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This case study concerns a fairly common occurrence – a property transaction which had stalled due to the discovery of environmental risks.

The purchaser intended to acquire a newly-built hotel in the UK, then lease it to a well-known hotel chain and was working to a tight budget.  A Phase I environmental report undertaken on the site identified a number of areas of possible concern.  The land had historically been used as a repository (a form of warehouse) and part of a depot, the surrounding area had also housed various depots and the report also identified that the site was located above a minor aquifer.

The purchaser’s funder would not proceed to lend unless the environmental risks at the site had been addressed. Meanwhile, the vendor/developer was not prepared to provide contaminated land cover, and as a result the deal was on the verge of collapse.

The ensura solution

A leading London law firm, who were acting on behalf of the purchaser, approached ensura, the specialist environmental risk solution provider.

Environmental risk assessment specialists, Argyll Environmental, were able to provide a rapid peer review of the third party environmental report in order to assist Underwriters with their environmental risk assessment.  This review indicated that there was likely to be a low-to-moderate contamination risk from both on- and off-site sources.

The law firm had investigated a number of alternative insurance products, but the maximum policy period offered was 10 years and the high premiums quoted did not reflect the low to medium risk status of the site, nor allow sufficient margin in the sale/purchase agreement to justify the purchase and leasing of the property. 

However, ensura were able to recommend the environmental insurance policy Terraffirm providing 15 years of cover - but at a premium of significantly less than £10,000, inclusive of insurance premium tax. With contaminated land cover successfully secured, the law firm were able to meet the requirements of the funders and finalise purchase of the property for their client.

The Benefits

The Terraffirm policy has been specifically designed to provide contaminated land indemnity insurance for existing commercial properties such as retail premises and light industrial units.  In the case above, where environmental risks threatened to derail the entire deal, a Terraffirm policy, with its extended period of insurance, comprehensive cover and cost-effective premium was able to provide the necessary security to all parties, in order for the deal to be completed.    

Please contact Antony Turck on 0845 652 8585 for futher information.