Slovakia has new cost recovery rules for the remediation of real estate with an environmental burden

Private property owners will have to compensate the government for any remediation of environmental burdens. In this article, you will learn who is affected by the new regulations, how compensation for remediation of the environmental burden is determined, what options owners have, and what restrictions the new legislation brings.

Generally, the responsibility for the remediation of the environmental burdens is either borne by the person causing the environmental burden or by a designated responsible person. However, for many former industrial sites located on environmentally contaminated land, there is neither a polluter nor a designated responsible person. In these cases, the state becomes the party responsible for the condition and remediation of the environmental burden.

Since the remediation of the environmental burden has a positive effect on the market price of the remediated real estate, the public financing of the remediation can be considered a form of indirect state aid. This is another reason why the amendment to the Act on Certain Measures in the Field of Environmental Burden,[1] which entered into force on 1 June 2022, transfers the obligation to bear the costs of remediation to the owners of the contaminated land.

Who will be affected by the new legislation?

If the state carries out the remediation of an environmental burden from public funds[2] on private land, the owner of the property must reimburse the state for the funds spent on the remediation of the environmental burden. The new legislation will also impact property owners whose remediation began prior to the amendment's effective date, because under the amendment's transitional provisions, the obligation to provide financial compensation also applies to privately owned properties whose remediation is completed after 1 June 2022.

Amount of financial compensation for the remediation of environmental burdens

The amount of the financial compensation for the remediated land will correspond to the funds reasonably expended for the geological survey of the environmental burden and the remediation of the environmental burden financed from public funds.

Monetary compensation or pledge

The owner of the remediated land has a choice. After approval of the final report on the burden remediation project, the competent ministry will send the owner a notice specifying the amount of financial compensation and attaching a draft pledge agreement for the remediated property. The owner must either pay the amount corresponding to the financial compensation or sign and deliver to the competent ministry the pledge agreement ensuring the payment of the financial compensation.

Should the owner of the land evade the above obligation, the competent ministry will issue a decision on the establishment of a pledge on the remediated land.

The establishment of the pledge will be registered in the Land Registry.

Restriction on disposal of encumbered property

The decision on the creation of the pledge will contain a prohibition on the owner of the remediated land from disposing of the subject matter of the pledge agreement without the prior approval of the competent ministry. The owner of the land may perform legal acts concerning the subject matter of the pledged land only with the prior consent of the competent ministry.

Summary

These changes in the law should be considered not only in the real estate due diligence proceedings, but also in new real estate investments in general.

[1] Act on Certain Measures in the Field of Environmental Pollution and on Amendments and Additions to Certain Acts No. 409/2011 Coll.

[2] Public funds means funds from the State budget, the European Union, the Norwegian Financial Mechanism or the Swiss Financial Mechanism.