value. For example, property may be able to maintain an income stream while remediation process is in progress. In some cases these costs may be amortised over a period rather than as a one-off cost.
  • 5.5 All Costs with Clean-up

    • The cost to remedy a contamination problem includes all costs resulting from and associated with the clean-up. These include the cost of the physical clean-up, monitoring remedial measures, legal fees and continuing costs. Costs may also involve a capital improvement such as a more efficient, less polluting system that enhances residual property value significantly.
  • 5.6 Develop & Maintain Cost Information File

    • Members may develop and maintain files of cleanup cost information. This information should not, however, be used to give detailed environmental advice or cost estimates to clients. Appropriate experts should be retained for this purpose.
  • 5.7 Physical Clean-up and/or Remedial Costs

    • This can involve a variety of techniques such as simply removing and replacing contaminated soil (recognising that an acceptable location to receive contaminated material is often very difficult to find), extracting harmful chemicals in groundwater by pump extraction, or isolating and permanently sealing off contamination. Neutralising the
      contaminants with special chemicals is a possible solution in some cases. Environmental engineers and other experts can explain the options for remedial work or hazard reduction and provide cost estimates for undertaking this work.
  • 5.8 Legal Costs

    • Legal costs associated with contamination may be considered part of the cost to cure the problem.
    • The extent of these legal costs will vary according to the circumstances of each particular property.
    • Members should refer to these costs in their report, where appropriate, and ensure that they are addressed by any expert environmental report obtained. The potential for litigation or pending litigation may affect marketability and further affect value by deterring prospective buyers. Such effects will usually be included within the Stigma component of environmental liabilities.
    • Alternatively, Members may include a separate 'contingency figure' to cover these effects. Such a figure should either be provided by an environmental expert or estimated by the Member following suitable enquiries of solicitors. It should always be qualified to inform the client that itis a contingency figure only and that it may not reflect the costs actually incurred should litigation eventuate.
  • 5.9 Continuing Costs

    • Final costs are often unknown before the completion of any clean-up. These costs often exceed original estimates, especially when future, more stringent regulations are anticipated. In addition, perceived or actual risks remaining
      after completion of clean-up may result in higher insurance costs. Members should ensure that figures obtained from environmental experts make allowance for these continuing costs and that these costs are appropriately spread over a period corresponding to anticipated plant or improvement life or the period of the remediation.
  • 5.10 Indirect Costs

    • These can include anything that affect the property's income producing potential during or after the clean-up. For example, tenants may not be able to live in a rental unit during lead paint removal. Another example would occur
      if one portion of an industrial plant could not be used because of toxic contamination and an intermediate product manufactured in that area was no longer able to be produced on-site.
    • Additional expenses would be incurred and the operation's earnings could suffer accordingly. Holding costs, due to delays in development caused by the need for prior remediation, are another form of indirect cost.
  • 5.11 Financing

    • There can be an adverse effect through financiers applying more conservative lending policies where there is a perception that a property may be secondary due to the effects of contaminants. (A Member, however, has a responsibility to ensure that mortgage clients are adequately informed of risks associated with known contamination.)
  • 5.12 Indemnification Agreements

    • Some indemnification agreements, as set out by the seller, agree to retain responsibility for current and future costs related to environmental contamination. From the point of view of market sales information, the sale price would need to be discounted. The valuer wherever possible makes enquiries to establish the extent of the indemnification.
  • 5.13 Stigma

    • This is an intangible factor that may not be measurable in terms of cost to cure but may have real impact on Market Value. It arises from the effect of present or past contamination upon the market's perception of the property and represents a discount, beyond the direct and indirect costs likely to be incurred, required to compensate for the risks associated with contaminated or previously contaminated property including the risk of achieving the planned remediation.
  • 5.14 Market Perception

    • The market may perceive stigma exists because of:
      • • Uncertainty affecting the existing or future use of the site;
      • • Risks associated with the effectiveness of remediation;
      • • a full 'cure' of the site being unattainable.
      • • Concern at possible hidden clean-up costs;
      • • Prejudice arising out of prior site uses;
      • • Alternative site uses being restricted;
      • • Legislative issues affecting contaminated sites;
      • • Possible future financing and marketability difficulties;
      • • Risks associated with public liability.
    • Stigma makes property less desirable, even when a complete remediation or cleanup has been carried out. That is, where there is a market perception that a property is or has been contaminated, despite the availability of information that cleanup has taken place, the market will often pay less than normal unaffected values. This situation is similar to obsolescence and represents a lingering detriment to a property. In some cases the stigma effect is variable with time or is transitory.
  • 5.15 Effect May be Out of Proportion

    • The stigma effect on value may be out of proportion to the cost to cure the problem, and can persist at varying levels for many years.
    • Main Causes of Market Value Loss
    • There are three broad categories of market value loss caused by land contamination:
      • • cost and risk of remediation including consultancy, legal and monitoring costs;
      • • liability to the public; and
      • • stigma (affecting marketability and suitability for mortgage security).
  • 5.16 Contaminants may not Necessarily Reduce Value

    • The presence of contaminants within a property may not necessarily reduce its value within the land use class or industry in which it is operating. Under State laws an existing use might be continued without remediation being required. For example, an industrial tailings pond having protective confines within land may contain toxic compounds that form part of a valuable industrial process for which there is a long term market demand. Special licensing generally accompanies these processes and the property can continue to be used as it is. A valuer reporting a value under these circumstances should also advise the client that the valuation could be significantly different should the current use cease.

6.0 Potential Problems for Lenders

  • 6.1 Lenders have Potential Exposure

    • Lenders have potential exposure to risk through land contamination as follows:
      • • loss of market value of collateral (property);
      • • a borrower's inability to repay loans because of clean-up costs, penalties or inability to continue business activities;
      • • lender's liability for clean-up costs following foreclosure of a mortgage, entering into possession as mortgagee in possession, or even exercising control under a scheme of arrangement.

7.0 Legislation

  • 7.1 Legislation Increasing

    • Legislation affecting property contamination and related environmental matters is increasing in this country and overseas.
    • A list of some of the relevant legislation and agreements is offered in Appendix 6.
  • 7.2 Environmental Protection Authorities in Australia

    • A list of the internet addresses for the Environmental Protection Authorities in Australia is offered in Appendix 7.1.
  • 7.3 Certain State Legislation Embodies ' the polluter pays'

    • Members who are acting for the vendor of a property should recognise that certain State legislation embodies the principle that in matters of land contamination, there is a principle 'the polluter pays', and this means that if a vednor has caused the land being valued to be contaminated, they may not be able to avoid responsibility for subsequent remediation even though the property has been sold. Members should refer to their own State legislation in this regard. Future Federal legislation may influence liability issues.
  • 7.4 Responsibility for Lessees

    • The lessor could be responsible for the activities of a lessee who is unable to pay remediation costs or penalties . Many leases now contain provisions to prohibit activities that would result in contamination. Where the lessee could be engaging in activities that could result in contamination, the valuation should comment on inadequate provisions of the lease.

8.0 Indemnity Insurance

  • 8.1 Policy Exclusions

    • Members should be aware of any exclusions within their professional indemnity insurance policy related to pollution, contamination or specific contaminants. Some policies do not provide cover in relation to claims arising from or in connection with these matters. For example, many policies exclude liability for claims arising from nuclear radiation. Furthermore, a Member may in some instances not be covered by a policy where the Member has failed to confine himself or herself to their field of expertise. Members should consult their professional indemnity insurance brokers in
      this regard.

9.0 GST Caution

Since the introduction of the GST on 1st July 2000 specific legal and/or accounting advice will need to be sought regarding the GST implications for this Guidance Note.

Appendix 1 - United Nations Hazard Classes

  1. Explosives
  2. Flammable Gas
  3. Non-Flammable/Compressed Gas
  4. Poison Gas
  5. Highly Flammable Liquid
  6. Flammable Liquid
  7. Flammable Solids
  8. Substances Liable to Spontaneous Combustion
  9. Substances Emitting Flammable Gases when Wet
  10. Oxidising Agents
  11. Organic Peroxides
  12. Poisonous (Toxic) Substances
  13. Infectious Substances
  14. Radioactive Substances
  15. Corrosives
  16. Miscellaneous Dangerous Substances

The categorisation of contaminating substances into these 'Hazard Classes' has been provided by the United Nations. These classes are not necessarily exclusive. Members should not confine their attention to substances falling within these classes.

Appendix 2 - Potentially Contaminating Activities, Industries and Land Uses

  1. Abattoirs and Animal Processing Works
    1. 1b. Arsenic
  2. Acid/Alkali Plant and Formulation
  3. Agricultural Activities (Vineyards, Tobacco, Sheep Dips, Market Gardens). Heavy metals
  4. Airports. Trichlore-ethylene from solvent cleaning operations.
  5. Alumina Refinery Residue Disposal Areas. Fluoride (atmospheric emissions).
  6. Asbestos/Asbestos Production
  7. By-Product Animal Rendering. Pesticides.
  8. Bottling Works
  9. Breweries. Pesticides, oils and greases, underground storage tanks
  10. Brickworks
  11. Car Wreckers. Oils and greases, TPH and BTEX compounds, TCE (solvent cleaning).
  12. Cement Works
  13. Cemeteries
  14. Ceramic Works. Heavy metals.
  15. Chemical Manufacture and Formulation
  16. Coal Mines and preparation Plants. Organic compounds -- surfactants.
  17. Defence Works
  18. Docks. Oils and greases, TPH and BTEX compounds, TCE (solvent cleaning), pesticides, heavy metals.
  19. Drum Reconditioning Works
  20. Dry Cleaning Establishments. Organic compounds.
  21. Electricity Distribution. PCB compounds.
  22. Electroplating and Heat Treatment Premises. Chrome, heavy metals.
  23. Ethanol Production Plants
  24. Engine works. TPH, BTEX compounds, organic compounds (associated with solvents).
  25. Explosives Industries
  26. Fertiliser Manufacturing Plants
  27. Gasworks
  28. Glass Manufacturing Works
  29. Horticulture/Orchards. OCP and OPP pesticides.
  30. Industrial Tailings Ponds. Heavy metals, organic compounds, TPH, BTEX.
  31. Iron and Steel Works
  32. Landfill Sites. Variety of possible contaminants.
  33. Limeworks
  34. Marinas and Associated Boat Yards. Heavy metals -- particularly Tri butyl tin
  35. Metal Treatment. Heavy metals.
  36. Mineral Sand Dumps
  37. Mining and Extractive Industries
  38. Munitions Testing and Production Sites
  39. Oil Production, Treatment and Storage
  40. Paint Formulation and Manufacture
  41. Pesticide Manufacture and Formulation
  42. Pharmaceutical Manufacture and Formulation
  43. Photographic Developers. Heavy metals -- Ag Cl used as part of process.
  44. Piggeries. Pesticides and heavy metals.
  45. Plant Nurseries
  46. Plant or Fibreglass
  47. Power Stations
  48. Prescribed Waste Treatment and Storage Facilities
  49. Printed Circuit Board Manufacturers. Solvents and glues -- volatile organic compounds.
  50. Properties Containing Underground Storage Tanks. TPH, BTEX, PAH, solvents.
  51. Radioactive Materials, Use or Disposal
  52. Railway Yards
  53. Research Laboratories. Metal, organic compounds, radioactive elements.
  54. Sawmills and Joinery works. Copper, chrome, arsenic.
  55. Scrapyards. TPH, BTEX.
  56. Service Stations
  57. Sewerage Works
  58. Smelting and Refining
  59. Sugarmill or Refinery
  60. Tanning and Associated Trades (eg. Fellmongery)
  61. Timber Treatment works. Formaldehyde, copper, chrome, arsenic.
  62. Transport/Storage Depots
  63. Tyre Manufacturing and Retreading Works. Glues -- volatile organic constituents.
  64. Waste Treatment Plants in which Solid, Liquid Chemical, Oil, Petroleum or Hospital Wastes are Incinerated, Crushed, Stored, Processed, Recovered or Disposed of.
  65. Wood Storage Treatment. Formaldehyde, copper, chrome, arsenic.
  66. Wood Treatment Facility. Formaldehyde, copper, chrome, arsenic.
  67. Wood Preservation. Formaldehyde, copper, chrome, arsenic.

Other Activities, Industries and Land Uses

  1. Sites of incidence: road or rail spillage involving hazardous substances; fires involving hazardous substances.
  2. 'Hot spots' of likely contamination by agricultural chemicals and their by-products, eg. spray mixing sites; sheep and cattle dips; pesticide disposal sites.

The above lists are illustrative only. They are not intended to be exclusive.

APPENDIX 3 - Suggested Environmental Checklist

1.0 Hazardous Materials, Storage and Disposal

  1. Are there any drums, tanks or other holders of hazardous materials like chemicals, pesticides, cleaners, solvents on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. If so, is there any indication of spills, leaks or discharges to the ground from the drums, tanks, other holders of hazardous material?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Are there any areas observed with stains on the ground or with dead or stressed vegetation?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  4. Is the facility on the property a generator of hazardous waste?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  5. If hazardous waste is generated at the property, does it appear to be improperly monitored or not transported off the property by professional hazardous waste disposal contractors?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  6. If the property generated hazardous waste, does it have statutory environmental authority approval, or is it licensed to do so?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  7. Does the property appear to have any pits, ponds, lagoons (other than normal water retention ponds required by some local councils) or other dumping areas?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  8. Is there any evidence of radioactive products being utilised on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  9. Does the facility appear to be free of any obvious sources of air emissions that have chemical odours, fumes or mists?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  10. Does the facility appear to be free of any noise pollution and are controls in place?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  11. Is there any evidence of any source of infectious waste (medical pathological wastes) on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  12. If there is any source of infectious waste, are facilities for its disposal inadequate or not functioning properly?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  13. If the current use of the property does not indicate any of the above, could prior uses of the land involve hazardous materials, storage and disposal?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  14. Is the property registered on any Government register of contaminated land or its equivalent?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  15. Are the existing or past operations on the property subject to local environmental concerns expressed by the local community, Council, Health Department or EPA?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  16. Do the existing operations comply with current regulatory permits and licensing?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  17. With reference to storage of hazardous chemicals, are the storage structures designed to minimise contamination in the event of fire or natural disaster?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

2.0 Management Controls: Hazardous Waste

  1. Does this facility have a policy document and is it available to all staff?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Does the facility have an action plan in place for monitoring and reviewing environment controls?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Does the facility have an emergency plan and/or procedures in the event of a spill, explosion or break down?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  4. Are copies of licenses and/or registrations easily visible and are they up to date?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  5. Verify the current status on any current orders
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  6. Verify the status on current audits
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

3.0 Extractive Industries

  1. Is there any extractive industry currently being operated on the site?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
    1. If yes, is there an Environmental Impact Statement available for perusal?
      Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
    2. If yes, is there a current Development Approval available for inspection?
      Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

4.0 Asbestos

  1. Is asbestos apparent on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Does a walk through the facilities reveal any obvious evidence of asbestos in ceilings, pipes, ducts, roofing, boiler insulation or structural beams, etc, that appears to be fireable, flaking or damaged?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Were the facilities on the property constructed prior to 1980 when the use of asbestos was banned?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  4. Has an asbestos survey/audit of the facilities been conducted?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  5. Did the survey find the buildings to be free of asbestos containing materials?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

5.0 Polychlorinated Biphenyls (PCBs)

  1. Is there any electrical equipment (transformers, capacitors, etc) that contain polychlorinated biphenyls (PCBs) on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. If PCB containing electrical equipment is presently on the property, is there any evidence of leaks or spills on the ground near the equipment?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

6.0 Underground Storage Tanks (USTs)

  1. Are there any underground storage tanks (USTs) containing petroleum products or hazardous chemicals on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. If USTs exist on the property, are leak detection equipment or secondary containment systems not installed on the tanks?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Have they ever been tested for leaks?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  4. Has there ever been an incident of a leak, spill or discharge?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  5. Have the owners or lessees of the property undertaken any environmental audit pertaining to underground storage tanks on the property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  6. Have the proper registration forms been submitted to the designated regulatory authorities?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

7.0 Land Fills

  1. Is there any evidence that the site is currently being filled or has been filled?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Have the filling operations been approved by Council and the EPA?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Do the filling operations allow for putrescible, non- putrescible or toxic wastes licence and/or Performance Guarantee and License from the EPA?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

8.0 Agricultural-Type Properties

  1. If the property has previously been used for horticultural, orchard or market garden purposes, is there any historic evidence of past land uses having involved persistent pesticides, such as dieldrin or DDT?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Are there any environmental audits available evaluating the presence of pesticides?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

9.0 Former Defence-Oriented Property

  1. Does the land contain unexploded munitions, radioactivity or other hazardous substances that could be associated with defence works?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Is there any information available from the Department of Defence or local authorities regarding the presence of unexploded munitions?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

10.0 Environmental Hazards on Adjacent Properties

  1. Do any adjacent properties appear to have any improper storage or dumping of hazardous materials, drums or containers that could impact on the value of the subject property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  2. Are there any landfills, dumps or other waste disposal facilities within one kilometre of the subject property?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________
  3. Is there any indication of operations such as gas stations, chemical plants, bulk storage tanks, manufacturing plants or other land uses which potentially involve land contamination (as outlined in this document), on any of the adjacent properties?
    Yes ☐ No ☐ N/A ☐ Comment: _________________________________________________________________

APPENDIX 4 Sample Environmental Balance Sheet

The following is a relatively simple non-costed Environmental Balance Sheet for example purposes.

Due Diligence/Initial Environment Consultants Costs
Quantification & Alternative Strategy Development Costs
Remediation/Clean-Up Action Costs
Contamination Control and Management Measures $
Redesign of Production Facilities
Avoidance of Migration of Contamination to Adjacent Sites
Notification, Training and Record Keeping
Allowance for Emergency Response Actions
Legal Costs
Indemnity Insurance for the Future
Monitoring Costs
Licensing Costs where Applicable
SUBTOTAL: Present Value of Action Plan
Estimated Negative Intangible (Stigma) Impact
* The GREATER of Zero or Unimpaired Value LESS any Environmental Liabilities.


APPENDIX 5 A Method of Assessing Stigma

Unimpaired Value of the Land (a medium hazard risk property) $

Present value of remediating costs $

Impaired value 1 - not allowing for stigma $

Comparable Case Studies
Case Study Number Indicated percentage of impaired value 1 lost to stigma Comparison to the property being valued
Treatment completed, stigma caused by fear of additional contamination, less severe than the subject property.
No treatment proposed at present, continued industrial use, similar risk level to subject property
Site not contaminated but is situated adjacent to a contaminated site
Similar type of contamination to subject property but slightly more severe
Heavily contaminated site, derelict land, more severe than the subject property

Range of stigma effects indicated by comparables 20.9% to 45.4%
Comparables closest to subject property, numbers 2 and 4, 29.2% to 32.7%
Therefore percentage stigma applicable to the subject property is 31%
Amount of stigma @ 31% of impaired value 1 $
Impaired value 2 (taking account of treatment and associated costs and stigma) $
Add value of buildings $
Total value of asset say $
Percentage reduction in value attributable to contamination 21.60%
Source: Developed from Patchin (1994) and Syms (1995) (UK)

APPENDIX 6 Environmental Legislation in Australia

For legislation in Australia see the Australian Legal Information Institute (AUSTLII) Website.

The following list is not intended to be exhaustive. It should, however, illustrate the wide variety of existing environmental legislation which may affect the value of a particular interest in land.

Commonwealth of Australia

  • 1. The Inter-Governmental Agreement on the Environment.
  • 2. National Waste Minimisation and Re cycling Strategy released by Commonwealth Environmental Protection Authority.
  • 3. Industrial Chemicals (Notification and Assessment) Amendment Act 1989.
  • 4. Ozone Protection Amendment Act 1992.
  • 5. Commonwealth Ozone Protection Act 1988.
  • 6. Petroleum (Submerged Lands) Act 1967.
  • 7. Environmental Protection (Nuclear Codes) Act 1978.
  • 8. Nature Conservation Act 1980.
  • 9. Water Pollution Act 1984.
  • 10. ACT (Planning & Land Management) Act 1988.

Australian Capital Territory

  • 1. Clinical Waste Act 1990
  • 2. Public Health Act 1982
  • 3. Poisons Act 1993
  • 4. Radiation Act 1983
  • 5. Air Pollution Act 1984
  • 6. Land Planning Act 1991

New South Wales

  • 1. Environmental Planning and Assessment Act 1979.
  • 2. Environmentally Hazardous Chemical Act 1985.
  • 3. State Environmental Planning Policy No. 33: Hazardous and Offensive Development - Gazetted 1March 1992.
  • 4. Clean Waters Act 1970.
  • 5. Environmental Offences and Penalties Act 1989.
  • 6. Clean Air Act.
  • 7. Noise Control Act.
  • 8. State Pollution Commission Control Act.
  • 9. Marine Pollution Act 1987.
  • 10. Petroleum (Submerged Land) Act 1982.
  • 11. Coastal Protection Act 1979.
  • 12. Drainage Act 1939.
  • 13. Water Board Act 1987.
  • 14. Pesticides Act 1978.
  • 15. Radioactive Control Act 1990.
  • 16. Rural Lands Protection Act 1989.
  • 17. Soil Conservation Act 1938.
  • 18. Unhealthy Building Land Act 1990.
  • 19. Environmental Restoration and Rehabilitation Trust Act 1990.
  • 20. Protection of the Environment (Operations) Act 1997


  • 1. Local Government (Planning and Environment) Act 1990.
  • 2. The Contaminated Land Act 1991.
  • 3. Nature Conservation Act.
  • 4. Local Government (Planning & Environmental) Amendment Act 1992.
  • 5. Pollution of Waters by Oil Amendment Bill 1992 (Proposed).
  • 6. Local Government Act 1936.
  • 7. Petroleum (Submerged Land) Act 1982.
  • 8. Harbours Act 1955.
  • 9. River Improvement Trust Act 1940.
  • 10. Water Resources Act 1989.
  • 11. Soil Conservation Act 1986.
  • 12. Radioactive Substances Act 1958.
  • 13. National workshop on Health Risk, Assessment and Management of Contaminated Land, November 1991.
  • 14. Clean Air Act 1963-1990.
  • 15. State Environment Act 1988.

South Australia

  • 1. Planning Practice Circular (distributed by the Department of Environment and Planning to Local Councils, Planners and Consultants in October 1990).
  • 2. Discussion Paper - Contaminated Land - A South Australian Legislative Approach.
  • 3. Proposal for South Australian Environmental Protection Authority and Chapter on Environmental Policy.
  • 4. Dangerous Substances Act 1979/1988.
  • 5. Environmental Protection Council Act 1972 and Local Government Act 1934.
  • 6. Marine Environment Protection Act 1990.
  • 7. Petroleum (Submerged Lands) Act 1982.
  • 8. Water Conservation Act 1936.
  • 9. Harbours Act 1936.
  • 10. Water Resources Act 1976.
  • 11. Native Vegetation Act 1991.
  • 12. Soil Conservation and Land Care Act 1989.
  • 13. Waste Management Act 1987.
  • 14. Clean Air Act 1984.
  • 15. Public & Environmental Health Act 1987.


  • 1. Environmental Protection Act 1973.
  • 2. Chlorofluorocarbons and other Ozone Depleting Substances Control Act 1988.
  • 3. Oil Pollution Act 1961.
  • 4. Public Health Act 1962.
  • 5. Groundwater Act 1985-1988.
  • 6. Water Act 1957-1923.
  • 7. Petroleum (Submerged Lands) Act 1982.

Northern Territory

  • 1. Conservation Commission Act 1980.
  • 2. Local Government Act 1954.
  • 3. Ozone Protection Act 1990.
  • 4. Public Health Act 1952.
  • 5. Uranium Mining (Environmental Control) Act 1979-1981.
  • 6. Petroleum (Submerged Lands) Act 1982-1986.
  • 7. Environmental Protection (NT Supreme Court) Act 1978.
  • 8. Environmental Assessment Act 1982.
  • 9. Soil Conservation & Land Utilisation Act.


  • 1. Environment Protection Act 1970.
  • 2. Pollution of Waters by Oil and Noxious Substances (Amendment) Act 1991.
  • 3. Marine Act 1988.
  • 4. Heritage Rivers Act 1992.
  • 5. Agricultural and Veterinary Chemicals Act 1992.
  • 6. Environment Protection (Resource Recovery) Act 1992.
  • 7. Various State Environmental Protection Policies made under the Environmental Protection Act 1970 covering air environment, control of noise, ground waters, etc.
  • 8. Local Government Act 1958.
  • 9. Petroleum (Submerged Land) Act 1982.
  • 10. Extractive Industries Act 1966.
  • 11. Land Conservation Act 1970.
  • 12. Soil Conservation and Land Utilisation Act 1958.
  • 13. Occupational Health and Safety (Asbestos) Regulations 1992.

Western Australia

  • 1. Environmental Protection Act 1986.
  • 2. Local Government Act 1960.
  • 3. Petroleum (Submerged Lands) Act 1982.
  • 4. Marine Harbours Act 1981.
  • 5. Pollution of Waters by Oil and Noxious Substances Act 1987.
  • 6. Waterways Conservation Act 1976.
  • 7. Poisons Act 1964.
  • 8. Radiation Safety Act 1975.
  • 9. Explosives and Dangerous Goods Act 1961.
  • 10. Agricultural Produce (Chemical Residues) Act 1983.
  • 11. Health Act 1911.
  • 12. Aerial Spraying Control Act 1966.
  • 13. Nuclear Activities Regulation Act 1978.
  • 14. Industrial Lands Development Authority Act 1966.
  • 15. Soil & Land Conservation Act 1945.

APPENDIX 7 Internet Address of Environment Protection Authorities of Australia


  1. Australian and New Zealand Environment and Conservation Council, National Health and Medical Research Council, Australian and New Zealand Guidelines for the Assessment and Management of Contaminated Sites, January 1992, p. 2.

  2. Research on Radon is being conducted by Murdoch University in Western Australia.
  3. The Institute gratefully acknowledges the assistance of the NSW Property Valuation Department of the Commonwealth Bank of Australia in the preparation of this Appendix.
  4. DoE, Queensland 1998.
  5. National Environmental Protection Council is to release a National Environment Protection Measure which will supersede the relevant sections of the ANZECC/NHRMC Australia and New Zealand Guidelines for the Assessment and Management of Contaminated Sites 1992.
  6. New South Wales EPA 1995.