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Conta­m­i­nated land: Liability, indem­ni­fi­cation and insurance

7. July 2023

Conta­m­i­nated sites represent a risk that should not be neglected, especially when acquiring commercial real estate. If they are not recog­nized in time or even ignored, this can lead to high costs. But who pays for these costs? And how can I, as the seller of a property, indemnify myself against possible later liability claims? The following legal advice will deal with these questions.

What are conta­m­i­nated sites anyway?

Conta­m­i­nated sites are defined by law in §2 of the Act for the Protection against Harmful Soil Changes and for the Remedi­ation of Conta­m­i­nated Sites (Bundes­bo­den­schutzgesetz: BBodSchG), explains attorney Sascha C. Fürstenow. Accord­ingly, these are “harmful soil changes”, §2 (5) BBodSchG which can be caused by waste or environ­men­tally harmful substances, §2 (5) No. 1 u. 2 BBodSchG.


Examples of conta­m­i­nated sites in the soil are:

War material such as bombs, grenades or ammunition, old gasoline tanks or other tank instal­la­tions, indus­trial and commercial waste such as chemicals, oils or heavy metals, agricul­tural waste such as fertil­izers or pesti­cides. In Berlin and surroundings you can still find a lot of such munitions on the 2nd World War in the ground

In the case of both private and commer­cially used real estate, these can greatly reduce the value of the property or even render it virtually worthless, since they can no longer be used for the intended purpose, for example.


So what do I have to consider as the seller of a property?

Sellers of real estate often have the idea of contrac­tually exempting themselves from liability or limiting it from the outset. However, this can be problematic, as it is neither in the interest of the buyer nor in the interest of the seller to protect the seller in this way during the contract negoti­a­tions; moreover, it is doubtful whether liability can be contrac­tually excluded in this way, i.e. for conta­m­i­nated sites that only become known later.

According to a recent decision of the Federal Court of Justice (Bundes­gerichtshof: BGH) (ruling dated November 11, 2022, file no. V ZR 213/21), a concealed suspicion of conta­m­i­nation on the part of the seller already triggers a claim by the buyer for recti­fi­cation of defects against the seller (if the suspicion is later confirmed), up to and including complete rescission of the purchase contract. Due to the often high costs, this repre­sents a high risk as described!

With known old loads these should be mentioned naturally in the sales contract and it should be also regulated, who is respon­sible for the removal of these, guesses attorney Fürstenow. This will be reflected regularly in the purchase price, since old loads will prove often as strongly value-reducing.

Therefore, it may be advisable for both buyer and seller to take out insurance to protect against such costs due to environ­mental risks.


What kind of insur­ances are there?

On the one hand, there is the so-called “W&I insurance” (Warranty & Identity). This is usually already standard for M&A trans­ac­tions such as company mergers, but can also be taken out for real estate trans­ac­tions, as is the case here. This covers (future) risks and oblig­a­tions arising from the purchase agreement. However, protection against environ­mental risks, which also include damage caused by conta­m­i­nated sites, is usually not covered by standard insurance due to the rapidly occurring amounts of damage, and additional cover would have to be taken out, for example, in the form of environ­mental damage insurance.

In addition to environ­mental damage insurance, another option is currently being developed: Pollution Legal Liability (PPL). Depending on its design, this can cover third-party claims, e.g. from author­ities, as well as general costs. The insurance is adapted to the respective risks of the matter to be covered by a prior precise exami­nation on the part of the insurance company.

Of course, the insurance premium to be paid is usually not small due to the dimen­sions that can actually occur, but it may still be advisable to take out such insurance. Especially since the insurance premium can usually be better negotiated or trans­par­ently taken into account in the purchase price as a fixed amount than any damage that may occur, which usually cannot yet be precisely measured. This may make trans­ac­tions somewhat more expensive in the short term, but in the long term, much higher costs can be avoided.

Both the buyer (as a kind of self-damage coverage) and the seller (as a kind of liability insurance) can take this out.



Potential conta­m­i­nation and its conse­quences should not be under­es­ti­mated in any real estate trans­action. It is therefore advisable for both the buyer and the seller to seek solutions in order to keep the risks as low as possible. Since the juris­diction sets however as pointed out clear partial borders to it, the conclusion of one of the described insurance can represent quite a meaningful solution. Whether such an insurance is actually worth­while, however, cannot be answered in general terms and depends on the individual case. It is equally uncertain whether it will become estab­lished in Germany. What is clear, however, is that you should deal with the issue of conta­m­i­nated sites, be aware of the risks and develop appro­priate solutions, especially in the case of any commercial real estate transaction.

Do you have any further questions on the subject; are you in or are you currently planning a (commercial) real estate trans­action and need support? Attorney Mr. Fürstenow will be happy to advise you further on this matter.


The legal advice was prepared by the employee of FÜRSTENOW Law Office, Mr. Ewert, and finalized by Attorney at Law Mr. Sascha C. Fürstenow.